The International Sustainability Standards Board (ISSB) has taken a significant step towards promoting transparency and accountability in sustainability reporting. Specifically, ISSB has issued its first-ever global sustainability disclosure standards. These standards, IFRS S1 and IFRS S2, mark the beginning of a new era in disclosing sustainability-related information in capital markets worldwide. Consequently, the ISSB aims to enhance trust and confidence in corporate disclosures. In addition to this, they seek to empower investors to make informed decisions. The goal is to do so by providing a common language for companies to communicate their climate-related risks and opportunities
IFRS S1 and IFRS S2
- IFRS S1. It establishes a set of disclosure requirements that enable companies to communicate sustainability-related risks and opportunities over the short, medium, and long term. The aim is to provide useful information to investors, facilitating a better understanding of how sustainability factors impact a company’s prospects.
- IFRS S2. It focuses specifically on climate-related disclosures and is designed to complement IFRS S1, ensuring a comprehensive approach to sustainability reporting.
- Both fully incorporate the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD).
Development and Launch
The ISSB developed these standards in response to the growing demand for consistent and comparable sustainability-related disclosures. With extensive market feedback, the ISSB aims to establish a global baseline for reporting sustainability information. This move has gained the support of the G20, the Financial Stability Board, and the International Organization of Securities Commissions (IOSCO).
The official launch of the ISSB Standards was led by ISSB Chair Emmanuel Faber at the IFRS Foundation’s annual conference 26-27 June 2023. At the event, Faber highlighted the significant role that these standards play in ensuring globally comparable information about sustainability-related risks and opportunities. This is crucial for investment decision-making.
Adoption and Implementation
Now that IFRS S1 and IFRS S2 are issued, the ISSB plans to collaborate with jurisdictions and companies to support the adoption of these standards. To facilitate this process, the ISSB will establish a Transition Implementation Group and launch capacity-building initiatives to aid effective implementation. Moreover, the ISSB is open to working with jurisdictions interested in additional disclosures beyond the global baseline and partnering with the Global Reporting Initiative (GRI). ISSB also aims to ensure efficient and effective reporting when combining the ISSB Standards with other reporting frameworks.
Various influential leaders and organizations have praised the ISSB’s initiative.
Erkki Liikanen, Chair of the IFRS Foundation Trustees, said:
“The global baseline approach, supported by the G20 and others, will provide investors with globally comparable sustainability-related disclosures that have the potential to move market prices, without constraining jurisdictions from requiring additional disclosures. This will help companies and investors by tackling duplicative reporting.”
Jean-Paul Servais, Chair of the International Organization of Securities Commission (IOSCO), said:
“IOSCO has been actively involved in the IFRS Foundation’s consideration of whether and how to apply its trusted reputation and internationally renowned global standard-setting process to the topic of sustainability disclosures. We commend the leadership of the ISSB for the pace and quality of their work. IOSCO is conducting an independent assessment of the ISSB Standards, with a view to completing this review promptly.”
The endorsements from diverse stakeholders support the importance of these standards in driving sustainable value creation.
The release of IFRS S1 and IFRS S2 by the ISSB signifies a significant milestone in advancing sustainability reporting worldwide. These standards establish a common language for disclosing climate-related risks and opportunities. This enhances transparency, accountability, and comparability in corporate sustainability reporting. The ISSB supports the adoption and implementation of these standards. Therefore, the global business community can look forward to a more comprehensive and consistent understanding of sustainability’s impact on companies’ prospects. Ultimately, this promotes a sustainable global economy.
For more information on these newly established standards continue reading here.
