- IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information
- IFRS S2 Climate-related Disclosures
Outline of the Standards
ISSB Standards ask companies to disclose sustainability risks and opportunities that may arise from their sustainability-related impacts that could be decision useful for investors and other capital providers. The first two issued on 26 June are designed to be applied together. TCFD reporters will be familiar with the architecture of governance, strategy, risk management, and metrics and targets.
It is important to note that these Standards are meant to be ‘interoperable’ with other standards that are designed to serve a broader set of stakeholders, such as GRI; but how this will work in practice is still a bit of an unknown.
- Sets the ‘new global baseline’ that reimagines value on the balance sheet.
- Requires companies to disclose material information about the sustainability-related risks and opportunities to which they are exposed over the short, medium, and long term that could affect cash flows, their access to finance or cost of capital over the short, medium or long term.
- Sets out the specific climate disclosures requirements for identifying, measuring and disclosing this information.
- Companies reporting against this Standard need to be fully reporting against the TCFD. This is because the ISSB has been formally requested to take over the monitoring and responsibilities of the TCFD from 2024.
Why should companies align?
The Standards are effective for annual reporting periods beginning on or after 1 January 2024. They are not mandatory for reporting unless they are adopted by governments but may be used voluntarily by companies. However, the UK Government has indicated its intention for UK companies to adopt the Standards and is in the process of setting up an appropriate endorsement mechanism. So, it is expected to become mandatory soon!
Where should companies start?
- If you haven’t done so already, carry out a materiality assessment that is specific to sustainability risks and opportunities. While the ISSB Standards require only a single, financial materiality approach, this was the subject of much debate and dismay among sustainability stakeholders – so from our perspective a double materiality approach is still the best and most robust approach.
- If you have never reported to any kind of sustainability framework before, conduct a gap analysis for your approach to sustainability, including the governance processes you use to track sustainability-related risk and opportunities.
Whether you are a first-time reporter or have been producing a sustainability report for years, these new Standards are changing the way companies need to think about and report on sustainability. If you need help thinking about how you can prepare, please get in touch with email@example.com