On 25 October 2023, the European Securities and Markets Authority (ESMA) published a report: The heat is on: Disclosure of climate-related matters in the financial statements.

The report aims to assist and enhance the ability of issuers to provide more robust disclosures and create more consistency in how climate-related matters are accounted for in financial statements drawn up in accordance with International Financial Reporting Standards (IFRS).

The report focuses on disclosures related to climate matters included in the 2022 annual financial statement of European non-financial corporate issuers. However, ESMA points out that the report does not set out best practices or prescribe the way in which the disclosure of climate-related matters should be made in the financial statements.

ESMA expects issuers (including their management, supervisory boards and audit committees) and auditors to consider the illustrative examples of the report when considering how to assess and disclose the degree to which climate-related matters play a role in the preparation and auditing of IFRS financial statements.

Finally, ESMA stresses that the guidance addressing climate impacts is not exhaustive and is developing at a fast pace, so issuers should follow closely the developments of standard setters in this area and their connection with sustainability reporting