ISSB issues inaugural global sustainability disclosure standards

The ISSB has released its inaugural standards, namely IFRS S1 and IFRS S2. This development marks a significant milestone in the realm of sustainability-related disclosures in global capital markets. The introduction of these standards is expected to enhance trust and confidence in company disclosures pertaining to sustainability, thus enabling better-informed investment decisions.
The development of IFRS S1 and IFRS S2 by the ISSB was carried out in response to calls from various influential bodies such as the G20, the FSB, IOSCO, as well as leaders in the business and investor community. Extensive market feedback was taken into consideration during their development. The ISSB Standards are designed to ensure that sustainability-related information is provided alongside financial statements, within the same reporting package. These standards can be applied in conjunction with any accounting requirements and are built upon the foundational concepts of the IFRS Accounting Standards, which are mandated by over 140 jurisdictions worldwide. As such, the ISSB Standards have global applicability and serve as a universal baseline.
One of the notable aspects of these standards is that they establish a common language for disclosing the impact of climate-related risks and opportunities on a company’s future prospects. By doing so, they bring about a new era of sustainability-related financial disclosures across capital markets worldwide. The objective is to improve transparency and ensure that relevant information is provided to investors to facilitate their decision-making processes.
IFRS S1, titled „General Requirements for Disclosure of Sustainability-related Financial Information“, lays down a set of disclosure requirements intended to enable companies to communicate with investors regarding the sustainability-related risks and opportunities they encounter in the short, medium, and long term. These requirements are designed to ensure that companies furnish investors with information that is pertinent to their decision-making processes.
IFRS S2, named „Climate-related Disclosures“, provides specific disclosures related to climate issues and is meant to be used alongside IFRS S1. Both IFRS S1 and IFRS S2 incorporate the recommendations put forth by the TCFD.
With the issuance of IFRS S1 and IFRS S2, the ISSB will collaborate with jurisdictions and companies to facilitate their adoption. This will involve establishing a Transition Implementation Group to support companies in applying the standards, as well as launching capacity-building initiatives to ensure effective implementation. Additionally, the ISSB will continue to engage with jurisdictions that wish to introduce additional disclosures beyond the global baseline. Collaborative efforts with the GRI will also be pursued to promote efficient and effective reporting when combining the ISSB Standards with other reporting standards.
Please note that you must be a registered user of the IFRS website to access the standards. We have therefore refrained from attaching them to this event.
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The ISSB is also seeking feedback on its priorities for the next two-year work plan. They are particularly interested in input on four potential projects related to biodiversity, ecosystems, human capital, human rights, and integrating sustainability information in financial reporting. The ISSB aims to address investor concerns and enhance decision-making processes by focusing on these areas. They value stakeholder feedback and aim to refine their work plan to meet the evolving needs of the investment community. The consultation period ends on 1 September 2023.
Stakeholders can respond to the Request for Information by submitting a survey (preferred).
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The ISSB has formulated the following 10 key points to better specify the IFRS S1 and IFRS S2 Standards:
1. Global Disclosure Standards: ISSB Standards offer a unified and global baseline for sustainability disclosures in capital markets. Additional jurisdictional requirements can be implemented on top of this global baseline.
2. International Support: The ISSB’s work has gained strong support from various stakeholders worldwide, including investors, companies, policy makers, market regulators, and international organizations such as the International Organization of Securities Commissions (IOSCO), the Financial Stability Board, the G20, and the G7 Leaders.
3. Disclosure of Decision-Useful, Material Information: The ISSB Standards prioritize material, proportionate, and decision-useful information for investors. By initially focusing on climate-related disclosures, companies can gradually incorporate their sustainability disclosures.
4. Building on Existing Initiatives: The ISSB Standards build upon and consolidate recommendations and frameworks such as the Task Force on Climate-related Financial Disclosures (TCFD), SASB Standards, CDSB Framework, Integrated Reporting Framework, and World Economic Forum metrics. This consolidation aims to streamline sustainability disclosures, enabling companies to leverage their previous investments in this area.
5. Reducing Duplicative Reporting: The baseline approach of ISSB Standards facilitates global comparability in financial markets. Jurisdictions can develop additional requirements if necessary, addressing public policy or broader stakeholder needs. This approach minimizes duplicative reporting for companies operating under multiple jurisdictional requirements.
6. Facilitating Global Communication: ISSB Standards have been designed to provide reliable information to investors, allowing companies to effectively communicate their identification and management of sustainability-related risks and opportunities over short, medium, and long terms on a global scale.
7. Connections with Financial Statements: The ISSB Standards require information to be presented alongside financial statements as part of the same reporting package. While they are compatible with any accounting requirements, they are built on the foundational concepts of International Financial Reporting Standards (IFRS) Accounting Standards, which are already mandated by over 140 jurisdictions.
8. Rigorous Consultation Process: The development of ISSB Standards followed an inclusive and transparent due process, similar to that used for IFRS Accounting Standards. The ISSB received more than 1,400 responses to its proposals, and all papers, feedback, and technical decision-making processes are publicly available online.
9. Interoperability with Broader Sustainability Reporting: The ISSB collaborates with the Global Reporting Initiative (GRI) to ensure compatibility with GRI standards. This partnership aims to reduce the reporting burden for companies that adopt both ISSB and GRI Standards for their sustainability reporting.
10. Partnership for Capacity Building: The ISSB recognizes its responsibility beyond standard setting. It has announced plans for a capacity building partnership program, which aims to establish resources for high-quality and consistent reporting across developed and emerging economies. This initiative was announced during COP27.
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See also
IFRS Issued Standards
IFRS Sustainability Disclosure Standards – Effects Analysis
IFRS Sustainability Disclosure Standards – Project Summary
IFRS Sustainability Disclosure Standards – Feedback Statement
IFRS Sustainability Standards Navigator
Speech by ISSB Chair Emmanuel Faber at the IFRS Foundation Conference: A new common language to build more resilient economics
Watch two high-level webcasts on IFRS S1 and IFRS S2, hosted by ISSB Vice-Chair Sue Lloyd