The International Sustainability Standards Board (ISSB) has published its first two finalised standards: S1 General Requirements for Disclosure of Sustainability-related Financial Information, and S2 Climate-related Disclosures.
The standards are intended to provide a comprehensive global baseline of sustainability disclosures, specifically focused on the needs of investors and the financial markets, something investors have long wanted.
The ISSB standards build on the work of other sustainability disclosure standards, such as the Climate Disclosure Standards Board (CDSB), the Task Force on Climate-related Financial Disclosures (TCFD), the Value Reporting Foundation’s Integrated Reporting Framework, and industry-based guidance from the Sustainability Accounting Standards Board (SASB).
The new S1 and S2 frameworks are intended to unite disclosure standards and make it easier for companies to report on their sustainability activities. The standards also aim to create a wide ranging, consistent and relatable disclosures for investors to understand and compare between different businesses.
“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” said Emmanuel Faber, the 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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How does this affect companies?
Although all public and private companies can apply IFRS S1 and IFRS S2, the ISSB can’t mandate the application of the standards. Companies can voluntarily apply them, and individual countries can decide whether to require listed companies to apply the standards.
ISSB Chair Emmanuel Faber said, adding the standards can be used for annual reports for 2024 onwards.
“We are committed to including reporting against UK endorsed versions of the IFRS sustainability disclosure standards launched here today,” said Joanna Penn, UK treasury minister at a launch event for the standards.
What does this mean for investors?
Global capital markets demand more consistent, comparable, and verifiable information about companies’ exposure to, and management of, sustainability-related risks and opportunities.
Having this information enables investors to make more informed decisions relating to providing resources to companies. The ISSB was created to meet this demand and should help direct capital towards sustainable objectives.
With the current voluntary adoption of the standards, investors will likely see companies approve these reporting standards, with governments potentially following suit.
This is a significant development for the sustainable finance landscape and is a key step towards ensuring investors have the information they need to make informed decisions.
