INSIGHT by ISSB
The International Sustainability Standards Board (ISSB) has issued its inaugural standards—IFRS S1 and IFRS S2 —ushering in a new era of sustainability-related disclosures in capital markets worldwide. The Standards will help to improve trust and confidence in company disclosures about sustainability to inform investment decisions.
And for the first time, the Standards create a common language for disclosing the effect of climate-related risks and opportunities on a company’s prospects.
The Standards were officially launched by ISSB Chair Emmanuel Faber at the IFRS Foundation’s annual conference (26 June 2023) and through a week of events hosted by stock exchanges around the world, including those in Frankfurt, Johannesburg, Lagos, London, New York, Santiago de Chile; the ASEAN Capital Markets Forum is also hosting a launch event in Singapore.
| About the Standards
IFRS S1 provides a set of disclosure requirements designed to enable companies to communicate to investors about the sustainability-related risks and opportunities they face over the short, medium and long term. IFRS S2 sets out specific climate-related disclosures and is designed to be used with IFRS S1.
Both fully incorporate the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD).
| A global baseline
The ISSB developed IFRS S1 and IFRS S2 with the benefit of extensive market feedback and in response to calls from the G20, the Financial Stability Board and the International Organization of Securities Commissions (IOSCO), as well as leaders in the business and investor community.
This support for a comprehensive global baseline of sustainability-related disclosures demonstrates the widespread demand for a consistent understanding of how sustainability factors affect companies’ prospects.
The ISSB Standards are designed to ensure that companies provide sustainability-related information alongside financial statements—in the same reporting package. The Standards have been developed to be used in conjunction with any accounting requirements. They are also built on the concepts that underpin the IFRS Accounting Standards, which are required by more than 140 jurisdictions. The ISSB Standards are suitable for application around the world, creating a truly global baseline.
| Adoption of the ISSB Standards
Now that IFRS S1 and IFRS S2 are issued, the ISSB will work with jurisdictions and companies to support adoption. The first steps will be creating a Transition Implementation Group to support companies that apply the Standards and launching capacity-building initiatives to support effective implementation.
The ISSB will also continue to work with jurisdictions wishing to require incremental disclosures beyond the global baseline and with GRI to support efficient and effective reporting when the ISSB Standards are applied in combination with other reporting standards.
“Today represents the outcome of more than 18 months of intense work to deliver an inaugural set of sustainability disclosure standards for the global capital markets. The ISSB Standards have been designed to help companies tell their sustainability story in a robust, comparable and verifiable manner. We have consulted closely with the market to ensure the Standards are proportionate and will result in disclosures that are relevant for investment decision-making.
We know that better information leads to better economic decisions. Today’s publication is just the starting point as we consult on our future priorities, beyond climate.”
-Emmanuel Faber, ISSB Chair
“The Monitoring Board welcomes the ISSB’s publication of IFRS S1 and IFRS S2. We will continue to collaborate closely with the leadership of the ISSB and the IFRS Foundation Trustees, and remain focused on supporting the ISSB’s ongoing and future work including on other sustainability topics beyond climate, to ensure continued robust governance, due process and oversight of the Foundation and its standard-setting boards.”
-Takashi Nagaoka, Chair of the IFRS Foundation Monitoring Board
“I welcome the publication today by the ISSB of its final standards on general sustainability-related disclosures and on climate-related disclosures. The publication of the ISSB standards marks an important milestone for achieving globally consistent disclosures.”
-Klaas Knot, Chair of the Financial Stability Board
“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.”
-Jean-Paul Servais, Chair of the International Organization of Securities Commission (IOSCO)
Please find the full announcement here.
| All opinions expressed are those of the author and/or quoted sources. investESG.eu is an independent and neutral platform dedicated to generating debate around ESG investing topics.
