IFRS S1, which outlines general requirements for disclosure of sustainability-related financial information, emphasizes the disclosure of material information about sustainability-related risks and opportunities. It also highlights the need for consistency and connections between financial statements and sustainability disclosures.
IFRS S2 focuses specifically on climate-related disclosures. It incorporates the Task Force on Climate-Related Financial Disclosures (TCFD) recommendations and includes industry-based disclosure requirements, such as financed emissions. This standard requires the disclosure of information about physical risks, transition risks, and climate-related opportunities.
To prepare for the implementation of the IFRS Sustainability Disclosure Standards, companies are advised to evaluate their internal systems and processes for collecting sustainability-related information and consider the risks and opportunities affecting their business. Additionally, adopting the SASB Standards, which provide industry-based disclosure standards, and implementing the TCFD Recommendations can help companies stay ahead and provide investors with relevant and comparable sustainability information.
ESG in Maldives
State Owned Enterprises (SOEs)
In the Maldives, state-owned enterprises (SOEs) are governed by the Privatisation and Corporatisation Board (PCB). The PCB has issued a Code of Corporate Governance specifically tailored for SOEs, with the primary objective of ensuring their efficient operation and enhancing performance through increased accountability, transparency, and improved practices at the board level, as well as in areas such as internal controls, internal audit, and risk management.
Within this Code of Corporate Governance, Chapter 7 places significant emphasis on Integrated Sustainability Reporting for SOEs. The code mandates that all SOEs report at least annually to their stakeholders on their policies and practices pertaining to various ESG related areas, including ethics, environment, health and safety, and social issues.
Public Limited Companies (PLCs)
In the Maldives, there is significant emphasis placed on the reporting of corporate governance matters within the framework of Environmental, Social, and Governance (ESG). The Capital Market Development Authority (CMDA), the governing body for all listed companies in the country, has implemented a principles-based Corporate Governance Code that is applicable to all listed companies, regardless of their business nature, detailing the governance requirements.
Effective from January 1st, 2023, sustainability reporting requirements have become mandatory for all listed companies operating in the Maldives as per CMDA CG Code. As part of these requirements, companies are obliged to develop and disclose their "sustainability policy," encompassing essential elements such as risk mitigation strategies, performance data, and other material information. The objective of this policy is to enhance stakeholders' comprehension of corporate performance and its broader impact.
To aid companies in formulating and presenting their sustainability reports, they have the flexibility to choose between internationally recognized reporting guidelines or develop their own internal framework. Notable internationally accepted reporting guidelines include the Global Reporting Initiative (GRI) sustainability reporting guidelines, United Nations Global Compact (UNGC) reporting principles, and OECD guidelines for multinational enterprises.
Way Forward in Maldives
IFRS Sustainability Disclosure Standards, S1 and S2 will become effective on 1st January 2024. Maldives is expected to incorporate the standards into the reporting mechanism to harmonise the ESG-related disclosures across entities.
For further reading on IFRS S1 and S2, refer to the attached pdf.