Article
June 26, 2025
Mr. Emmanuel Faber, ISSB Chair
IFRS Foundation
Columbus Building
7 Westferry Circus
Canary Wharf
London E14 4HD, UK
Dear Mr. Faber,
Re: CBA1 comments on International Sustainability Standards Board (ISSB) Exposure Draft: Amendments to Greenhouse Gas (GHG) Emissions Disclosures – Proposed amendments to IFRS S2
We thank the ISSB for the opportunity to provide feedback on the Exposure Draft, Amendments to IFRS S2: Greenhouse Gas Emissions Disclosures. We also welcomed the opportunity to meet with ISSB Board member Michael Jantzi and staff to learn more about the Exposure Draft and share our preliminary views during the consultation period.
We appreciate the ISSB’s willingness to respond to specific application challenges and propose targeted amendments related to GHG emissions disclosure. In this letter, we share our views on the four proposed technical amendments, along with the effective date.
1a. Measurement of Scope 3 Category 15 GHG emissions
We broadly agree with the proposed amendment to exclude emissions associated with derivatives, and other financial activities, for example, facilitated and insurance-associated emissions when measuring and disclosing Scope 3 Category 15 GHG emissions. This amendment reflects the current state of nascent methodologies, and data challenges which limits the decision usefulness for these items.
1b. Disclosure of Scope 3 Category 15 GHG emissions exclusions
We broadly disagree with the disclosure proposals for quantitative information for users of general-purpose financial reports to understand the magnitude of the derivatives and financial activities associated with emissions that are excluded from measurement of Scope 3 Category 15 GHG emissions. We note that some ISSB members expressed concern about requiring disclosures of these amounts based on whether the cost of providing this information would be warranted by its usefulness to users of general-purpose financial reports.
We share the same concern and encourage the ISSB to critically assess the decision-usefulness of this information in light of the following factors:
- Given GHG emissions data associated with derivatives and other financial activities is itself of limited decision-usefulness at this stage, the "amount" of derivatives and other financial activities excluded is even less likely to provide meaningful insight for users of general-purpose financial reports.
- Interpretive differences in defining "amount" may undermine comparability and consistency across entities and jurisdictions, particularly given the early stage of development in how such terms are defined. This challenge is especially pronounced where there is no clear reference to disclosures in the financial statements that can be made. For facilitated emissions, the fee revenue for these activities is recorded, however the exposures necessary to calculate facilitated emissions may also not be captured internally, making this particularly challenging.
- Even where entities can cross-reference to existing financial disclosures, the figures may still be misleading, as the financial data lacks the sector-specific context and emissions-related insights (e.g., emissions intensity) necessary to fully understand the “amount” of excluded emissions associated with derivatives and other financial activities.
We suggest the ISSB allow for the inclusion of a qualitative statement for the entity to explain the elections taken above, providing the rationale to support exclusion.
Should the Board insist on requiring these quantitative disclosures, we do appreciate the flexibility offered in determining what constitutes the "amount" excluded and support the inclusion of the illustrative examples in paragraph BC23. Our members noted that aligning the definition of derivatives with IFRS 9 Financial Instruments would ensure consistency for entities applying IFRS standards.
2a. Use of Alternate Industry Classification Systems
We broadly agree with the proposed amendment to allow the use of industry classification systems other than the Global Industry Classification Standard (GICS) which would address the cost and operational burden concerns raised by the ISSB Board Member.
Canadian banks generally rely on Standard Industrial Classification (SIC) codes, North American Industry Classification System (NAICS), or internal classification systems used for credit risk management. For climate reporting and financed emissions calculation purposes, we adapt these classification systems by applying manual reclassifications to better reflect the emissions associated with the activities of the underlying companies. The adaptations create internal consistency between the climate risk management processes and climate reporting. Thus, regardless of any industry classification system applied, there will likely be a need for manual adjustments.
Below are some examples, noting these can differ from bank to bank:
- Provincial power utilities classified under "Public Sector" for credit risk management and financial reporting are recategorized as "Power and Utilities" for GHG financed emissions calculation purposes
- Aviation leasing companies classified under "Leasing & Financing" for credit risk management and financial reporting are recategorized as "Aviation" for GHG financed emissions calculation purposes
- Captive financing within the automotive sector classified as "Financing Companies" for credit risk management and financial reporting purposes are recategorized as “Automotive” for GHG emissions calculation purposes
In Canada, banks are supervised by the Office of the Superintendent of Financial Institutions (OSFI). When applying the proposed amendments, the hierarchy is operationally complex.
- Canadian banks are currently not applying GICS to classify their lending or investing activities
- For regulatory climate reporting, OSFI supports the use of NAICS but does not mandate it
- For certain regulatory reports, OSFI does mandate the use of NAICS and SIC; thus, for simplicity, we disaggregate using the same industry classification systems for financial reporting purposes
- In the banking industry, there are also extensive regulations to consider when determining whether a jurisdictional requirement exists, including OSFI and Basel frameworks
Thus, it is unclear if jurisdictional authorities require the use of a particular industry classification standard for financial reporting disclosures.
Another example of the challenge presented by the current drafting is where applying the hierarchy in paragraph B62B could lead to the required use of GICS even if it is not the predominantly used classification system across a consolidated group. There could be a scenario where a subsidiary is required to use GICS because of local regulatory requirements and the current proposed wording in paragraph B62B(a) would require the consolidated group to follow suit. This could result in significant cost and effort to transition the group, creating an unnecessary burden as well as introducing confusion and inconsistency with the industry classification system(s) used in other reporting contexts, including general-purpose financial reporting to investors.
Due to the challenges noted above, we strongly support removing the hierarchy altogether and allowing entities to exercise judgment in selecting the most appropriate industry classification system, including the use of an industry classification methodology that is consistently applied for climate reporting purposes.
2b. Disclosure of Industry Classification System Used
We broadly agree with the proposed disclosure requirement in paragraph B62C, as it promotes transparency and accountability. This approach better reflects current practices and, in our view, enhances the decision-usefulness of climate disclosures by more accurately representing entities’ emissions profiles, without compromising comparability.
3. & 4. Jurisdictional Relief on GHG Protocol and Global Warming Potential (GWP)
We broadly agree and support the jurisdictional relief proposed for both the GHG Protocol Corporate Standard and GWP values, particularly where alignment with domestic regulatory frameworks (e.g., OSFI Guideline B-15 Climate Risk Management in Canada) is required.
5. Effective Date
We broadly agree with the proposed approach to apply the amendments as soon as practicable with early application permitted.
We thank the ISSB for its ongoing collaboration with the global financial community. As always, we welcome further dialogue to support the development of robust and globally interoperable sustainability standards.
If you have any questions or comments, please do not hesitate to contact me at dhannah@cba.ca or 647-730-4760.
Sincerely,
Darren Hannah
1 The Canadian Bankers Association is the voice of more than 60 domestic and foreign banks that help drive Canada’s economic growth and prosperity. The CBA advocates for public policies that contribute to a sound, thriving banking system to ensure Canadians can succeed in their financial goals. www.cba.ca