Who does this affect: The ISSB Sustainability Standards are available for voluntary use by public and private companies of any size. The International Organization of Securities Commissions (IOSCO) has endorsed the ISSB standards, as they have been designed to support jurisdictions in establishing or enhancing sustainability reporting requirements. Broad global use of the ISSB standards by market participants and regulators will lead to more consistent, comparable, and reliable reporting on sustainability-related financial information.
Many regulators have announced plans to consider adopting or incorporating the ISSB standards into their regulator frameworks, including Nigeria, Ghana, and Zimbabwe who have been early adopters, and Hong Kong and Singapore’s Exchanges have released consultations on ISSB-aligned reporting requirements. Countries including the UK, Japan, Canada, and Australia have also established processes for considering the standards as they shape their reporting requirements.
Why was the ISSB established: Founded by the International Financial Reporting Standards (IFRS) Foundation in November 2021 as an effort to create high-quality sustainability standards that better fulfill investors’ information needs. One of the primary goals of the ISSB is to help converge the currently fragmented reporting landscape, creating the next generation of norms for voluntary reporting.
What does it require: The ISSB’s current standards include IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2 Climate-related Disclosures. S1 sets standards for investor-focused disclosures about its material sustainability-related risks and opportunities and sustainability-related financial information. S2 sets standards for climate-related risks and opportunities, providing guidelines for identifying, measuring, and disclosing this information. Both build upon the TCFD foundation.
As it relates to GHGs, the S2 includes a requirement to disclose absolute greenhouse gas emissions for scopes 1, 2, and 3, measured in accordance with the Greenhouse Gas Protocol Corporate Standard (with limited exceptions for jurisdictional protocols). S2 also requires disclosures about how and why specific inputs, assumptions, and estimation techniques, including any changes made from prior calculations. This will drive enhanced transparency and reliability for investors, as companies will need to show the details of their carbon accounting processes to support their emissions disclosures.
When would it come into effect: As of June 2023 the rules were released, and are now available for voluntary use. They will be formally effective for use as of January 1, 2024 for preparers of any size in any jurisdiction. The ISSB has announced that companies reporting using its standards may choose to delay reporting on non-climate-related sustainability information for an extra year to enable companies to “focus initial efforts on ensuring they meet investor information needs around climate change.”
Where is reporting required: In General Purpose Financial Reporting. As jurisdictions choose to adopt, incorporate, or use the standards, their exact location will be determined by individual jurisdictions.
Original text: Exposure Draft on IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and Exposure Draft IFRS S2 Climate-related Disclosures
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