A Bright Future: ISSB Sustainability Standards

The International Financial Reporting Standards (IFRS) Sustainability Disclosure Standards are here, and their impact on global capital markets is set to be revolutionary. For the uninitiated, these new standards aim to provide a baseline of sustainability-related disclosures for the capital markets, thus enabling better economic decisions. Here, we unpack the ten key takeaways from the ISSB's newly launched standards.

Understanding the ISSB Standards

Global Disclosure Standards: The newly established ISSB Standards provide a unified, global baseline of sustainability disclosures for capital markets. These standards allow for jurisdiction-specific requirements to be built upon this global foundation.

International Support: From the International Organization of Securities Commissions (IOSCO) to the G20 and G7 leaders, the ISSB's work has attracted worldwide backing from influential investors, companies, policymakers, and market regulators.

Disclosure of Decision-Useful, Material Information: ISSB Standards are laser-focused on capital markets, necessitating information that is not only material and proportionate but also useful for investors' decision-making. Initiating with climate-related disclosures, companies can progressively introduce their sustainability disclosures.

Building on and Consolidating Existing Initiatives: The ISSB has streamlined sustainability disclosures by consolidating various initiatives like the TCFD recommendations, SASB Standards, CDSB Framework, Integrated Reporting Framework, and World Economic Forum metrics into IFRS S1 and S2. This consolidation will support companies in leveraging their existing investments in sustainability disclosures while reducing disclosure complexity.

Reducing Duplicative Reporting: By offering a global benchmark, ISSB Standards help to achieve global comparability for financial markets. This approach minimizes the reporting burden for companies operating under multiple jurisdictional requirements.

Helping Companies Communicate Worldwide Cost-Effectively: Designed to deliver reliable information to investors, the ISSB Standards assist companies in cost-effectively communicating how they identify and manage sustainability-related risks and opportunities across various timelines.

Connections with Financial Statements: To be provided alongside financial statements, the ISSB Standards have been designed to complement any accounting requirements, drawing upon the concepts underlying IFRS Accounting Standards.

Developed Through Rigorous Consultation: The ISSB Standards have been developed following the same inclusive, transparent due process used to develop IFRS Accounting Standards, incorporating over 1,400 responses to the ISSB’s proposals.

Interoperability with Broader Sustainability Reporting: The ISSB's partnership with the Global Reporting Initiative (GRI) allows ISSB Standards to be interoperable with GRI standards, further reducing the disclosure burden for companies using both ISSB and GRI Standards for reporting.

A Partnership for Capacity Building: The ISSB doesn't just set the standards; it's working towards building capacity as well. Announced at COP27, the ISSB's capacity-building partnership programme aims to allocate necessary resources for consistent, high-quality reporting across developed and emerging economies.

Conclusion

The release of these inaugural standards marks a significant milestone in the journey towards globally standardized sustainability disclosures. By enabling better access to sustainability-related disclosures, the ISSB is ushering in a new era of transparency and comparability in the world of finance and beyond. As we move forward, it's vital for businesses, investors, and other stakeholders to familiarize themselves with these new standards and their implications. Together, we can build a more sustainable future.