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The International Sustainability Standards Board (ISSB) in March 2022 launched a consultation on its first two proposed standards—one on climate-related disclosures and one on general sustainability-related disclosures. The proposed standards, when finalised, would form a comprehensive global baseline of sustainability-related disclosures designed to meet the information needs of investors in assessing enterprise value.

The proposed requirements in the Exposure Draft IFRS S2 Climate-related Disclosures (Climate Exposure Draft) build upon the recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD) and incorporate industry-based disclosure requirements derived from SASB Standards.

The ISSB is currently redeliberating the proposals based on feedback on the Exposure Draft, collected over a 120-day consultation, which ended in July 2022.

The proposals have been developed in response to requests from G20 leaders, the International Organization of Securities Commissions (IOSCO) and others for enhanced information from companies on sustainability-related risks and opportunities. The proposals set out requirements for the disclosure of material information about a company’s significant sustainability-related risks and opportunities that is necessary for investors to assess a company’s enterprise value.

ISSB Update September 2022

The ISSB met on 20–23 September 2022:

  • to discuss the summary of comments on its Exposure Draft IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information (draft S1) and Exposure Draft IFRS S2 Climate-related Disclosures (draft S2);
  • to discuss the proposed plan for redeliberating draft S1 and draft S2;
  • to explore amending the proposals in draft S1 and draft S2 to introduce mechanisms that allow entities with varied capabilities and preparedness to apply these proposals—reducing the potential burden on entities. These mechanisms are referred to as mechanisms for addressing ‘scalability’; and
  • to discuss the matters raised in the feedback on the proposals for financed and facilitated emissions in draft S2 and the preliminary proposed approach to redeliberations following that feedback.

Summary of comments (Agenda papers 3A and 4A)

The ISSB discussed feedback provided in comment letters and in responses to its survey on draft S1 and draft S2.

The ISSB was not asked to make any decisions.

Plan for redeliberations (Agenda Paper 3B and 4B)

The ISSB discussed how draft S1 and draft S2 should be redeliberated. In particular, the ISSB considered: what its general approach to redeliberation should be; specific topics for redeliberation; and the projects’ timings.

The ISSB tentatively decided on topics for redeliberation of both draft S1 and draft S2:

  1. scalability; and
  2. current and anticipated effects of sustainability-related and climate-related risks and opportunities on an entity’s financial performance, financial position and cash flows.

The ISSB tentatively decided on the topics for redeliberation of draft S1:

  1. enterprise value;
  2. breadth of reporting required;
  3. 'significant’ sustainability-related risk or opportunity;
  4. identifying significant sustainability-related risks and opportunities and disclosures (including using the materials of other standard-setters);
  5. application of the materiality assessment;
  6. connected information; and
  7. frequency of reporting.

The ISSB tentatively decided on topics for redeliberation of draft S2:

  1. strategy and decision-making, including transition planning;
  2. climate resilience;
  3. greenhouse gas emissions; and
  4. industry-based requirements, including financed and facilitated emissions.

All 10 ISSB members agreed with these decisions.

Scalability (Agenda Paper 3C and 4C)

The ISSB discussed how it could give more consideration to the range of capabilities and preparedness of entities around the world to apply the proposals in draft S1 and draft S2. The mechanisms the ISSB could use to address this issue are referred to as mechanisms for addressing ‘scalability’. The ISSB considered the factors to be used to evaluate which scalability mechanisms would be appropriate for responding to any identified scalability challenges.

The ISSB tentatively decided that mechanisms should be identified to enable disclosure requirements to be scalable, when relevant. In particular, the ISSB considered whether:

  1. to amend the proposed disclosure requirements so that an entity, based on specific criterion related to scalability, would not be required to provide a particular disclosure (or would be required to provide an alternative disclosure that is simpler to apply);
  2. to amend the proposed disclosure requirements so that an entity that meets a criterion of being unable to provide a disclosure is required to explain how it meets the criterion;
  3. to provide materials to assist preparers in the application of the standards, which include the ISSB providing guidance to support application;
  4. to provide materials to assist preparers in the application of the standards, which include referring to other sustainability-related protocols, frameworks and guidance as resources for further guidance, measurement methodologies and inputs to calculations to support application; and
  5. to amend the proposed disclosure requirements to differentiate the application by entities, by identifying requirements that are ‘basic’ and ‘advanced’ that could be utilised by a jurisdiction for a transition period.

The ISSB tentatively decided on factors to assess which scalability mechanisms are appropriate for responding to specific scalability challenges:

  1. whether the scalability challenges are temporary (in other words transitional) or more permanent (for example, due to data availability);
  2. the extent to which the set of entities with a scalability challenge can be specifically identified;
  3. the extent of available market guidance, methods, industry-practices and techniques; and
  4. the maturity of the underlying methods and techniques that underpin the disclosure requirement.

All 10 ISSB members agreed with this decision.

Financed and facilitated emissions (Agenda Paper 4D)

The ISSB discussed the matters raised in the feedback on the proposals for financed and facilitated emissions in draft S2 and the preliminary proposed approach to redeliberations following that feedback.

The ISSB was not asked to make any decisions.

Next milestone

IFRS Sustainability Disclosure Standard