Market participants welcomed the launch of the International Sustainability Standards Board (ISSB) S1 and S2 sustainability reporting standards.
IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2 Climate-related Disclosures are effective for annual reporting periods beginning on or after 1 January 2024.
They are the first two IFRS Sustainability Disclosure Standards developed by the ISSB, and serve as a comprehensive global baseline of sustainability disclosures for the capital markets.
IFRS S1 prescribes how companies prepare and report their sustainability-related financial disclosures. IFRS S2 sets out the requirements for companies to disclose information about their climate-related risks and opportunities, while building on the requirements in IFRS S1.
The view is that the standards affirm the value a company is creating is inextricably linked to its business ecosystems, the society with which it operates in, its business partners, and the natural capital it puts at work.
They will create a common language to express the risks and opportunities that are underlying this entire value system, beyond the limits of a single company, to its entire ecosystem.
They also require disclosure of the current and anticipated effects of sustainability risks, and opportunities on financial statements and the company’s prospects.
The aim is for these two new standards to improve trust and confidence in company disclosures about sustainability to inform investment decisions.
The hope is that they will also usher in a new era of sustainability-related disclosures in capital markets worldwide.
At the launch event, Julia Hoggett, CEO of the London Stock Exchange Group, said, “Whether you’re a corporate financial institution, a government or a regulator, these standards can provide the foundation to advance our shared sustainability objectives.”
She added, “Providing complete and reliable information on climate and sustainability will enhance a company’s access to capital.”
The new ISSB standards build on the framework developed by the Taskforce on Climate-related Financial Disclosure (TCFD) and other international frameworks.
Market participants believe they have the potential to provide the international consistency that is needed to unlock comparable, actionable information to inform sustainability-related decision making.
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