ISSB issues inaugural standard for sustainability disclosure

Posted on: June 29th, 2023

The IFRS (International Financial Reporting Standards) Foundation, which hosts the ISSB (International Sustainability Standards Board), has this week launched two new reporting standards which, if widely adopted as intended, should become significant facilitators of the transition towards more sustainable business practices.

The developments have been welcomed by the FCA .

SRI Services is also delighted to welcome this important step in the right direction and wishes those involved every success in its roll out.

Below is ‘cut and pasted’ text from the IFRS website sets out ’10 key points’ about the standards – plus further links.

IFRS text:

This week marks the issuance of the inaugural IFRS Sustainability Disclosure Standards, designed to provide a global baseline of sustainability-related disclosures for the capital markets.

Better information leads to better economic decisions. IFRS S1 requires companies to communicate the sustainability-risks and opportunities they face over the short, medium, and long term. The requirements are designed to ensure that companies provide investors information relevant to decision-making. IFRS S2 sets out specific climate-related disclosures and is designed to be used with IFRS S1. Both Standards are based on recommendations of the Task Force on Climate-related Financial Disclosures (TCFD).

Issuing these Standards is just the starting point. The ISSB is consulting on future priorities to help determine what comes next. We welcome your feedback before the consultation closes on 1 September 2023.

Here are 10 things you need to know about the ISSB’s new standards:

Global disclosure standards

ISSB Standards allow companies and investors to standardise on a single, global baseline of sustainability disclosures for the capital markets, with any additional jurisdictional requirements being built on top of this global baseline.
International support

The ISSB’s work has received strong support from investors, companies, policy makers, market regulators and others from around the world, including the International Organization of Securities Commissions (IOSCO), the Financial Stability Board, the G20 and the G7 Leaders.
Disclosure of decision-useful, material information

Focusing exclusively on capital markets means that ISSB Standards only require information that is material, proportionate and decision-useful to investors.  Moreover, by beginning with climate, companies can phase-in their sustainability disclosures.
Building on and consolidating existing initiatives

IFRS S1 and IFRS S2 are built on and consolidate the TCFD recommendations, SASB Standards, CDSB Framework, Integrated Reporting Framework and World Economic Forum metrics to streamline sustainability disclosures.  Consolidation will help companies to benefit from their investments they’ve already made in sustainability disclosures while reducing the ‘alphabet soup’ of sustainability disclosures.
Reducing duplicative reporting

The baseline approach provides a way to achieve global comparability for financial markets, and allow jurisdictions to further develop additional requirements if needed to meet public policy or broader stakeholder needs. This approach helps to reduce duplicative reporting for companies subject to multiple jurisdictional requirements.
Helping companies communicate worldwide cost-effectively

ISSB Standards have been designed to provide reliable information to investors; helping companies to communicate how they identify and manage the sustainability-related risks and opportunities they face over the short, medium and longer term.
Connections with financial statements

The information required by the ISSB Standards is designed to be provided alongside financial statements as part of the same reporting package.  ISSB Standards have been developed to work with any accounting requirements, but they are built on the concepts underpinning IFRS Accounting Standards, already required for use by more than 140 jurisdictions.
Developed through rigorous consultation

ISSB Standards have been developed using the same inclusive, transparent due process used to develop IFRS Accounting Standards – with more than 1,400 responses to the ISSB’s proposals. All ISSB papers, feedback and technical decision-making are available to view online.
Interoperability with broader sustainability reporting

The ISSB’s partnership with the Global Reporting Initiative enables the ISSB to build its requirements to be interoperable with GRI standards, helping to reduce the disclosure burden for companies using both ISSB and GRI Standards for reporting.
A partnership for capacity building

The ISSB’s responsibilities do not stop at standard setting. At COP27, the ISSB announced plans for a capacity building partnership programme, helping to establish the necessary resources for high quality, consistent reporting across developed and emerging economies.

Together, these inaugural standards and the ISSB’s capacity building programme will help build trust, confidence and much-needed global comparability to the sustainability disclosure landscape.

__________________________________________

The International Sustainability Standards Board (ISSB) issued its inaugural standards—IFRS S1 and IFRS S2—on 26 June 2023. The Standards have ushered in a new era of sustainability-related financial disclosures in capital markets worldwide. The Standards will help to improve trust and confidence in company disclosures about sustainability to inform investment decisions.

The Standards create, for the first time, a common language for disclosing the effect of climate-related risks and opportunities on a company’s prospects.

Over time we will be creating a library of resources to help companies apply ISSB Standards.

In applying IFRS S1 companies are required to consider the SASB Standards to identify risks and opportunities. SASB Standards are available to download. For guidance on how to use SASB Standards, please see the SASB Implementation Primer.

Companies may refer to and consider the applicability of:

the CDSB Framework Application Guidance for Water-related Disclosures and the CDSB Framework Application Guidance for Biodiversity-related Disclosures (collectively referred to as ‘CDSB Framework Application Guidance’);
the most recent pronouncements of other standard‑setting bodies whose requirements are designed to meet the information needs of users of general purpose financial reports; and
the sustainability-related risks and opportunities identified by entities that operate in the same industry(s) or geographical region(s).

ISSB issues inaugural standard for sustainability disclosure

Global disclosure standards

International support

Disclosure of decision-useful, material information

Building on and consolidating existing initiatives

Reducing duplicative reporting

Helping companies communicate worldwide cost-effectively

Connections with financial statements

Developed through rigorous consultation

Interoperability with broader sustainability reporting

A partnership for capacity building