ISSB Resources 2 — Questions and Answers
Question 1: Under IFRS S2, what type of scenario analysis must entities include when assessing climate-related risks to natural resources?
- Only internal proprietary scenarios developed by the entity
- At least one scenario consistent with limiting global warming to 1.5°C (Correct answer)
- Historical scenario analysis based on past climate events only
- Regulatory scenarios mandated by local governments
Correct answer: At least one scenario consistent with limiting global warming to 1.5°C
IFRS S2 requires entities to use climate-related scenario analysis that includes at least one scenario aligned with the Paris Agreement's 1.5°C warming limit.
Question 2: How does IFRS S1 define the scope of 'value chain' for resource dependency disclosures?
- Only direct Tier 1 suppliers and immediate customers
- Only the entity's own internal operations and facilities
- All activities, resources, and relationships from raw material extraction through to end use by customers (Correct answer)
- Only downstream activities from the entity's point of sale onward
Correct answer: All activities, resources, and relationships from raw material extraction through to end use by customers
IFRS S1 defines the value chain broadly to encompass all activities, resources, and relationships across the entire chain from raw material sourcing through end-customer use.
Question 3: Under ISSB standards, which industry classification system is most frequently referenced for sector-specific resource metrics?
- GRI (Global Reporting Initiative) Standards
- SASB (Sustainability Accounting Standards Board) Standards (Correct answer)
- CDP Climate Disclosure Framework
- UN Sustainable Development Goals Framework
Correct answer: SASB (Sustainability Accounting Standards Board) Standards
IFRS S1 explicitly references SASB standards as a primary source of guidance for industry-specific sustainability metrics, including those related to resource use.
Question 4: What term does IFRS S1 use to describe the inputs an entity depends on to create value over time?
- Capital assets and liabilities
- Material dependencies and exposures
- Resources and relationships (Correct answer)
- Operational inputs and throughputs
Correct answer: Resources and relationships
IFRS S1 uses the phrase 'resources and relationships' to encompass the natural, human, financial, and social capital that entities rely on to create value.
Question 5: Under IFRS S2, which metrics are required when water is identified as a material climate-related risk?
- Total water withdrawal volumes only, verified by a third party
- Only qualitative narrative description of water risks
- Metrics on water consumption, withdrawal, and discharge especially in water-stressed areas (Correct answer)
- Annual capital expenditure on water infrastructure only
Correct answer: Metrics on water consumption, withdrawal, and discharge especially in water-stressed areas
When water is material, IFRS S2 requires quantitative metrics on consumption, withdrawal, and discharge with particular emphasis on water-stressed geographic areas.
Question 6: Which physical risk category under ISSB relates to long-term, gradual changes in natural resource availability due to climate change?
- Acute physical risks
- Chronic physical risks (Correct answer)
- Transition risks
- Policy and legal risks
Correct answer: Chronic physical risks
Chronic physical risks refer to long-term, gradual climate shifts — such as changing precipitation patterns and rising temperatures — that permanently alter natural resource availability.
Question 7: Under IFRS S1, what is the primary test for determining whether resource-related sustainability information is 'material'?
- Whether the resource cost exceeds 5% of the entity's annual revenue
- Whether omitting or misstating it could reasonably affect users' decisions (Correct answer)
- Whether the relevant regulatory body has mandated its specific disclosure
- Whether peer companies in the same industry routinely report it
Correct answer: Whether omitting or misstating it could reasonably affect users' decisions
IFRS S1 defines materiality as information that, if omitted, misstated, or obscured, could reasonably be expected to influence decisions made by primary users of general purpose financial reports.
ISSB Resources 2
Under IFRS S2, what type of scenario analysis must entities include when assessing climate-related risks to natural resources?