Financial markets need to assess the risks and opportunities facing individual companies that arise from environmental, social and governance (ESG) issues, as these affect enterprise value.
At the November 2021 COP26 – UN Climate Change Conference, the International Financial Reporting Standard (IFRS) Foundation announced the creation of a new International Sustainability Standards Board (ISSB) in order to develop a comprehensive global baseline of sustainability disclosure standards that meets investors’ information needs. This has been the biggest change in corporate reporting since the 1930s and will simplify and harmonise the sustainability reporting landscape.
We can keep you up to date on the newest developments of the International Sustainability Standards, allow you to become more familiar with the exposure drafts and be prepared for the sustainability reporting journey ahead.
The IFRS will complete the consolidation of Value Reporting Foundation (VRF) (the recently merged entity uniting the Sustainability Accounting Standards Board (SASB) and International Integrated Reporting Council (IIRC)) and Climate Disclosure Standards Board (CDSB), an initiative of the Carbon Disclosure Project, into ISSB by the end of 2022.
In October 2021, the Technical Readiness Working Group (TRWG), a group formed by the IFRS Foundation Trustees to undertake preparatory work for the ISSB, released prototype climate and general disclosure requirements. These prototypes are the result of joint work by representatives of the CDSB, the International Accounting Standards Board (IASB), the TCFD, the VRF and the World Economic Forum (WEF), supported by the International Organization of Securities Commissions (IOSCO) and its Technical Expert Group of securities regulators.
IFRS uses the recommendations by the TCFD as the starting point for its Climate-Related Disclosures Prototype and General Requirements Prototype as well as the architecture of the sustainability standards, which includes governance, strategy, risk management, and metrics and targets sections.
On 31 March 2022, the International Sustainability Standards Board published its first two proposed IFRS Sustainability Disclosure Standards. Once finalised, these standards will form a comprehensive global baseline of sustainability disclosures designed to meet the information needs of investors when assessing enterprise value.
The proposed IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information (General Requirements Exposure Draft) would require companies to disclose information about all of their significant sustainability-related risks and opportunities.
The proposed IFRS S2 Climate-related Disclosures (Climate Exposure Draft) focuses on climate-related risks and opportunities. It incorporates the recommendations from the Task Force on Climate-related Financial Disclosure (TCFD) and includes metrics tailored to industry classifications derived from the industry-based SASB Standards.
The proposals aim to create a global baseline for investor-focused sustainability reporting that local jurisdictions can adopt or build into its own local requirements. The two exposure drafts are open for comment until 29 July 2022.