The International Sustainability Standards Board (ISSB) has issued its inaugural standards — IFRS S1 and IFRS S2 — a highly-anticipated move that will align sustainability-related disclosures in capital markets worldwide.
In a first, the ISSB Standards create a common language for disclosing the effect of climate-related risks and opportunities on a company’s prospects, says the ISSB in a June 26 statement. This will help set a global baseline for disclosures among companies.
The Standards are designed to ensure that companies provide sustainability-related information alongside financial statements in the same reporting package. They are effective for annual reporting periods beginning on or after Jan 1, 2024.
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).
“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,” says Emmanuel Faber, ISSB chair. “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.”
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Now that the Standards are issued, the ISSB says it 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 the Global Reporting Initiative (GRI) to support efficient and effective reporting when the ISSB Standards are applied in combination with other reporting standards.
The ISSB builds upon the TCFD recommendations for climate reporting, and applies them to sustainability reporting as a whole, said Tan Boon Gin, chief executive officer of Singapore Exchange S68 (SGX) RegCo, in July 2022. “So, issuers already using TCFD for climate reporting will find it familiar and relatively easier to apply it to the rest of their sustainability reporting.”
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Tan said then that the bourse will “consider very carefully” the pace and cadence at which it adopts the ISSB standards.
SGX announced in 2021 a phased approach to mandatory climate reporting based on the recommendations of the TCFD. Climate reporting is mandatory for issuers in the financial and energy industries, as well as those in the agriculture, food and forest products industry, from their financial year starting in 2023.
Faber will launch the Standards at the IFRS Foundation’s annual conference and through a week of events hosted by stock exchanges around the world, including those in Frankfurt, Johannesburg, Lagos, London, New York and Santiago de Chile.
The Asean Capital Markets Forum is also hosting a launch event in Singapore on June 27, followed by technical training sessions on June 28. Scheduled to speak are Abigail Ng, executive director and head of department, markets policy and infrastructure, Monetary Authority of Singapore (MAS) and SGX RegCo’s Tan.
