The IFRS Foundation is a not-for-profit organisation founded in 2001 on the belief that better information supports better economic and investment decisions. As a public interest organisation, the IFRS Foundation works to achieve this vision through the development of high-quality, global standards that result in corporate information that informs investment decisions. This work contributes towards efficient and resilient capital markets, thus fulfilling society’s needs.
In its first two decades, the IFRS Foundation—through the first of its independent standard-setting boards, the International Accounting Standards Board (IASB)—transformed the global landscape of financial information by introducing IFRS Accounting Standards. The Standards have become the de facto global language of financial statements—trusted by investors worldwide and required for use by more than 140 jurisdictions.
Today, economic and investment decisions are increasingly incorporating sustainability information. Responding to the need for such information, in 2021 the IFRS Foundation created the International Sustainability Standards Board (ISSB) as a sister board to the IASB. The ISSB is responsible for developing IFRS Sustainability Disclosure Standards, to provide a truly global baseline of sustainability disclosures to further inform economic and investment decisions.
IFRS Accounting Standards and IFRS Sustainability Disclosure Standards are developed using the same rigorous, inclusive and transparent due process. The two boards ensure connectivity in their work to enable the Standards to operate effectively together and to support connected reporting, building on the IASB’s Management Commentary and on Integrated Reporting.
The better information we have, the better we can act. Our purpose is to empower people with the right information to support better economic and investment decision-making.
The Trustees announced the formation of the ISSB on 3 November 2021 at COP26 in Glasgow.
The ISSB is developing—in the public interest—standards that will result in a high-quality, comprehensive global baseline of sustainability disclosures focused on the needs of investors and the financial markets.
The ISSB has set out four objectives:
- developing standards for a global baseline of sustainability disclosures.
- meeting the information needs of investors.
- enabling companies to provide comprehensive sustainability information to global capital markets.
- facilitating interoperability with disclosures that are jurisdiction-specific and/or aimed at broader stakeholder groups.
The ISSB builds on the work of market-led investor-focused reporting initiatives—including the Climate Disclosure Standards Board (CDSB), the Task Force for Climate-related Financial Disclosures (TCFD), the Value Reporting Foundation’s Integrated Reporting Framework and industry-based SASB Standards, as well as the World Economic Forum’s Stakeholder Capitalism Metrics.
There was strong demand for the IFRS Foundation to create the ISSB.
The provision of rigorous, reliable and comparable sustainability information enables informed investment and economic decisions in the public interest. This approach promotes the proper functioning of capital markets, building trust, resilience, efficiency, transparency and accountability.
Sustainability factors are becoming a mainstream part of investment decision-making. There are increasing calls for companies to provide high-quality, globally comparable information on sustainability-related risks and opportunities, as indicated by feedback from many consultations with market participants.
There is also a strong desire to address a fragmented landscape of voluntary, sustainability-related standards and requirements that add cost, complexity and risk to both companies and investors.
The ISSB also has international political support: its work to develop the Sustainability Disclosure Standards is backed by the G7, the G20, the International Organization of Securities Commissions (IOSCO), the Financial Stability Board, African Finance Ministers and Finance Ministers and Central Bank Governors from more than 40 jurisdictions.
Emmanuel Faber is the Chair and Jingdong Hua and Sue Lloyd are Vice-Chairs of the ISSB. The ISSB comprises 14 members from across the world with a mix of professional perspectives, including investors and preparers.
The ISSB collaborates with global and regional partners, and operates a multi-location model to ensure proximity and market relevance across the world. Engagement with developing and emerging economies is an important priority for the ISSB.
In 2022, the IFRS Foundation advanced its multi-location footprint, establishing offices in Frankfurt and Montreal, and announced plans for a new office in Beijing. The IFRS Foundation also expanded its existing offices in London and Tokyo, and inherited an office in San Francisco following consolidation with the Value Reporting Foundation.
The ISSB works in close cooperation with the IASB, ensuring connectivity and compatibility between IFRS Accounting Standards and IFRS Sustainability Disclosure Standards. Each board is independent, and their Standards complement each other to provide investors and other capital market participants with comprehensive information to meet their needs. The staff of the IASB and the ISSB work in coordination at all times to ensure their Standards are compatible.
The IFRS Advisory Council and the Integrated Reporting and Connectivity Council advise the IASB and the ISSB.
The IFRS Advisory Council provides strategic support, and comprises individuals and organisations with an interest in international financial reporting. The Integrated Reporting and Connectivity Council provides advice on how the boards’ required reporting could be integrated, and how they could consider applying concepts and principles from the Integrated Reporting Framework to their projects.
Many leading investor-focused sustainability and integrated reporting organisations contribute in various ways to the work of the ISSB.
The content, staff, technical expertise and other resources of the Climate Disclosure Standards Board (CDSB) and the Value Reporting Foundation (Integrated Reporting Framework and SASB Standards) were fully consolidated into the IFRS Foundation in 2022. Both the Task Force for Climate-related Financial Disclosures (TCFD) and the World Economic Forum fully supported the creation of the ISSB.
The ISSB also works closely with Global Reporting Initiative (GRI), the leading provider of sustainability standards aimed at broader stakeholders. This collaboration aims to ensure compatibility and interconnectedness between the ISSB’s investor-focused baseline sustainability information designed to meet the needs of the capital markets, and GRI’s information intended to serve the needs of a broader range of stakeholders. This work will help reduce the reporting burden for companies and further harmonise the sustainability reporting landscape at an international level.
In March 2022, the ISSB published its first two Draft Standards for consultation:
IFRS S1: General Requirements for Disclosure of Sustainability-related Financial Information
- asks for disclosure of material information about sustainability-related risks and opportunities;
- sets out general reporting requirements;
- points to other standards and frameworks (for example, SASB Standards and CDSB Framework application guidance) in the absence of specific IFRS Standards; and
- emphasises the need for consistency and connections between financial statements and sustainability disclosures, requiring financial statements and sustainability disclosures to be published at the same time.
IFRS S2: Climate-related Disclosures
- sets out disclosure of material information about climate-related risks and opportunities;
- Incorporates TCFD Recommendations and includes SASB Standards’ climate-related industry-specific topics and metrics as illustrative guidance;
- requires disclosure of information, when material, about physical risks (for example, flood risk), transition risk (for example, regulatory change) and climate-related opportunities (for example, new technologies); and
- sets out disclosure for transition planning, climate resilience, and Scope 1, 2 and 3 emissions.
There were more than 1,400 responses to the ISSB’s consultation on its first two Draft Standards, the comment period for which ended in July 2022. Respondents welcomed the ISSB’s timely publication of the proposals and encouraged the ISSB to continue to move at pace to develop the Standards. There was support for IFRS S1 as the overarching standard, with IFRS S2 especially well received by investors.
Feedback identified a need for further support, guidance and examples to enable effective application of the proposed Standards. There were also calls for interoperability with jurisdictional developments, including the European Sustainability Reporting Standards that are under development.
Feedback also highlighted the importance of connected standard-setting between the IASB and the ISSB, to facilitate the delivery of financial and sustainability-related disclosures that work as a package and can be assured. It is important to understand that, while the IFRS Accounting Standards and IFRS Sustainability Disclosure Standards are highly compatible and can applied as a package, they do not have to be. The IFRS Sustainability Disclosure Standards are written to be applied in a GAAP-agnostic manner.
Finally, respondents said there was a need for proportional reporting requirements and capacity-building support, especially for smaller companies and in emerging economies. The ISSB is working with international partners to support capacity building and the high-quality, consistent application of the ISSB’s Standards globally.
Following extensive consultation and many months of deliberations, the ISSB took its final decisions on the technical content of its initial two Standards in February 2023. Now the Standards will go through a thorough drafting and formal ‘balloting’ approval process, ahead of their issuance towards the end of Q2 2023.
To support future adoption of the standards and high-quality disclosures, during this time, the ISSB will also focus efforts on capacity building by working with partners from jurisdictions globally to deliver education and raise awareness.
Also in Q2, the ISSB will consult on priorities beyond these initial Standards in early 2023. Based on feedback from investors and other market participants, the ISSB will seek further feedback on four projects in its upcoming consultation on agenda priorities:
- biodiversity, ecosystems and ecosystem services;
- human capital;
- human rights; and
- connectivity in reporting (a potential joint project with the IASB).
The first three projects are broader in scope than the research the ISSB has agreed to undertake on incremental enhancements that complement IFRS S2 in relation to natural ecosystems and the human capital aspects of the climate resilience transition (‘just transition’).
The project on connectivity in reporting would involve the ISSB working with the IASB to build on the IASB’s Management Commentary and the Integrated Reporting Framework.
The consultation on agenda priorities will collect further stakeholder input to inform the ISSB’s research and standard-setting priorities. The ISSB and IASB encourages all stakeholders to provide feedback on the agenda priorities. For notices of upcoming consultation periods, please subscribe to sustainability alerts via the IFRS Foundation’s notifications dashboard.
The ISSB’s work is backed by the G7, the G20, IOSCO, the Financial Stability Board, African Finance Ministers and by Finance Ministers and Central Bank Governors from over 40 jurisdictions.
IOSCO will review the Standards, once finalised, for potential IOSCO endorsement—a move that will encourage their widespread adoption.
Jurisdictions such as Australia, Brazil, Canada, Japan and South Korea are also establishing—or have established—sustainability standards boards that enable them to cooperate with the ISSB.
The ISSB is developing standards that provide a comprehensive global baseline of sustainability disclosure standards that can be mandated and combined with jurisdiction-specific requirements or requirements aimed at meeting the information needs of broader stakeholder groups beyond investors. Consistent with the approach taken for IFRS Accounting Standards issued by the IASB, it is for jurisdictional authorities to decide whether to mandate use of IFRS Sustainability Disclosure Standards issued by the ISSB.
The ISSB collaborates closely with jurisdictions to foster regulatory adoption of the IFRS Sustainability Disclosure Standards, as well as to facilitate compatibility and interoperability. This work benefits companies by improving reporting efficiency and reducing the risks of confusion for those using the information. In addition to supporting regulatory adoption, the ISSB is supporting voluntary adoption of the IFRS Sustainability Disclosure Standards, particularly for preparers in jurisdictions where the IFRS Accounting Standards are not currently mandated but where investors are seeking relevant sustainability disclosures.
The IFRS Foundation has created the Sustainability Standards Advisory Forum as a mechanism for formal engagement on standard-setting between the ISSB and jurisdictional representatives, including those from emerging markets. The Jurisdictional Working Group also continues to provide support to the ISSB.
The IFRS Foundation’s focus is on meeting the information needs of investors. Therefore, the ISSB uses the same definition of ‘material’ that is used in IFRS Accounting Standards – that is, information is material if omitting, obscuring or misstating it could be reasonably expected to influence investor decisions.
Companies should continue using and adopting the SASB Standards, TCFD Recommendations, CDSB Framework and Integrated Reporting Framework. Because the ISSB has built on these materials, efforts to apply them now are expected to help companies implement IFRS Sustainability Disclosure Standards in the future.
Companies that are new to sustainability disclosure should use 2023 to prepare for the future application of IFRS Sustainability Disclosure Standards by:
- evaluating internal systems and processes for collecting, aggregating and validating sustainability-related information across the company and its value chain;
- considering the sustainability-related risks and opportunities that affect the business;
- reviewing the ISSB’s proposed standards; and
- reviewing or using the SASB Standards and CDSB Framework (both of which support IFRS S1), TCFD Recommendations (which form the foundation of IFRS S1 and IFRS S2) and the Integrated Reporting Framework (whose concepts are reflected in IFRS S1).
It isn’t only regulatory adoption that should encourage the use of the Sustainability Disclosure Standards.
The Standards are designed to be cost-effective and have been developed with efficiency in mind, to help companies report what is needed by investors across markets globally.
The Standards are also intended to be decision-useful—providing the right information, in the right way, to support investor decision-making and facilitate international comparability to attract capital.
Furthermore, a company can avoid double-reporting by applying IFRS Sustainability Disclosure Standards. When jurisdictional requirements build on the global baseline, companies are able to meet jurisdictional requirements, while benefitting from the baseline’s efficiency and comparability.
