The International Sustainability Standards Board (ISSB)
The ISSB sits alongside the existing International Accounting Standards Board (IASB), with both standard-setting boards operating under the oversight of the IFRS Foundation. Although the ISSB and IASB are separate and independent boards, they work alongside each other to enhance interconnectedness between financial reporting and sustainability reporting.
The formation of the ISSB resulted in the consolidation of two pre-existing sustainability frameworks, namely The Climate Disclosure Standards Board and The Value Reporting Foundation’s Integrated Reporting Framework. Consequently, the Value Reporting Foundation’s SASB Standards (a set of 77 industry-based standards) were brought under the oversight of the ISSB and are now being used in the development process of the ISSB’s standards.
Although the ISSB is building on the established work of these pre-existing frameworks, it is the Task Force on Climate-related Financial Disclosures (TCFD) framework that forms the bedrock of the first two standards issued by the ISSB.
IFRS S1 and IFRS S2
The ISSB has focused its initial efforts on general disclosure requirements and climate-related reporting, issuing its first two IFRS Sustainability Disclosure Standards, IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2 Climate-related Disclosures, in June 2023.
IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information
IFRS S1 sets out the general reporting requirements. It requires an entity to disclose material information about the sustainability-related risks and opportunities to which it is exposed, including information about the entity’s governance, strategy, risk management, and metrics and targets. The standard permits reference to other standards and frameworks in the absence of topic specific IFRS Sustainability Disclosure Standards.
IFRS S2 Climate-related Disclosures
IFRS S2 requires an entity to disclose certain information about its governance, strategy, risk management and metrics and targets in respect of climate-related risks and opportunities. This includes information about physical risks (eg, extreme weather events) as well as transition risks (eg, changes in customer behaviour). An in-scope entity will also be required to disclose information on its transition planning, climate resilience as well as its scope 1, 2 and 3 emissions.
UK plan to adopt ISSB Standards
The UK Government has indicated its intention for UK companies to adopt the ISSB’s IFRS Sustainability Disclosure Standards and is in the processes of setting up an appropriate endorsement mechanism. As part of this process, the Government is establishing two advisory committees; the first to cover matters of public policy and the second to consider how the ISSB Standards fit alongside existing reporting requirements for UK companies in scope. An endorsement decision is expected to be made within 12 months of IFRS S1 and IFRS S2 being issued.
Future priorities of the ISSB
The ISSB has initially focused its efforts on general disclosure requirements and climate-related reporting. Over time, it will work towards meeting the information needs of investors on other specific environmental, social and governance (ESG) matters. In May 2023, the ISSB published its first Request for Information, Consultation on Agenda Priorities, to ask for feedback on its priorities for 2024-2026. The following potential projects have been identified by the ISSB:
- biodiversity, ecosystems and ecosystem services;
- human capital;
- human rights; and
- integration in reporting.
The feedback will help the ISSB finalise its research and standard-setting projects as well as influence the strategic direction of the ISSB’s activities.
Global alignment in sustainability reporting
Global alignment with sustainability reporting initiatives from other jurisdictions is a priority for the ISSB. In April 2022, the ISSB established a working group of jurisdictional representatives to open a dialogue for enhanced compatibility between the work of the ISSB and other standard-setters.
Meeting summaries for the Jurisdictional Working Group are available on the IFRS Foundation’s website.
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