Following a recent consultation on its future priorities, the International Sustainability Standards Board (ISSB) has announced two projects to look at disclosure on risks and opportunities associated with nature and human capital.

They will focus on the common information needs of investors in assessing how the risks and opportunities associated with nature and human capital can reasonably be expected to affect a company’s prospects.

The ISSB will take a similar approach in its inaugural IFRS Sustainability Disclosure Standards, by potentially building from relevant pre-existing initiatives. This includes those already under its purview – the Sustainability Accounting Standards Board (SASB) Standards and Climate Disclosures Standards Board (CDSB) guidance. It will also include relevant aspects of the work of the Taskforce on Nature-related Financial Disclosures (TNFD).

Disclosure of material information covering all sustainability-related risks and opportunities is already required under IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information. In meeting this requirement, companies are asked to refer to sources of guidance (including the SASB Standards) to provide appropriate disclosures beyond climate. These new projects are the start of a process to develop standards on more specific disclosures.

Possible standard-setting

Through the research projects, the ISSB will assess and define the limitations with current disclosures in these areas, identifying possible solutions and deciding whether standard-setting is required.

At board meetings to discuss the outcome of its agenda consultation, the ISSB decided to place a high level of focus on activities to support the implementation of its inaugural standards – IFRS S1 and IFRS S2 Climate-related Disclosures. The two research projects plus work to enhance the SASB Standards will be the ISSB’s other areas of focus. 

Informed by market feedback, the ISSB decided not to research the risks and opportunities associated with human rights, beyond risks and opportunities relating to a company’s own workforce and workers in its value chain, or integration in reporting at this time. However, the ISSB agreed to closely monitor developments in these important areas and may consider including them in a future agenda consultation.

The ISSB expects to publish a summary of the feedback on its agenda consultation in June, together with its response to the feedback and its work plan for the next two years.

“Beyond climate, we are committed to building out the global baseline of sustainability-related financial disclosure to meet the needs of investors,” says ISSB Chair Emmanuel Faber. “Feedback indicated a significant and growing need among investors for improved disclosures around biodiversity, ecosystems and ecosystems services as well as human capital, as a key source of value for companies.”

Investor information

Industry-specific SASB Standards continue to be used as a cost-effective way of providing decision-useful information to investors, he adds. “We are committed to enhancing the SASB Standards further given they will also support our new research areas. We look forward to sharing our work plan for the next two years in June.”

Laura Woods, ICAEW’s Technical Manager, Corporate Reporting, says: “We are pleased that the ISSB has decided to prioritise implementation activities; something we have strongly encouraged to date. Successful implementation of its first two standards is key to ensuring a strong foundation for future topical standards. 

“We also welcome the ISSB’s intention to go beyond climate and make progress on nature and human capital, two important topics that are critical areas of sustainability reporting. ICAEW is committed to supporting the ISSB with its ongoing implementation and research activities.” 

Toby Roxburgh, Nature and Biodiversity Manager at ICAEW, says: “The ISSB’s announcement is an important step towards fully incorporating nature and social dimensions in its standards. It’s an ambitious agenda and will increase focus on the need to consider impacts on the environment and people. 

“This is an issue of growing investor concern as poorly performing businesses become an increasingly risky bet due to changing regulation and public mood. It’s also good to see the emphasis on human capital, though it will be difficult to avoid touching on human rights as part of this. We welcome the ISSB’s commitment to tackling these fundamentally important topics and look forward to continuing to support it.”

The ISSB’s announcement was also welcomed by the TNFD, which published its final recommendations in September 2023 to enable global corporates and financial institutions to begin reporting and managing nature-related issues. As the TNFD emphasises, the ISSB’s new research on nature will help towards achievement of Target 15 of the Global Biodiversity Framework, under which nearly 200 governments have committed to introduce mandatory reporting of risks, dependencies and impacts by large companies and finance institutions. See the TNFD’s press release.