The first two Sustainability Standards will be:
- IFRS S1 ‘General Requirements for Disclosure of Sustainability-related Financial Information’
- IFRS S2 ‘Climate-related Disclosures’.
The decision to have a short period between the release of these two Standards and the effective date is in response to the strong demand from investors of reporting entities around the world to disclose some consistent, comprehensive and comparable sustainability-related information.
There have been many parties, for example, the International Organisation of Securities Commissions (IOSCO) and leaders from G2), as well as their Governments, being vocal about the urgent need for some Sustainability Standards to be put in place and made effective as soon as possible. Disclosing information about sustainability-related risks and opportunities, initially starting with climate, to protect investors and support systemic financial stability is seen by many, including the ISSB, as essential.
At this meeting, the ISSB also agreed to reference the European Sustainability Reporting Standards (ESRS) within an appendix to IFRS S1, as guidance for entities to use, given a full suite of IFRS Sustainability Standards is still to be issued. This appendix is designed to help reporting entities to readily identify metrics and disclosures that meet the information needs of investors. This decision demonstrates the ISSB’s commitment to work closely with Europe towards a shared objective of maximising the interoperability of their Standards, particularly in the area of climate disclosure.
Between now and the June 2023 release date of the ISSB Standards, the ISSB will focus on creating further guidance and training material to support and explain how IFRS S1 and IFRS S2 should be applied. They will also look to introduce programmes that will support reporting entities to apply its Standards appropriately and consistently as market infrastructure and capacity on dealing with both these Standards is built.
The timeline could pose a challenge for some reporting entities
We support the ISSB selecting the effective date of periods commencing on or after 1 January 2024, as it will respond to the investor demands for these Standards. However, given this short implementation timeframe, for some reporting entities this could pose a challenge to meet all of the requirements that set out in both of these Standards as sustainability will be new to many of them. We urge reporting entities to start evaluating the impact of these two new Standards as soon as they can.