On June 26, 2023, the International Sustainability Standards Board (ISSB) issued the first set of standards – IFRS S1 and IFRS S2 – opening a new era of sustainability-related information disclosure. in capital markets worldwide. The Standards will help improve trust and confidence in corporate disclosures on sustainability to inform investment decisions.
IFRS S1 provides a set of disclosure requirements designed to disclose to investors the sustainability-related risks and opportunities they face in the short, medium and long term. IFRS S2 brings together detailed climate-related disclosures and is designed for use with IFRS S1.
Since ISSB published IFRS S1 and IFRS S2 in June 2023, ISSB has received many positive responses to the Standards and momentum for their adoption has also increased.
On July 25, 2023, IOSCO called on its 130 member jurisdictions—capital markets authorities that regulate more than 95% of the world’s securities markets—to consider how they can incorporate the ISSB Standards into their respective regulatory frameworks to deliver consistency and comparability of sustainability-related disclosures worldwide.
IOSCO’s endorsement sent a strong signal to jurisdictions around the world that the ISSB Standards are fit for purpose for capital market use, enabling pricing in of sustainability-related risks and opportunities, and to facilitate enhanced data collection and analysis.
2. IFRS Foundation publishes comparison of IFRS S2 with the TCFD Recommendations
On July 24, 2023, following the Financial Stability Board’s announcement that the work of the Task force on Climate-related Financial Disclosures (TCFD) has been completed—with the ISSB Standards marking the ‘culmination of the work of the TCFD’—the IFRS Foundation published a comparison of the requirements in IFRS S2 Climate-related Disclosures and the TCFD recommendations.
The requirements in IFRS S2 are consistent with the four core recommendations and eleven recommended disclosures published by the TCFD.
Although the work of the TCFD is completed, the TCFD recommendations remain available for companies to use should they choose to. Using the recommendations is a good entry point for companies as they move to use the ISSB Standards.
3. European Commission, EFRAG and ISSB confirm high degree of climate-disclosure alignment
On July 31, 2023, The European Commission issued the European Sustainability Reporting Standards (ESRS) which come into effect in 2024.
To coincide with the publication, the European Commission, EFRAG and the International Sustainability Standards Board (ISSB) are providing an update on their discussions around alignment and interoperability between ESRS and the ISSB Standards.
The European Commission, EFRAG and the ISSB have worked jointly to improve the interoperability of their respective climate-related disclosure requirements in the overlapping climate disclosure standards. This work has successfully led to a very high degree of alignment, reduced complexity and duplication for entities wishing to apply both the ISSB Standards and ESRS.