Objective:
The purpose of Neftaly assurance is to provide stakeholders with confidence that an organization’s financial disclosures related to transition risks are reliable, accurate, and aligned with relevant reporting frameworks. Transition risks, arising from the shift to a low-carbon economy, can materially impact a company’s financial position, performance, and prospects. Assurance over these disclosures helps investors, regulators, and other stakeholders make informed decisions.
Scope of Assurance:
Neftaly assurance engagements cover:
- Identification of Transition Risks – Evaluation of processes used to identify regulatory, technological, market, and reputational risks associated with climate transition.
- Quantification and Measurement – Assessment of methodologies, assumptions, and models used to estimate the financial impact of transition risks, including scenario analysis and sensitivity testing.
- Disclosure Accuracy – Verification that transition risk-related financial disclosures in financial statements or sustainability reports are complete, consistent, and materially accurate.
- Alignment with Standards – Ensuring disclosures comply with relevant frameworks, such as TCFD (Task Force on Climate-related Financial Disclosures), ISSB standards, or local regulatory requirements.
- Governance and Controls – Review of internal controls over transition risk assessment and reporting processes, including management oversight and data quality assurance.
Assurance Approach:
Neftaly assurance follows a structured, risk-based approach:
- Planning and Risk Assessment: Understanding the entity’s business model, transition strategy, and regulatory context to identify areas of highest risk.
- Evidence Gathering: Evaluating data sources, models, and management assumptions; performing tests of controls and substantive procedures.
- Analysis and Evaluation: Assessing whether financial estimates and disclosures reflect a reasonable and unbiased view of transition risks.
- Reporting: Issuing an assurance statement detailing the level of assurance provided, scope limitations, and any key findings or recommendations.
Levels of Assurance:
- Limited Assurance: Provides moderate confidence that disclosures are free from material misstatement. Procedures are primarily analytical and inquiry-based.
- Reasonable Assurance: Provides a high level of confidence. Procedures include extensive testing, validation, and verification of underlying data and models.
Key Considerations for Practitioners:
- Dynamic Regulatory Environment: Transition risk disclosure requirements may evolve rapidly; assurance engagements must remain up-to-date with emerging standards.
- Complexity of Financial Modelling: High uncertainty in estimating transition impacts requires robust validation of assumptions and scenario analysis.
- Stakeholder Expectations: Transparency, comparability, and clarity are critical for investor confidence and decision-making.
Conclusion:
Neftaly assurance enhances the credibility and reliability of transition risk-related financial disclosures. By providing independent verification and insight into the processes, assumptions, and data underlying these disclosures, Neftaly supports organizations in meeting regulatory requirements, strengthening stakeholder trust, and facilitating effective risk management in the transition to a low-carbon economy.