The International Sustainability Standards Board (ISSB) has issued its first two standards, IFRS S1 and IFRS S2, heralding in a new era of sustainability-related disclosures in global capital markets. The Standards will aid in enhancing investor confidence and trust in the sustainability disclosures of companies. And for the first time, the Standards establish a standardized vernacular for disclosing the impact of climate-related risks and opportunities on a company’s prospects.
The Standards will be formally introduced by ISSB Chair Emmanuel Faber at the IFRS Foundation’s annual conference today 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 will also host a launch event in Singapore.
Regarding the Standards
IFRS S1 provides a set of disclosure requirements designed to enable companies to communicate with investors about the short-, medium-, and long-term sustainability-related risks and opportunities they face. IFRS S2 specifies climate-related disclosures and is intended to be used in conjunction with IFRS S1.
Both entirely incorporate the Task Force on Climate-related Financial Disclosures (TCFD) recommendations.
Providing a global baseline
The ISSB formulated IFRS S1 and IFRS S2 in response to requests from the G20, the Financial Stability Board, the International Organization of Securities Commissions (IOSCO), and corporate and investor community leaders.
This support for a comprehensive global baseline of sustainability-related disclosures demonstrates the widespread demand for a standardized understanding of how sustainability factors influence the prospects of businesses.
The ISSB Standards are intended to ensure that companies include sustainability-related information alongside their financial statements within the same reporting bundle. The Standards have been designed for use with all accounting requirements. In addition, they are based on the concepts underlying the IFRS Accounting Standards, which are mandated in over 140 jurisdictions. A genuinely global baseline is created by the ISSB Standards, which are applicable worldwide.
Adoption of the Standards
Following the publication of IFRS S1 and IFRS S2 have been issued, the International Sustainability Standards Board will engage with governments and businesses to promote their adoption. The initial stages will consist of establishing a Transition Implementation Group to assist companies applying the Standards and launching capacity-building initiatives to facilitate effective implementation.
In addition, the ISSB will continue to collaborate with jurisdictions wishing to require incremental disclosures beyond the global baseline and with GRI to facilitate efficient and effective reporting when the ISSB Standards are applied in conjunction with other reporting standards.
Emmanuel Faber, ISSB Chair, said:
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.
