This document outlines responses provided by Philip Morris International, Inc. to theInternational Sustainability Standards Board (ISSB) of the IFRS Foundation on July 29, 2022
in response to public consultation on its Exposure Draft on IFRS S2 Climate-related
Disclosures. It should be read in conjunction with a publicly available cover letter co-signedby Emmanuel Babeau, CFO and Jennifer Motles, CSO. Text in blue indicates company
responses.

Question 1—Objective of the Exposure
Paragraph 1 of the Exposure Draft sets out the proposed objective: an entity is required todisclose information about its exposure to climate-related risks and opportunities, enablingusers of an entity’s general purpose financial reporting:to assess the effects of climate-related risks and opportunities on the entity’s enterprisevalue;
to understand how the entity’s use of resources, and corresponding inputs, activities,
outputs and outcomes support the entity’s response to and strategy for managing its
climate-related risks and opportunities; andto evaluate the entity’s ability to adapt its planning, business model and operations toclimate-related risks and opportunities.
Paragraphs BC21–BC22 of the Basis for Conclusions describe the reasoning behind the
Exposure Draft’s proposals.
(a) Do you agree with the objective that has been established for the Exposure Draft? Whyor why not?
Broadly agree.
It would be useful to define the difference between “outputs” and “outcomes.” Similar to
the general disclosure requirements exposure draft, if this is meant to go in the
management report the threshold for significance and materiality would need to beclarified. Voluntary application outside the management report should be made possible for
U.S. companies.
(b) Does the objective focus on the information that would enable users of general purpose
financial reporting to assess the effects of climate-related risks and opportunities onenterprise value?
Broadly agree.
(c) Do the disclosure requirements set out in the Exposure Draft meet the objectives
described in paragraph 1? Why or why not? If not, what do you propose instead andwhy?
Broadly agree.

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There is a risk that the litigious nature in the U.S. could lead to boilerplate disclosure,
limiting the decision-usefulness of the information disclosed.

Question 2—GovernanceParagraphs 4 and 5 of the Exposure Draft propose that an entity be required to disclose
information that enables users of general purpose financial reporting to understand thegovernance processes, controls and procedures used to monitor and manage climaterelated risks and opportunities. To achieve this objective, the Exposure Draft proposes thatan entity be required to disclose information about the governance body or bodies (which
can include a board, committee or equivalent body charged with governance) with oversightof climate-related risks and opportunities, and a description of management’s role regarding
climate-related risks and opportunities.
The Exposure Draft’s proposed governance disclosure requirements are based on therecommendations of the TCFD, but the Exposure Draft proposes more detailed disclosure onsome aspects of climate-related governance and management in order to meet the
information needs of users of general purpose financial reporting. For example, theExposure Draft proposes a requirement for preparers to disclose how the governancebody’s responsibilities for climate-related risks and opportunities are reflected in theentity’s terms of reference, board mandates and other related policies. The related TCFD’s
recommendations are to: describe the board’s oversight of climate-related risks andopportunities and management’s role in assessing and managing climate-related risks andopportunities.
Paragraphs BC57–BC63 of the Basis for Conclusions describe the reasoning behind the
Exposure Draft’s proposals.
Do you agree with the proposed disclosure requirements for governance processes, controls
and procedures used to monitor and manage climate-related risks and opportunities? Whyor why not?
Broadly agree.

Question 3—Identification of climate-related risks and opportunities
Paragraph 9 of the Exposure Draft proposes that an entity be required to identify anddisclose a description of significant climate-related risks and opportunities and the time
horizon over which each could reasonably be expected to affect its business model, strategy
and cash flows, its access to finance and its cost of capital, over the short, medium or longterm. In identifying the significant climate-related risks and opportunities described inparagraph 9(a), an entity would be required to refer to the disclosure topics defined in theindustry disclosure requirements (Appendix B).
Paragraphs BC64–BC65 of the Basis for Conclusions describe the reasoning behind the
Exposure Draft’s proposals.

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(a) Are the proposed requirements to identify and to disclose a description of significant
climate-related risks and opportunities sufficiently clear? Why or why not?
Broadly agree.
We note the term “objectives” in paragraph BC64 but that it is not included in paragraph 9
and suggest that it be added because it is a different concept than business model, strategy,
and cash flows. Climate-related risks and opportunities can lead to changes in objectives
even if the business model and strategy remain intact. They can also lead to changes in what
objectives are set for cash flows vs. changes in what the actual cash flows turn out to be.
(b) Do you agree with the proposed requirement to consider the applicability of disclosure
topics (defined in the industry requirements) in the identification and description ofclimate-related risks and opportunities? Why or why not?
Broadly agree.
It is a good reference point, but it should be clarified if this is a requirement or a suggestion.
Do you believe that this will lead to improved relevance and comparability of disclosures?
Why or why not?
Broadly agree.
This will again depend to a large degree on the ability or willingness of U.S. companies todisclose decision-useful information on climate-related topics and the level of alignment
between the ISSB standards the proposed U.S. SEC climate-related disclosure standard.
Are there any additional requirements that may improve the relevance and comparability ofsuch disclosures? If so, what would you suggest and why?
No additional suggestions.

Question 4—Concentrations of climate-related risks and opportunities
in an entity’s value chain
Paragraph 12 of the Exposure Draft proposes requiring disclosures that are designed toenable users of general purpose financial reporting to understand the effects of significant
climate-related risks and opportunities on an entity’s business model, including in its value
chain. The disclosure requirements seek to balance measurement challenges (for example,
with respect to physical risks and the availability of reliable, geographically-specificinformation) with the information necessary for users to understand the effects ofsignificant climate-related risks and opportunities in an entity’s value chain.
As a result, the Exposure Draft includes proposals for qualitative disclosure requirements
about the current and anticipated effects of significant climate-related risks andopportunities on an entity’s value chain. The proposals would also require an entity todisclose where in an entity’s value chain significant climate-related risks and opportunities
are concentrated.

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Paragraphs BC66–BC68 of the Basis for Conclusions describe the reasoning behind the
Exposure Draft’s proposals.
(a) Do you agree with the proposed disclosure requirements about the effects of significant
climate-related risks and opportunities on an entity’s business model and value chain?
Why or why not?
Broadly agree.
We believe the standards could clarify how strategy is treated throughout. For example,
there is no question about “Strategy and decision-making” (paragraph 13). This paragraph isreferred to below in Question 5 but with a narrow focus on transition plans rather than theentity’s strategy more broadly speaking.
We would also recommend defining the term “value chain” the first time it is used soreaders are clear that it covers both “upstream” and “downstream” activities. This is implicit
in how the term is used but for many readers “value chain” connotes inputs.
Finally, it would be helpful to standardize the categories companies can use for qualitative
disclosures. The Exposure Draft currently has some examples of how the value chain
descriptions might be segmented (e.g., geography, facilities, or types of assets, etc.) that
could lead to disparate responses from reporters. We would suggest explicitly linking this toa subset of the 15 Scope 3 emissions categories in the GHG Protocol that ISSB considers
falling under the “value chain” definition for reporters to choose from.
(b) Do you agree that the disclosure required about an entity’s concentration of climaterelated risks and opportunities should be qualitative rather than quantitative? Why or
why not? If not, what do you recommend and why?
Broadly agree.
Qualitative reporting helps report users evaluate the company’s understanding of risks andopportunities (which are heavily company-specific) and contextualize the metrics andtargets set.

Question 5—Transition plans and carbon offsets
Disclosing an entity’s transition plan towards a lower-carbon economy is important for
enabling users of general purpose financial reporting to assess the entity’s current andplanned responses to the decarbonisation-related risks and opportunities that canreasonably be expected to affect its enterprise value.
Paragraph 13 of the Exposure Draft proposes a range of disclosures about an entity’stransition plans. The Exposure Draft proposes requiring disclosure of information to enable
users of general purpose financial reporting to understand the effects of climate-relatedrisks and opportunities on an entity’s strategy and decision-making, including its transition
plans. This includes information about how it plans to achieve any climate-related targets
that it has set (this includes information about the use of carbon offsets); its plans andPhilip Morris Products S.A., Avenue de Rhodanie 50, 1007 Lausanne, Switzerland
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critical assumptions for legacy assets; and quantitative and qualitative information about
the progress of plans previously disclosed by the entity.
An entity’s reliance on carbon offsets, how the offsets it uses are generated, and thecredibility and integrity of the scheme from which the entity obtains the offsets have
implications for the entity’s enterprise value over the short, medium and long term. The
Exposure Draft therefore includes disclosure requirements about the use of carbon offsets
in achieving an entity’s emissions targets. This proposal reflects the need for users ofgeneral purpose financial reporting to understand an entity’s plan for reducing emissions,the role played by carbon offsets and the quality of those offsets.
The Exposure Draft proposes that entities disclose information about the basis of theoffsets’ carbon removal (nature- or technology-based) and the third-party verification or
certification scheme for the offsets. Carbon offsets can be based on avoided emissions.
Avoided emissions are the potential lower future emissions of a product, service or project
when compared to a situation where the product, service or project did not exist, or when it
is compared to a baseline. Avoided-emission approaches in an entity’s climate-related
strategy are complementary to, but fundamentally different from, the entity’s emissioninventory accounting and emission-reduction transition targets. The Exposure Draft
therefore proposes to include a requirement for entities to disclose whether the carbon
offset amount achieved is through carbon removal or emission avoidance.
The Exposure Draft also proposes that an entity disclose any other significant factors
necessary for users of general purpose financial reporting to understand the credibility ofthe offsets used by the entity such as information about assumptions of the permanence ofthe offsets.
Paragraphs BC71–BC85 of the Basis for Conclusions describe the reasoning behind the
Exposure Draft’s proposals.
(a) Do you agree with the proposed disclosure requirements for transition plans? Why or
why not?
Broadly agree
We would emphasize the importance of separate disclosures about avoided emissions.
(b) Are there any additional disclosures related to transition plans that are necessary (orsome proposed that are not)? If so, please describe those disclosures and explain why
they would (or would not) be necessary.
Yes
We believe that changes in human capital will be needed for companies to best succeed intheir transitions to a low-carbon economy and discussions should be included in the strategy
and business model disclosures. We would suggest strengthening the wording aroundinterdependencies between capitals as part of the strategy and business model discussion
more broadly, beyond human capital considerations.

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(c) Do you think the proposed carbon offset disclosures will enable users of general purpose
financial reporting to understand an entity’s approach to reducing emissions, the role
played by carbon offsets and the credibility of those carbon offsets? Why or why not? If
not, what do you recommend and why?
Broadly agree.
(d) Do you think the proposed carbon offset requirements appropriately balance costs for
preparers with disclosure of information that will enable users of general purpose financial
reporting to understand an entity’s approach to reducing emissions, the role played bycarbon offsets and the soundness or credibility of those carbon offsets? Why or why not? If
not, what do you propose instead and why?
Other.
For a large multinational entity such as PMI that is already reporting against a range ofvoluntary standards, these requirements would incur transition costs but would not
substantially increase the ongoing reporting costs. For organizations that are smaller, or lessmature in their reporting, the proposal might present a much higher burden in terms of theinitial and ongoing investment.

Question 6—Current and anticipated effects
The Exposure Draft proposes requirements for an entity to disclose information about the
anticipated future effects of significant climate-related risks and opportunities. The
Exposure Draft proposes that, if such information is provided quantitatively, it can be
expressed as a single amount or as a range. Disclosing a range enables an entity tocommunicate the significant variance of potential outcomes associated with the monetised
effect for an entity; whereas if the outcome is more certain, a single value may be more
appropriate.
The TCFD’s 2021 status report identified the disclosure of anticipated financial effects ofclimate-related risks and opportunities using the TCFD Recommendations as an area withlittle disclosure. Challenges include: difficulties of organisational alignment, data, risk
evaluation and the attribution of effects in financial accounts; longer time horizons
associated with climate-related risks and opportunities compared with business horizons;and securing approval to disclose the results publicly. Disclosing the financial effects ofclimate-related risks and opportunities is further complicated when an entity provides
specific information about the effects of climate-related risks and opportunities on theentity. The financial effects could be due to a combination of other sustainability-relatedrisks and opportunities and not separable for the purposes of climate-related disclosure (forexample, if the value of an asset is considered to be at risk it may be difficult to separately
identify the effect of climate on the value of the asset in isolation from other risks).
Similar concerns were raised by members of the TRWG in the development of the climaterelated disclosure prototype following conversations with some preparers. The difficulty ofproviding single-point estimates due to the level of uncertainty regarding both climate
outcomes and the effect of those outcomes on a particular entity was also highlighted. As a

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result, the proposals in the Exposure Draft seek to balance these challenges with theprovision of information for investors about how climate-related issues affect an entity’s
financial position and financial performance currently and over the short, medium and longterm by allowing anticipated monetary effects to be disclosed as a range or a point
estimate.
The Exposure Draft proposes that an entity be required to disclose the effects of significant
climate-related risks and opportunities on its financial position, financial performance andcash flows for the reporting period, and the anticipated effects over the short, medium andlong term—including how climate-related risks and opportunities are included in the entity’s
financial planning (paragraph 14). The requirements also seek to address potential
measurement challenges by requiring disclosure of quantitative information unless an entity
is unable to provide the information quantitatively, in which case it shall be provided
qualitatively.
Paragraphs BC96–BC100 of the Basis for Conclusions describe the reasoning behind the
Exposure Draft’s proposals.
(a) Do you agree with the proposal that entities shall disclose quantitative information on
the current and anticipated effects of climate-related risks and opportunities unless they
are unable to do so, in which case qualitative information shall be provided (seeparagraph 14)? Why or why not?
Broadly agree.
(b) Do you agree with the proposed disclosure requirements for the financial effects ofclimate-related risks and opportunities on an entity’s financial performance, financial
position and cash flows for the reporting period? If not, what would you suggest andwhy?
Broadly agree.
(c) Do you agree with the proposed disclosure requirements for the anticipated effects ofclimate-related risks and opportunities on an entity’s financial position and financial
performance over the short, medium and long term? If not, what would you suggest andwhy?
Broadly agree.

Question 7—Climate resilience
The likelihood, magnitude and timing of climate-related risks and opportunities affecting an
entity are often complex and uncertain. As a result, users of general purpose financial
reporting need to understand the resilience of an entity’s strategy (including its businessmodel) to climate change, factoring in the associated uncertainties. Paragraph 15 of the
Exposure Draft therefore includes requirements related to an entity’s analysis of theresilience of its strategy to climate-related risks. These requirements focus on:

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•
•
•
•

what the results of the analysis, such as impacts on the entity’s decisions andperformance, should enable users to understand; andwhether the analysis has been conducted using:climate-related scenario analysis; oran alternative technique.

Scenario analysis is becoming increasingly well established as a tool to help entities andinvestors understand the potential effects of climate change on business models, strategies,
financial performance and financial position. The work of the TCFD showed that investors
have sought to understand the assumptions used in scenario analysis, and how an entity’s
findings from the analysis inform its strategy and risk-management decisions and plans. The
TCFD also found that investors want to understand what the outcomes indicate about theresilience of the entity’s strategy, business model and future cash flows to a range of futureclimate scenarios (including whether the entity has used a scenario aligned with the latest
international agreement on climate change). Corporate board committees (notably audit
and risk) are also increasingly requesting entity-specific climate-related risks to be included
in risk mapping with scenarios reflecting different climate outcomes and the severity of theireffects.
Although scenario analysis is a widely accepted process, its application to climate-related
matters in business, particularly at an individual entity level, and its application acrosssectors is still evolving. Some sectors, such as extractives and minerals processing, have usedclimate-related scenario analysis for many years; others, such as consumer goods ortechnology and communications, are just beginning to explore applying climate-related
scenario analysis to their businesses.
Many entities use scenario analysis in risk management for other purposes. Where robust
data and practices have developed, entities thus have the analytical capacity to undertake
scenario analysis. However, at this time the application of climate-related scenario analysis
for entities is still developing.
Preparers raised other challenges and concerns associated with climate-related scenario
analysis, including: the speculative nature of the information that scenario analysis
generates, potential legal liability associated with disclosure (or miscommunication) of suchinformation, data availability and disclosure of confidential information about an entity’s
strategy. Nonetheless, by prompting the consideration of a range of possible outcomes andexplicitly incorporating multiple variables, scenario analysis provides valuable informationand perspectives as inputs to an entity’s strategic decision-making and risk-management
processes. Accordingly, information about an entity’s scenario analysis of significant climaterelated risks is important for users in assessing enterprise value.
The Exposure Draft proposes that an entity be required to use climate-related scenario
analysis to assess its climate resilience unless it is unable to do so. If an entity is unable touse climate-related scenario analysis, it shall use an alternative method or technique toassess its climate resilience.
Requiring disclosure of information about climate-related scenario analysis as the only tool
to assess an entity’s climate resilience may be considered a challenging request from thePhilip Morris Products S.A., Avenue de Rhodanie 50, 1007 Lausanne, Switzerland
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perspective of a number of preparers at this time—particularly in some sectors. Therefore,
the proposed requirements are designed to accommodate alternative approaches toresilience assessment, such as qualitative analysis, single-point forecasts, sensitivity analysis
and stress tests. This approach would provide preparers, including smaller entities, withrelief, recognising that formal scenario analysis and related disclosure can be resource
intensive, represents an iterative learning process, and may take multiple planning cycles toachieve. The Exposure Draft proposes that when an entity uses an approach other thanscenario analysis, it disclose similar information to that generated by scenario analysis toprovide investors with the information they need to understand the approach used and the
key underlying assumptions and parameters associated with the approach and associatedimplications for the entity’s resilience over the short, medium and long term.
It is, however, recommended that scenario analysis for significant climate-related risks (andopportunities) should become the preferred option to meet the information needs of users
to understand the resilience of an entity’s strategy to significant climate-related risks. As aresult, the Exposure Draft proposes that entities that are unable to conduct climate-related
scenario analysis provide an explanation of why this analysis was not conducted.
Consideration was also given to whether climate-related scenario analysis should be
required by all entities with a later effective date than other proposals in the Exposure Draft.
Paragraphs BC86–BC95 of the Basis for Conclusions describe the reasoning behind the
Exposure Draft’s proposals.
(a) Do you agree that the items listed in paragraph 15(a) reflect what users need tounderstand about the climate resilience of an entity’s strategy? Why or why not? If not,what do you suggest instead and why?
Broadly agree.
We would advise clarifying the meaning of “strategy” and “business model” to avoid
ambiguity (especially in the second sentence of the first paragraph above: “an entity’s
strategy (including its business model).)” Throughout they are typically treated as separate
concepts, not one as a subset of the other. We would highlight that the concept of “businessmodel” is used a lot, so much so that one might infer it is more important than “strategy.”(b) The Exposure Draft proposes that if an entity is unable to perform climate-related
scenario analysis, that it can use alternative methods or techniques (for example, qualitative
analysis, single-point forecasts, sensitivity analysis and stress tests) instead of scenario
analysis to assess the climate resilience of its strategy.
(i) Do you agree with this proposal? Why or why not?
Broadly agree.
(ii) Do you agree with the proposal that an entity that is unable to use climate-related
scenario analysis to assess the climate resilience of its strategy be required to disclose thereason why? Why or why not?
Broadly agree.

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It would be useful to have some general language about what capabilities are necessary to
perform scenario analysis. We think this is important because the Exposure Draft is clearthat scenario analysis is the preferred approach, and an entity should disclose if it wasn’t
conducted. We would recommend requiring companies that are currently not using
scenario analysis to describe their plans to develop such capabilities in the future or explain
why scenario analysis is not appropriate.
(iii) Alternatively, should all entities be required to undertake climate-related scenario
analysis to assess climate resilience? If mandatory application were required, would thisaffect your response to Question 14(c) and if so, why?
We do not think scenario analysis should be mandated for all entities at this point. If it weremandatory, it would not affect our answer to Question 14(c): a phased approach to
implementation of this standard would not be appropriate.
(b) Do you agree with the proposed disclosures about an entity’s climate-related scenario
analysis? Why or why not?
Broadly agree.
(d) Do you agree with the proposed disclosure about alternative techniques (for example,
qualitative analysis, single-point forecasts, sensitivity analysis and stress tests) used forthe assessment of the climate resilience of an entity’s strategy? Why or why not?
Broadly agree
We recommend that issuers provide an explanation for why a particular method is chosen.
We would also seek clarification in case an entity uses a technique that is not on this list
(i.e., we would advise the entity to be required to explain the methodology and therationale for selecting it as a legitimate technique).
(e) Do the proposed disclosure requirements appropriately balance the costs of applying therequirements with the benefits of information on an entity’s strategic resilience toclimate change? Why or why not? If not, what do you recommend and why?
Broadly agree.
For a large multinational entity such as PMI that is already reporting against a range ofvoluntary standards, these requirements would incur transition costs but would not
substantially increase the ongoing reporting costs.

Question 8—Risk management
An objective of the Exposure Draft is to require an entity to provide information about its
exposure to climate-related risks and opportunities, to enable users of general purpose
financial reporting to assess the effects of climate-related risks and opportunities on theentity’s enterprise value. Such disclosures include information for users to understand theprocess, or processes, that an entity uses to identify, assess and manage not only climaterelated risks, but also climate-related opportunities.

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Paragraphs 16 and 17 of the Exposure Draft would extend the remit of disclosures about risk
management beyond the TCFD Recommendations, which currently only focus on climaterelated risks. This proposal reflects both the view that risks and opportunities can relate toor result from the same source of uncertainty, as well as the evolution of common practicein risk management, which increasingly includes opportunities in processes for
identification, assessment, prioritisation and response.
Paragraphs BC101–BC104 of the Basis for Conclusions describe the reasoning behind the
Exposure Draft’s proposals.
Do you agree with the proposed disclosure requirements for the risk management processes
that an entity uses to identify, assess and manage climate-related risks and opportunities?
Why or why not? If not, what changes do you recommend and why?
Broadly agree.
Most risk management processes are not focused on opportunities. The language in thestandards should therefore be more explicit about how a company is adapting risk
management processes to account for opportunities. As with strategy and business model,
the line blurs a bit. Note the sentence in BC103 “For example, risk (and opportunity)
identification and assessment inform the entity’s strategy formulation and planning, and its
establishment of performance targets.” We appreciate that it is difficult to be precise aboutsuch broad terms as “strategy” and “risk management” but allocating opportunities
primarily to risk management runs counter to how most companies operate. Including
opportunities will call for more integration between strategy formulation and risk
management than is the case in most companies.

Question 9—Cross-industry metric categories and greenhouse gas
emissions
The Exposure Draft proposes incorporating the TCFD’s concept of cross-industry metriccategories with the aim of improving the comparability of disclosures across reporting
entities regardless of industry. The proposals in the Exposure Draft would require an entity
to disclose these metrics and metric categories irrespective of its particular industry or
sector (subject to materiality). In proposing these requirements, the TCFD’s criteria wereconsidered. These criteria were designed to identify metrics and metric categories that are:••••indicative of basic aspects and drivers of climate-related risks and opportunities;
useful for understanding how an entity is managing its climate-related risks andopportunities;
widely requested by climate reporting frameworks, lenders, investors, insurance
underwriters and regional and national disclosure requirements; andimportant for estimating the financial effects of climate change on entities.

The Exposure Draft thus proposes seven cross-industry metric categories that all entities
would be required to disclose: greenhouse gas (GHG) emissions on an absolute basis and on
an intensity basis; transition risks; physical risks; climate-related opportunities; capital
deployment towards climate-related risks and opportunities; internal carbon prices; and thePhilip Morris Products S.A., Avenue de Rhodanie 50, 1007 Lausanne, Switzerland
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percentage of executive management remuneration that is linked to climate-related
considerations. The Exposure Draft proposes that the GHG Protocol be applied to measure
GHG emissions.
The GHG Protocol allows varied approaches to be taken to determine which emissions anentity includes in the calculation of Scope 1, 2 and 3—including for example, how theemissions of unconsolidated entities such as associates are included. This means that theway in which information is provided about an entity’s investments in other entities in theirfinancial statements may not align with how its GHG emissions are calculated. It also meansthat two entities with identical investments in other entities could report different GHG
emissions in relation to those investments by virtue of choices made in applying the GHG
Protocol.
To facilitate comparability despite the varied approaches allowed in the GHG Protocol, theExposure Draft proposes that an entity shall disclose:••••

separately Scope 1 and Scope 2 emissions, for:the consolidated accounting group (the parent and its subsidiaries);
the associates, joint ventures, unconsolidated subsidiaries or affiliates not includedin the consolidated accounting group; andthe approach it used to include emissions for associates, joint ventures,
unconsolidated subsidiaries or affiliates not included in the consolidated accounting
group (for example, the equity share or operational control method in the GHG
Protocol Corporate Standard).

The disclosure of Scope 3 GHG emissions involves a number of challenges, including thoserelated to data availability, use of estimates, calculation methodologies and other sources of
uncertainty. However, despite these challenges, the disclosure of GHG emissions, including
Scope 3 emissions, is becoming more common and the quality of the information provided
across all sectors and jurisdictions is improving. This development reflects an increasing
recognition that Scope 3 emissions are an important component of investment-risk analysis
because, for most entities, they represent by far the largest portion of an entity’s carbon
footprint.
Entities in many industries face risks and opportunities related to activities that drive Scope
3 emissions both up and down the value chain. For example, they may need to address
evolving and increasingly stringent energy efficiency standards through product design (atransition risk) or seek to capture growing demand for energy-efficient products or seek toenable or incentivise upstream emissions reduction (climate opportunities). In combination
with industry metrics related to these specific drivers of risk and opportunity, Scope 3 data
can help users evaluate the extent to which an entity is adapting to the transition to alower-carbon economy. Thus, information about Scope 3 GHG emissions enables entities
and their investors to identify the most significant GHG reduction opportunities across anentity’s entire value chain, informing strategic and operational decisions regarding relevant
inputs, activities and outputs.
For Scope 3 emissions, the Exposure Draft proposes that:

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•
•

•
•

an entity shall include upstream and downstream emissions in its measure of Scope
3 emissions;an entity shall disclose an explanation of the activities included within its measure of
Scope 3 emissions, to enable users of general purpose financial reporting tounderstand which Scope 3 emissions have been included in, or excluded from, thosereported;
if the entity includes emissions information provided by entities in its value chain in
its measure of Scope 3 greenhouse gas emissions, it shall explain the basis for thatmeasurement; andif the entity excludes those greenhouse gas emissions, it shall state the reason foromitting them, for example, because it is unable to obtain a faithful measure.

Aside from the GHG emissions category, the other cross-industry metric categories aredefined broadly in the Exposure Draft. However, the Exposure Draft includes nonmandatory Illustrative Guidance for each cross-industry metric category to guide entities.
Paragraphs BC105–BC118 of the Basis for Conclusions describe the reasoning behind the
Exposure Draft’s proposals.
(a) The cross-industry requirements are intended to provide a common set of core, climaterelated disclosures applicable across sectors and industries. Do you agree with the sevenproposed cross-industry metric categories including their applicability across industries
and business models and their usefulness in the assessment of enterprise value? Why or
why not? If not, what do you suggest and why?
Broadly agree.
(b) Are there any additional cross-industry metric categories related to climate-related risks
and opportunities that would be useful to facilitate cross-industry comparisons andassessments of enterprise value (or some proposed that are not)? If so, please describe
those disclosures and explain why they would or would not be useful to users of general
purpose financial reporting.
No.
(c) Do you agree that entities should be required to use the GHG Protocol to define andmeasure Scope 1, Scope 2 and Scope 3 emissions? Why or why not? Should othermethodologies be allowed? Why or why not?
Broadly agree.
We strongly believe that entities should be required to use the GHG Protocol, as it
constitutes the most established and widely used method for carbon footprint accounting
and it will be the basis, perhaps to varying degrees, for the SEC and EFRAG. Having this usedby the ISSB will greatly help to establish a global baseline for carbon emissions’ reporting.
Allowing other methodologies would run counter to the stated objective of comparability of
information.

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(d) Do you agree with the proposals that an entity be required to provide an aggregation of
all seven greenhouse gases for Scope 1, Scope 2, and Scope 3—expressed in
CO2 equivalent; or should the disclosures on Scope 1, Scope 2 and Scope 3 emissions be
disaggregated by constituent greenhouse gas (for example, disclosing methane (CH4)
separately from nitrous oxide (NO2))?
Broadly agree.
This is the most feasible in the short term.
(e) Do you agree that entities should be required to separately disclose Scope 1 and Scope 2
emissions for:(i) the consolidated entity; andBroadly agree.
(ii) for any associates, joint ventures, unconsolidated subsidiaries and affiliates? Why or why
not?
In our carbon footprint reporting, and in line with the GHG protocol, those entities overwhich our company does not have operational control are excluded from scope 1+2 but
included under scope 3 ("investment" category).
Also, separate disclosure for scope 1+2 for these entities would represent a significant scope
expansion that can create a lot of ambiguity as to which entities should be included –particularly depending on the definition used for affiliate or associate. This could also create
an issue for data collection where our company does not control the respondent and may
not have a contractual relationship to leverage for timely data.
(f) Do you agree with the proposed inclusion of absolute gross Scope 3 emissions as a crossindustry metric category for disclosure by all entities, subject to materiality? If not, what
would you suggest and why?
Broadly agree.

Question 10—Targets
Paragraph 23 of the Exposure Draft proposes that an entity be required to disclose
information about its emission-reduction targets, including the objective of the target (forexample, mitigation, adaptation or conformance with sector or science-based initiatives), as
well as information about how the entity’s targets compare with those prescribed in thelatest international agreement on climate change.
The ‘latest international agreement on climate change’ is defined as the latest agreement
between members of the United Nations Framework Convention on Climate Change(UNFCCC). The agreements made under the UNFCCC set norms and targets for a reduction
in greenhouse gases. At the time of publication of the Exposure Draft, the latest suchagreement is the Paris Agreement (April 2016); its signatories agreed to limit global warming

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to well below 2 degrees Celsius above pre-industrial levels, and to pursue efforts to limit
warming to 1.5 degrees Celsius above pre-industrial levels. Until the Paris Agreement is
replaced, the effect of the proposals in the Exposure Draft is that an entity is required toreference the targets set out in the Paris Agreement when disclosing whether or to what
degree its own targets compare to the targets in the Paris Agreement.
Paragraphs BC119–BC122 of the Basis for Conclusions describe the reasoning behind the
Exposure Draft’s proposals.
(a) Do you agree with the proposed disclosure about climate-related targets? Why or why
not?
Broadly agree.
We do not believe the above examples for establishing an objective are mutually exclusive.
We suggest a concrete list of objectives would be useful rather than saying “for example” inorder to prevent bases for setting objectives that are very bespoke and not well establishedand understood.
(b) Do you think the proposed definition of ‘latest international agreement on climatechange’ is sufficiently clear? If not, what would you suggest and why?
Broadly agree.
Some language would be useful about what process would be used to define this in a way
other than the UNFCCC. We can’t think of a likely alternative at this point but it’sconceivable another international agreement could be developed that would be morecredible and useful.

Question 11— Industry-based requirements
The Exposure Draft proposes industry-based disclosure requirements in Appendix B that
address significant sustainability-related risks and opportunities related to climate change.
Because the requirements are industry-based, only a subset will apply to a particular entity.
The requirements have been derived from the SASB Standards. This is consistent with the
responses to the Trustees’ 2020 consultation on sustainability that recommended that the
ISSB build upon existing sustainability standards and frameworks. This approach is also
consistent with the TRWG's climate-related disclosure prototype.
The proposed industry-based disclosure requirements are largely unchanged from theequivalent requirements in the SASB Standards. However, the requirements included in the
Exposure Draft include some targeted amendments relative to the existing SASB Standards.
The proposed enhancements have been developed since the publication of the TRWG's
climate-related disclosure prototype.
The first set of proposed changes address the international applicability of a subset of
metrics that cited jurisdiction-specific regulations or standards. In this case, the Exposure
Draft proposes amendments (relative to the SASB Standards) to include references tointernational standards and definitions or, where appropriate, jurisdictional equivalents.

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Paragraphs BC130–BC148 of the Basis for Conclusions describe the reasoning behind the
Exposure Draft’s proposals to improve the international applicability of the industry-based
requirements.
Do you agree with the approach taken to revising the SASB Standards to improve theinternational applicability, including that it will enable entities to apply the requirements
regardless of jurisdiction without reducing the clarity of the guidance or substantively
altering its meaning? If not, what alternative approach would you suggest and why?
Broadly agree.
We think this was very carefully done.

Question 12—Costs, benefits and likely effects
Paragraphs BC46–BC48 of the Basis for Conclusions set out the commitment to ensure that
implementing the Exposure Draft proposals appropriately balances costs and benefits.
(a) Do you have any comments on the likely benefits of implementing the proposals and thelikely costs of implementing them that the ISSB should consider in analysing the likely
effects of these proposals?
Assuming the information disclosed is decision-useful for investor audiences, we note thatthe costs are largely borne by the reporting entity, but the benefits accrue to both the entity
and the users of its reports. The proposal will clearly improve the data made available tousers and they have no required costs. Some investors may find reduced costs due to lesstime spent on purchasing third-party data, data aggregation, and trying to reconcile
information from different sources. Some may find their costs increase as they build
capacity to make better use of better data.
In terms of costs to the issuer, it is also hard here to predict the direction. PMI alreadyundertakes substantial reporting and would find any increased costs rather marginal. We
expect to benefit by having a clear standard to follow which should reduce data requests
from multiple data vendors or make it easier to decline requests for providing data. Entities
such as ours with track record on managing climate-related risks and opportunities will havethe benefit of credible data being made available to users for their decisions.
Both entities and the users of the information will have the benefit of more effective
engagement. This will result in conversations more focused on performance than datareliability and methodology, helping companies improve its management of climate-relatedrisks and opportunities.
(b) Do you have any comments on the costs of ongoing application of the proposals that the
ISSB should consider?
We simply want to note that the costs are ultimately borne by investors and so if in theaggregate they feel the benefits exceed the costs this view should dominate over entities’view if it is different. For a large multinational entity such as PMI that is already reporting
against a range of voluntary standards, these requirements would incur transition costs but

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would not substantially increase ongoing reporting costs. For organizations that are smaller,
or less mature in their reporting, the proposal might present a much higher burden in termsof the initial investment.
(c) Are there any disclosure requirements included in the Exposure Draft for which thebenefits would not outweigh the costs associated with preparing that information? Whyor why not?
No.

Question 13—Verifiability and enforceability
Paragraphs C21–24 of [draft] IFRS S1 General Requirements for Disclosure of Sustainabilityrelated Financial Information describes verifiability as one of the enhancing qualitative
characteristics of sustainability-related financial information. Verifiability helps giveinvestors and creditors confidence that information is complete, neutral and accurate.
Verifiable information is more useful to investors and creditors than information that is notverifiable.
Information is verifiable if it is possible to corroborate either the information itself or the
inputs used to derive it. Verifiability means that various knowledgeable and independent
observers could reach consensus, although not necessarily complete agreement, that a
particular depiction is a faithful representation.
Are there any disclosure requirements proposed in the Exposure Draft that would present
particular challenges to verify or to enforce (or that cannot be verified or enforced) byauditors and regulators? If you have identified any disclosure requirements that present
challenges, please provide your reasoning.
As with all narrative data, verification is especially difficult. Similarly, to the extent it has
been verified, it is difficult for regulators to assess the quality of the verification.
Quantitative data, including targets (if they are subject to verification), are easier to verify.
Scope 3 is harder than Scopes 1 and 2. For these quantitative metrics, the main challenge
would be having externally verified data ready in time for an expedited reporting calendar
as much of this information would need to rely on process or estimates if the information is
to be reported at the same time as our 10-K.
We would like to take the opportunity to discuss issues relating to verification that are notraised in the Exposure Draft: (1) Which organizations have responsibility for assuring thisdata (statutory auditor or another firm?); (2) If a firm other than the statutory auditor
provides these services for some or all sustainability information, how would that impact
the overall assurance opinion for the management report? If a separate firm provides anassurance opinion on the management report, what are the expectations for the statutory
auditor to provide an assurance opinion for the combined management report and financial
statements?; and (3) Would enforcement of these auditing standards fall within the remit of
the regulator responsible for enforcing the quality of financial audits in each jurisdiction? To
what extent would these regulators be capable of enforcing verification of sustainability
information?

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Question 14—Effective date
Because the Exposure Draft is building upon sustainability-related and integrated reporting
frameworks used by some entities, some may be able to apply a retrospective approach toprovide comparative information in the first year of application. However, it isacknowledged that entities will vary in their ability to use a retrospective approach.
Acknowledging this situation and to facilitate timely application of the proposals in the
Exposure Draft, it is proposed that an entity is not required to disclose comparative
information in the first period of application.
[Draft] IFRS S1 General Requirements for Disclosure of Sustainability-related Financial
Information requires entities to disclose all material information about sustainability-relatedrisks and opportunities. It is intended that [draft] IFRS S1 General Requirements forDisclosure of Sustainability-related Financial Information be applied in conjunction with the
Exposure Draft. This could pose challenges for preparers, given that the Exposure Draft
proposes disclosure requirements for climate-related risks and opportunities, which are asubset of those sustainability-related risks and opportunities. Therefore, the requirements
included in [draft] IFRS S1 General Requirements for Disclosure of Sustainability-related
Financial Information could take longer to implement.
Paragraphs BC190–BC194 of the Basis for Conclusions describe the reasoning behind the
Exposure Draft's proposals.
(a) Do you think that the effective date of the Exposure Draft should be earlier, later or thesame as that of [draft] IFRS S1 General Requirements for Disclosure of Sustainabilityrelated Financial Information? Why?
The same as.
We believe that the effective date should be the same for both S-1 and S-2 to avoid
duplication, considering S-2 is a subset of S-1. Implementing S-2 before S-1 could also create
the need for revisions in the year in which S2 is implemented, causing unnecessary
confusion for users and potentially harming credibility.
(b) When the ISSB sets the effective date, how long does this need to be after a final
Standard is issued? Please explain the reason for your answer including specificinformation about the preparation that will be required by entities applying the
proposals in the Exposure Draft.
To some extent this depends on when the final Standard is issued given that mostcompanies are on a calendar fiscal year. If the final Standard is issued mid-next year theearliest date of application would be fiscal year 2025. Our reasoning is that 24 months is thenecessary period of time to build up internal capabilities, data collection processes, andinternal controls and procedures, including any updates to IT systems and software thatwould be required, and to prepare for external assurance.
(c) Do you think that entities could apply any of the disclosure requirements included in the
Exposure Draft earlier than others? (For example, could disclosure requirements related

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to governance be applied earlier than those related to the resilience of an entity’s
strategy?) If so, which requirements could be applied earlier and do you believe thatsome requirements in the Exposure Draft should be required to be applied earlier thanothers?
Other.
In theory yes, but we do not support this idea. The fundamental thesis of this Exposure Draft
is about how an entity is managing climate-related risks and opportunities in an integrated
way in terms of governance, strategy, risk management, and targets and metrics. Allowing
entities to report on only a portion could lead to them needing to revise prior disclosed
information when put in the full context, creating initial confusion for the users of thisinformation and potentially harming credibility.

Question 15—Digital reporting
The ISSB plans to prioritise enabling digital consumption of sustainability-related financial
information prepared in accordance with IFRS Sustainability Disclosure Standards from theoutset of its work. The primary benefit of digital consumption of sustainability-related
financial information, as compared to paper-based consumption, is improved accessibility,
enabling easier extraction and comparison of information. To facilitate digital consumptionof information provided in accordance with IFRS Sustainability Disclosure Standards, an IFRS
Sustainability Disclosures Taxonomy is being developed by the IFRS Foundation. The
Exposure Draft and [draft] IFRS S1 General Requirements for Disclosure of Sustainabilityrelated Financial Information Standards are the sources for the Taxonomy.
It is intended that a staff draft of the Taxonomy will be published shortly after the release of
the Exposure Draft, accompanied by a staff paper which will include an overview of theessential proposals for the Taxonomy. At a later date, an Exposure Draft of Taxonomy
proposals is planned to be published by the ISSB for public consultation.
Do you have any comments or suggestions relating to the drafting of the Exposure Draft thatwould facilitate the development of a Taxonomy and digital reporting (for example, any
particular disclosure requirements that could be difficult to tag digitally)?
We are aware of the fact that narrative data can be subject to digital reporting. We are lesssure how digital reporting captures the desire for an integrated approach with connected
information.

Question 16—Global baseline
IFRS Sustainability Disclosure Standards are intended to meet the needs of the users ofgeneral purpose financial reporting to enable them to make assessments of enterprisevalue, providing a comprehensive global baseline for the assessment of enterprise value.
Other stakeholders are also interested in the effects of climate change. Those needs may be
met by requirements set by others including regulators and jurisdictions. The ISSB intends
that such requirements by others could build on the comprehensive global baseline
established by the IFRS Sustainability Disclosure Standards.

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Are there any particular aspects of the proposals in the Exposure Draft that you believe
would limit the ability of IFRS Sustainability Disclosure Standards to be used in this manner?
If so, what aspects and why? What would you suggest instead and why?
We are encouraged by the collaboration between the IFRS Foundation and GRI and the factthat the revised CSRD proposed directive (2021/0104 (COD) states that “European standards
should reduce the risk of inconsistent reporting requirements on undertakings that operate
globally by integrating the content of global baseline standards to be developed by the ISSB,
to the extent that the content of the ISSB baseline standards is consistent with the EU’s legal
framework and the objectives of the European Green Deal.” We believe this will be criticalto the success of setting a global baseline and encourage ISSB to engage with EFRAG. We
also believe interoperability must be maintained between the ISSB standards and the
proposed U.S. SEC climate-related disclosures standard.

Question 17—Other comments
Do you have any other comments on the proposals set out in the Exposure Draft?
Our general observations will be presented in a public comment letter posted shortly after
our survey responses.

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