IPSASB SRS 1 Climate-Related Disclosures Standard: A Breakthrough in Public Sector Financial Reporting

The issuance of Sustainability Reporting Standard (SRS) 1, Climate-related Disclosures, by the International Public Sector Accounting Standards Board (IPSASB) marks a significant development in public sector financial reporting. The Standard introduces a structured framework for disclosing climate-related risks and opportunities within General Purpose Financial Reports (GPFRs). It is applicable from 1 January 2028, with early adoption permitted, and provides temporary relief from Scope 3 disclosures during the first three annual reporting periods following initial adoption.

Introduction

Climate change has emerged as a critical macroeconomic and fiscal challenge for governments worldwide. Damage to public infrastructure from extreme weather, rising disaster-response spending, declining public health, falling workforce productivity, and decarbonisation pressures are significantly affecting public finances — even as the transition to a low-carbon economy presents opportunities for sustainable growth and resilience.

Stakeholders need reliable information on how governments identify, manage, and respond to climate-related risks and opportunities, including impacts on asset impairment, provisioning, contingent liabilities, operating costs, and revenue uncertainty. IPSASB issued SRS 1 in January 2026 to establish a structured approach for incorporating such information into GPFRs, strengthening transparency, accountability, and fiscal decision-making.

Climate-Related Disclosures in Public Financial Reporting

SRS 1 provides a comprehensive framework for reporting climate-related risks, opportunities, governance structures, and performance metrics within GPFRs. By embedding such disclosures into mainstream financial reporting, the Standard moves public sector reporting beyond narrative sustainability statements toward structured, fiscally relevant information — serving not just investors but citizens, legislators, and other stakeholders concerned with stewardship of public resources.

Significance in Public Financial Management

Climate change affects fiscal sustainability in several interconnected ways:

• Increased public expenditure: Rising frequency and intensity of climate events drive higher spending on disaster relief, rehabilitation, and crop insurance. Climate change could push up to 132 million people into extreme poverty by 2030.
• Capital investment needs: Developing countries may require roughly US$4.5–5.4 trillion annually by 2030 for climate-resilient infrastructure.
• Revenue volatility: Disruptions in agriculture, fisheries, and tourism cause wide swings in government revenue; global GDP could fall 11–14% by 2050 due to climate change.
• Long-term fiscal risk: Persistent climate shocks could push public debt to unsustainable levels, with cumulative global losses estimated at $23 trillion between 2030 and 2050.

While frameworks such as PEFA Climate, the IMF's Climate Public Investment Management Assessment (C-PIMA), and the World Bank's Disaster Risk Reduction–Public Financial Management (DRR-PFM) tool assess climate responsiveness from specific angles, SRS 1 integrates climate disclosures directly into general purpose financial reporting — enhancing relevance for budgeting, risk assessment, and policy evaluation, and establishing a common benchmark for reporting.

Overview of SRS 1

SRS 1 is organised around four core pillars: Governance, Strategy, Risk Management, and Metrics and Targets. Together, these provide a coherent framework for understanding how public sector entities identify, assess, and respond to climate-related risks and opportunities. Illustrative practices already observed in Indian public sector undertakings demonstrate alignment with the intent of this framework.

Alignment with Global Frameworks

SRS 1 is closely aligned with IFRS S2 (issued by the ISSB) and is conceptually consistent with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). All three share a common structure centred on governance, strategy, risk management, and metrics — but SRS 1 is tailored specifically to the public sector context, extending beyond investor decision-making to accountability for public resources and service delivery.

Key Differences Between SRS 1 and IFRS S2

Implementation Timeline and Challenges

SRS 1 applies to reporting periods beginning on or after 1 January 2028, with early adoption permitted and temporary Scope 3 relief for the first three reporting periods. Key implementation challenges include:

• Data quality: Fragmented digital platforms make organisation-wide climate data, especially Scope 3, hard to compile.
• Institutional coordination: Climate information is dispersed across departments, especially challenging for sub-national governments.
• Capacity constraints: Government accounting personnel often lack climate risk assessment expertise.
• System integration: Existing financial systems aren't built to capture climate data.
• Measurement complexity: Significant estimation and judgment are required, complicating audit scrutiny.
• Audit and assurance: Reliance on estimates and third-party data complicates verification of completeness and accuracy.

These challenges can be addressed through phased implementation, capacity building, and better coordination between finance and climate professionals.

Implications for Indian Public Sector Entities

India has committed to net-zero emissions by 2070 and has introduced National and State Action Plans on Climate Change, emission intensity targets, and a centralised carbon trading platform. Climate budgeting and SDG budgeting initiatives are also gaining traction.

Government entities eligible to adopt SRS 1 include the Union Government, state governments, urban local governments, public sector undertakings, and other government institutions. The Comptroller and Auditor General of India and the Controller General of Accounts can play key roles in driving adoption.

Potential Benefits

• Improved budget credibility through better identification and costing of climate risks.
• Enhanced fiscal risk management via structured disclosure of uncertainties and contingent liabilities.
• Strengthened public investment decisions through integrated climate considerations in project planning.
• Greater transparency and accountability in climate-related expenditure.
• Improved access to green and climate finance through enhanced investor confidence.

Climate-Related Disclosures: Illustrative Example

Consider a coastal state government vulnerable to rising sea levels and cyclones. Under SRS 1, it would disclose:

Role of Chartered Accountants

• Advisory: Designing climate reporting frameworks aligned with existing financial systems.
• Reporting: Ensuring consistency between climate disclosures and financial statements (provisions, contingent liabilities, asset valuations).
• Assurance: Providing independent assurance on climate disclosures.
• Risk assessment: Applying risk management thinking to identify and quantify climate-related risks.
• Capacity building: Training government officials to build institutional reporting capability.

Way Forward

SRS 1 represents the first phase of climate-related public sector reporting. Future developments are expected to include expansion to policy-level reporting, integration with budgeting and fiscal planning, development of standardised sector-specific metrics, and greater global convergence with sustainability reporting frameworks.

Conclusion

The introduction of SRS 1 marks a transformative step in public sector financial reporting. By embedding climate-related disclosures within GPFRs, the Standard enhances the relevance of financial reporting for fiscal risk management and policy decision-making. For India, it presents an opportunity to strengthen public financial governance, with Chartered Accountants playing a crucial role in enabling this transition and ensuring the credibility of climate-related disclosures.

Source: The Chartered Accountant, ICAI — May 2026 (pp. 35–39)