IFRS S1/S2 Report

Preparation of sustainability and climate risk reporting in accordance with international IFRS S1 and IFRS S2 standards

HPBS helps companies and financial institutions prepare reporting in accordance with IFRS S1 “General Requirements for Disclosure of Sustainability-related Financial Information” and IFRS S2 “Climate-related Disclosures”.

The work includes not only the preparation of the report itself, but also the creation of a data system, calculation of greenhouse gas emissions, assessment of climate risks and opportunities, analysis of their financial impact, development of climate targets, and integration of climate factors into corporate governance and risk management.

What are IFRS S1 and IFRS S2

IFRS S1 establishes general requirements for the disclosure of information about sustainability-related risks and opportunities that may affect the company’s financial position, performance, cash flows, and access to financing.

IFRS S2 establishes requirements for the disclosure of climate-related information, including:
• corporate governance of climate-related matters;
• climate risks and opportunities;
• the impact of climate factors on strategy and the business model;
• physical and transition climate risks;
• the company’s climate resilience;
• climate risk management processes;
• greenhouse gas emissions Scope 1, Scope 2 and, where applicable, Scope 3;
• climate metrics and targets.

For banks and other financial institutions, the calculation of financed emissions — Scope 3, Category 15, including the use of the PCAF methodology — is of particular importance.

Who needs an IFRS S1/S2 report

The service is suitable for:
• banks and financial institutions;
• large industrial enterprises;
• companies attracting international financing;
• companies working with international financial institutions and investors;
• companies that need to systematize ESG and climate disclosures;
• organizations preparing for the requirements of investors, creditors, and international partners in the field of climate reporting.

What is included in the work

Diagnostics and Gap Analysis

We analyze the company’s existing documents, processes, and data and compare them with the requirements of IFRS S1 and IFRS S2.
The following are determined: reporting boundaries; reporting period; list of companies and divisions included in the report; availability of initial ESG and climate data; current gaps relative to IFRS S1/S2 requirements; main users of the reporting; applicable national and international requirements.

Result: diagnostic report and register of required data and responsible persons.

Materiality Assessment

An assessment is carried out of sustainability and climate risks and opportunities that may affect the decisions of investors, creditors, and other users of financial statements.
If necessary, the applicability of industry-specific SASB topics and metrics is analyzed.
For the first year of reporting, the application of IFRS S1/S2 transitional provisions may be considered, with the initial disclosure focused on climate-related matters.

Result: materiality matrix and justification of material topics.

Carbon Footprint Calculation

HPBS performs the calculation of corporate greenhouse gas emissions in accordance with the GHG Protocol.
The calculation may include:
Scope 1: stationary fuel combustion; corporate transport; heating; refrigerant leakage; other direct emission sources.
Scope 2: purchased electricity; heat and other types of purchased energy; location-based and market-based calculation where the necessary data are available.
Scope 3: indirect emissions from the value chain; identification of material categories.
For financial institutions — financed emissions Scope 3, Category 15, according to the PCAF methodology. For each source, the source data, emission factors, calculation methodology, and data quality are recorded.

Result: carbon footprint calculation, Excel model, and the “Metrics” section of the IFRS S2 report.

Assessment of Climate Risks and Opportunities

We prepare a register of: physical climate risks; transition risks; climate opportunities. Their potential impact on assets, operations, clients, supply chains, and the organization’s financial indicators is analyzed. For banks, the distribution of climate risks by economic sectors, regions, and the loan portfolio may also be assessed.

Result: the “Strategy” and “Climate Resilience” sections of the report.

Climate Scenario Analysis

To assess the resilience of the company’s strategy, climate scenarios are considered over different time horizons.
The following scenarios may be used: low-emission development; high-emission development; Net Zero 2050; Delayed Transition; Current Policies. IPCC AR6 and NGFS may be used as sources of scenario data. The analysis is carried out over short-term, medium-term, and long-term horizons.

Result: description of climate scenarios, key assumptions, and their potential impact on the company’s activities.

Assessment of the Financial Effect of Climate Risks

The channels through which climate risks may affect the company’s financial position are identified.
For financial institutions, the analysis may include: credit losses; changes in collateral value; interest and commission income; operating expenses; cost and availability of funding; impact on profit and capital. If sufficient source data are available, a quantitative assessment is carried out. In the case of high uncertainty or insufficient data, a qualitative assessment is performed with disclosure of the assumptions and limitations used.

Result: financial model or table of climate risk impact channels.

Integration of Climate Risks into the Risk Management System

Recommendations are developed for incorporating climate risks into the company’s existing risk management system.
The work may include: climate risk register; assessment scales; KRI — key risk indicators; monitoring procedure; risk escalation procedure; concentration limits; recommendations for credit and investment policy.

Result: the “Risk Management” section and recommendations for integrating climate factors into the company’s existing processes.

Development of Climate Targets

Based on the results of the emissions calculation and climate risk assessment, the company’s climate targets are developed.
They may include: absolute Scope 1 and Scope 2 reduction targets; financed emissions targets; carbon intensity reduction targets; sustainable and climate finance targets. A roadmap is developed with measures, responsible persons, resources, and progress indicators. If necessary, the targets may be aligned with SBTi approaches.

Preparation of the Final IFRS S1/S2 Report

HPBS prepares the final report in Russian or English.
Before delivery, quality control is carried out: verification of calculated indicators; reconciliation of data with primary sources; verification of disclosures against IFRS S1/S2 requirements; verification of methodological assumptions; two rounds of comments and revisions.

Project result:
• final IFRS S1/S2 report;
• carbon footprint calculation;
• register of climate risks and opportunities;
• results of scenario analysis;
• assessment of financial effects;
• climate metrics and targets;
• working Excel models;
• register of source data and emission factors;
• methodological note.

Two Levels of Report Preparation

Basic Report
Suitable for a company preparing IFRS S1/S2 reporting for the first time. Includes the main volume of disclosures required for the first reporting period, using applicable transitional provisions of the standards. The main focus is IFRS S2 and climate disclosures, corporate Scope 1 and Scope 2, climate risks, governance, strategy, and targets.

Extended Report
Intended for companies that want to immediately establish a more mature climate reporting system and prepare for subsequent reporting periods.

May additionally include:
• full Scope 3;
• financed emissions according to PCAF;
• extended assessment of SASB topics;
• five climate scenarios;
• quantitative assessment of financial consequences;
• detailed climate model;
• financed emissions targets;
• sustainable finance targets;
• alignment of climate targets with SBTi.

Methodological Basis

Depending on the scope of the project, HPBS uses:
• IFRS S1;
• IFRS S2;
• SASB industry standards;
• GHG Protocol Corporate Standard;
• GHG Protocol Scope 2 Guidance;
• GHG Protocol Scope 3 Standard;
• PCAF Global GHG Accounting and Reporting Standard;
• IPCC;
• NGFS Climate Scenarios;
• recommendations of the Basel Committee on climate-related financial risks;
• IFRS 9 — when assessing the financial impact of risks for financial institutions.

What Is Required from the Company

To prepare the report, the client appoints a responsible employee and provides access to the necessary information. Depending on the project, the following may be required: financial and management reporting; organizational structure; energy consumption information; fuel data; transport information; refrigerant data; asset information; procurement and supply chain data; corporate policies and risk management procedures.

For financial institutions, anonymized loan or investment portfolio data may additionally be required: sector, region, financing amount, term, type of collateral, and other characteristics necessary for the assessment of climate and financed emissions.

Completion Time

The estimated duration of a comprehensive project is 13–15 weeks. Individual stages may be carried out in parallel. The project duration depends on the size of the organization, the quality of the source data, the structure of assets or the financial portfolio, and the selected level of reporting.

Why HPBS

HPBS combines expertise in one project in the areas of: IFRS Sustainability + ESG + GHG Accounting + PCAF + climate risks + decarbonization + digital MRV. We do not limit ourselves to preparing a text report. Our task is to create a transparent and reproducible system of data and calculations that the company can use in subsequent reporting periods, for managing climate risks, interacting with investors, and attracting sustainable financing.

Contact the HPBS team: info@hpbs.uz, Telegram +998 (90) 930 65 66

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