The minute
- TCFD (Task Force on Climate-related Financial Disclosures) set 4 pillars: governance, strategy, risk management and metrics/targets
- ISSB (International Sustainability Standards Board) folded TCFD into the IFRS S1 and S2 standards, now the global reference
- The key difference from GRI is direction: ISSB measures climate’s risk to the company, not the company’s impact on the climate
Why it matters: Institutional investors increasingly use the ISSB standard as an allocation filter, and a company without this disclosure risks falling out of portfolios that require the data.
TCFD’s four pillars
Governance (who oversees climate risk at board level), strategy (scenarios and financial impact), risk management (the identification process) and metrics and targets (indicators and progress). ISSB kept this structure when creating IFRS S2, specific to climate.
Physical risk and transition risk
Physical risk is direct damage from climate events (floods, drought) to assets and operations. Transition risk is the cost of adapting to a world with stricter carbon regulation, including assets that lose value (stranded assets).
What changes for reporters
It becomes necessary to estimate the financial effect of climate on the financial statements, not just describe the company’s environmental policy in prose.
Frequently asked questions
Is ISSB mandatory in Brazil?
Not strictly. CVM rules made ISSB-based reporting mandatory for listed companies from fiscal year 2026, but CVM Resolution 244/2026 turned it into an option: from January 1, 2027, a listed company that does not file must explain why in a market announcement.
Do I need to adopt TCFD and ISSB separately?
No. ISSB already incorporates the TCFD structure; adopting IFRS S2 covers the requirement.
Does ISSB replace GRI?
No, they serve different audiences: ISSB for investors, GRI for the company’s broad impact on the world.
Read next: how to write the sustainability report.
Read next: voluntary vs compliance market.
Primary sources: Recommendations of the Task Force on Climate-related Financial Disclosures (TCFD, 2017); IFRS S2 Climate-related Disclosures (ISSB, 2023); ISSB and TCFD (IFRS Foundation, 2024); CVM Resolution 193/2023 and amendments, official text in Portuguese (CVM, 2023-2026).
There is no newsletter yet. Leave your email and you will hear first on the day there is one.