Karachi: The Securities and Exchange Commission of Pakistan (SECP) has issued a letter to clarify the application of the International Financial Reporting Standards (IFRS) Sustainability Disclosure Standards for listed companies. The letter, numbered SMD/PRDD/Comp(4)/2021/27 and dated July 30, 2026, aims to elucidate the implementation process as required under an earlier order dated December 31, 2024.
The SECP's clarification pertains to the phased adoption of the International Sustainability Standards Board's IFRS S1 and IFRS S2 by companies eligible for sustainability reporting. IFRS S1 focuses on the general requirements for disclosing sustainability-related financial information, while IFRS S2 deals specifically with climate-related disclosures.
According to the SECP’s latest directive, parent companies within group structures that are eligible under the previous order may choose to apply the IFRS Sustainability Disclosure Standards at the group level. This would involve a consolidated report encompassing both the parent company and its subsidiaries, thereby exempting them from submitting individual sustainability-related financial disclosures. However, if a parent company opts not to apply these standards at the group level, both the parent and its eligible subsidiaries will be required to report their stand-alone sustainability-related financial disclosures.
The directives come amidst an evolving regulatory landscape where transparency and sustainability have become focal points for listed entities. According to information available from the Pakistan Stock Exchange (PSX), the adoption and reporting of sustainability standards are increasingly significant for market participants.
The SECP's clarification aims to provide a streamlined approach for companies navigating the complexities of sustainability reporting, ensuring compliance while promoting greater corporate responsibility in environmental and climate-related matters. The decision underscores the SECP's commitment to aligning domestic financial reporting practices with international standards, fostering a more transparent and accountable market environment.