ISSB: Global Momentum for Sustainability Reporting

15th May 2024

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The standards released by the International Sustainability Standards Board (ISSB) in June 2023 are rapidly gaining traction across the world, but the pace and approach of adoption have been significantly varied. The standards are comprised of IFRS S1 on general sustainability-related financial disclosures, and IFRS S2 on climate-related disclosures, which we have unpacked in a previous article. These standards will provide investors and other stakeholders with the comparable, decision-useful information they need to assess the financial impacts of sustainability and climate change on a company, and the adequateness of their governance and strategies to manage sustainability-related risks and opportunities.

In this article, Roohi Ghelani, Principal Consultant, dives into how different jurisdictions are approaching and implementing the ISSB with our experts from around the world sharing their insights on key developments.

Europe

The European Union

The primary and most comprehensive sustainability disclosure framework in the EU is the Corporate Sustainability Reporting Directive (CSRD), under which the European Financial Reporting Advisory Group (EFRAG) has developed the European Sustainability Reporting Standards (ESRS). These standards cover the full range of sustainability-related issues and are intended to standardise sustainability reporting within the EU.

EFRAG has expressed strong support for the ISSB and its standards, and highlights that the ESRS incorporate ISSB disclosures under a thorough interoperability approach. Entities preparing sustainability reports in compliance with the ESRS on climate change will therefore be meeting the requirements of the ISSB standards to a large extent, thus preventing the need for separate reporting under the ISSB standards.

The ESRS and IFRS S1 and S2 have been developed in parallel, ensuring a high degree of alignment between both sets of standards. EFRAG and the ISSB have recently released an interoperability map that illustrates this alignment.

Whilst in the EU, the CSRD remains the key ESG mandatory reporting framework, the commitment to interoperability from both the IFRS and EFRAG is crucial; especially for those companies headquartered outside the EU, but with significant operations within. We’re finally seeing more clarity on how the needs of both frameworks can be met, for example in materiality assessment and stakeholder engagement.”

Chris Shaw, Technical Director, Anthesis EMEA

The United Kingdom

The UK currently has in place mandatory climate-related financial disclosure requirements for large companies and LLPs through the Companies Act 2006, and for financial institutions through the Financial Conduct Authority. These are currently based on the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), which has been subsumed by the ISSB.

On 16 May 2024, the UK Government published an update to its Sustainability Disclosure Requirements confirming that the UK will be assessing the ISSB standards for implementation. Subject to a positive endorsement decision, the Government will aim to make the UK-endorsed ISSB standards, or the UK Sustainability Reporting Standards, available in Q1 2025.

Following a consultation process, the introduction of mandatory reporting requirements will be overseen by the Financial Conduct Authority (FCA) for UK-listed companies. The UK Government will assess disclosure requirements for non-listed companies and others that do not fall within the FCA’s remit, as well as the legislative instruments to facilitate this implementation. These decisions are expected to be taken in Q2 2025. It is expected that any mandatory disclosure requirements will likely be effective no earlier than accounting periods beginning on or after 1 January 2026.

The UK Government has further announced that its consultation on implementing the UK-endorsed ISSB standards will include potential requirements around transition plan disclosures given the overlap between IFRS S2 and the Transition Plan Taskforce’s Disclosure Framework.

Over the last 18 months, we’ve seen an unprecedented demand from UK businesses on the topic of climate risk. Much of this demand was initially linked to disclosing against the various regulatory requirements. However, as a result of these disclosures, many of our clients are now looking to design and embrace longer term, systemic shifts to more climate resilient business models. This is truly inspiring to see.”

Matt Rooney, Associate Director, Anthesis UK

North America

The United States of America

The US Securities and Exchange Commission (SEC) approved its own climate disclosure rulemaking in March 2024. The general disclosures mandated through this regulation are broadly aligned with the TCFD framework. In the final rule, the SEC emphasises disclosure of only those climate-related risks that have been found to be potentially material to the company as well as Scope 1 and 2 GHG emissions only if found to be material. Companies subject to the SEC’s rule will also be required to disclose the actual financial impacts from climate-related events and/or transition planning activities on their income statement and balance sheet for the reporting period, subject to a reporting threshold.

Upon approval of the final rule, the SEC faced litigation from various groups stating concerns such as the SEC’s authority to implement such regulations and arguments that the ruling does not go far enough. In light of these legal challenges, the SEC put a pause on implementation of the rule until litigation is resolved.

It’s exciting to see the U.S. take action on mandating public companies to report on climate-related issues after years of public comment and planning from the SEC. Although the SEC’s rule differs in some respects from frameworks like TCFD and ISSB and does not include a requirement for Scope 3 emissions disclosure, it shows a strong signal that climate is a topic investors are seeking more transparent and reliable information on in decision-making.”

Kimberly van Boden, Associate Director, Anthesis North America

Canada

The Canadian Securities Administrators (CSA) announced their intention to align their sustainability reporting regime with the ISSB standards in a consultation paper released in December 2023. Canada is not directly adopting the ISSB standards but is developing its own set of standards called the Canadian Sustainability Disclosure (CSDS).

In March 2024, the Canadian Sustainability Standards Board (CSSB) published its draft Canadian Sustainability Disclosure Standards (CSDS) for consultation. CSDS 1, General Requirements for Disclosure of Sustainability-related Financial Information, and CSDS 2, Climate-related Disclosures are based on IFRS S1 and S2, with some modifications that best suit the Canadian context. Key modifications include a proposed effective date from 1st January 2025, a year later than the global ISSB baseline, and a Scope 3 emissions relief of two years (until 1st January 2027) before mandatory disclosure of Scope 3 emissions is required.

The consultation is open until 10th June 2024, after which the CSSB is expected to finalise the standards shortly thereafter, though there isn’t a confirmed finalisation date yet.

We welcome the proposed Canadian Sustainability Disclosure Standards (CSDS). Aligning disclosures on sustainability-related information with the rest of the world is crucial for Canada’s long-term economic success. The CSDS represent a significant step forward in ensuring Canadian companies continue to act for crucial sustainability risks and opportunities while remaining competitive and attractive to global investors through standardised and consistent disclosures, echoing the actions recently taken by key trading partners such as the US and the EU.”

Mari Desangles, Principal Consultant, and Bridie O'Boyle, Principal Consultant, Anthesis North America

Asia-Pacific

The APAC region is leading the global response to the ISSB standards and implementation of these through the various national sustainability and climate reporting frameworks.

Australia

Australia is positioned to be among the first countries to implement mandatory climate reporting standards aligned with the ISSB standards, with the new requirements proposed to start for Australia’s largest listed and unlisted businesses and financial institutions from 1st January 2025.

The Australian Accounting Standards Board (AASB) aims to issue its final climate reporting standards in August 2024, ahead of the 1st January 2025 start date. The draft Australian Sustainability Reporting Standards (ASRS) released for consultation in October 2023 aims to align with ISSB standards, with modifications to be more suitable for the Australian context and policy priorities, focusing solely on climate-related disclosures as a starting point. The AASB is currently reviewing the feedback received from the public consultation.

Legislation to mandate the new ISSB-aligned reporting requirements was introduced to Parliament in March 2024. This includes a phased implementation timeline for mandatory reporting in the private sector over several years, with large listed and private entities meeting certain revenue, asset, employee, or emissions thresholds being required to publish mandatory climate-related disclosures. The legislation also sets the expectation that companies will be required to obtain reasonable assurance over their full disclosure by FY2030. The Australian Auditing and Assurance Standards Board has been tasked with setting the roadmap to phase in assurance over a five-year period.

In an important milestone in the legislative process, on 3rd May the Senate Economics Legislation committee recommended the legislation be passed, citing a strong need and widespread support for implementing the new climate-related disclosure requirements.

The Australian Government is separately developing mandatory climate-related disclosure requirements for the public sector based on the ASRS/ISSB tailored to Australian government entity circumstances, commencing for annual reports ending 30th June 2025. The Australian government is also running a pilot disclosure program for some government entities to include a limited sub-set of climate-related disclosures their annual report ending 30th June 2024.

As we move into this mandatory setting, companies will gain the most by focusing not only on compliance, but ultimately on the strategic benefits to gain deep business insights, improve resilience and performance and attract investment and other opportunities.”

Amy Quinton, Principal Consultant, Anthesis Australia

Singapore

Singapore has recently announced and finalised mandatory climate-related disclosure requirements fully aligned with the ISSB standards.

Publicly listed companies on the Singapore Exchange (SGX) from five prioritised industries are currently required to report in line with the Task Force on Climate-related Financial Disclosures (TCFD). In February 2024, the Singapore Exchange Regulation (SGX RegCo) and the Accounting and Corporate Regulatory Authority (ACRA) finalised a public consultation that sought feedback on implementing mandatory climate-related financial disclosures, and how best to integrate the ISSB standards into existing sustainability reporting requirements.

The Sustainability Reporting Advisory Committee (SRAC), an industry-led panel set up by ACRA and SGX RegCo, announced that listed companies and large unlisted companies will be required to publish mandatory climate-related disclosures fully in line with IFRS S2 in a phased approach over FY2025 to FY2030. Reporting entities will also be required to apply the general requirements and conceptual foundations of IFRS S1 insofar as they relate to the climate-related risks and opportunities. SRAC may review the implementation of the ISSB Standards for broader sustainability-related risks and opportunities beyond CRD a few years later.

An official announcement from SGX RegCo outlining the final amendments to listing rules and the Sustainability Reporting Guide that incorporate the ISSB standards is anticipated soon.

Singapore’s adoption and mainstreaming of the ISSB standards is a clear signal that it is fully committed to the green transition and demonstrating credibility in its climate initiatives. It is also the first Asian country to extend mandatory climate-related disclosures to non-listed companies while implementing support mechanisms to support capacity building in meeting the new reporting requirements. This helps to position Singapore as a leader in advancing sustainability reporting in Asia, and enable Singaporean companies to become more resilient and adaptable in a low-carbon economy.”

Peggy Oh, Director, Anthesis Singapore

Read further regional insights below:

Japan is actively moving towards adopting sustainability disclosure standards (SDS) based on the ISSB framework. The Sustainability Standards Board of Japan (SSBJ) published three exposure drafts in April 2024:

  1. Universal SDS Exposure Draft “Application of the Sustainability Disclosure Standards”
  2. Theme-based SDS Exposure Draft No. 1 “General Disclosures”
  3. Theme-based SDS Exposure Draft No. 2 “Climate-related Disclosures”

These drafts are largely based on the ISSB’s IFRS S1 and IFRS S2 standards, with some potential adjustments for the Japanese context. The drafts allow Japanese companies to elect to apply certain jurisdiction-specific options alongside the core ISSB requirements. While the final timeline is yet to be determined, the exposure drafts assume that reporting under these standards will eventually be mandatory for companies listed on the Prime Market of the Tokyo Stock Exchange.

The consultation period for the exposure drafts is open until 31st July 2024, and the SSBJ is expected to finalise the standards in late 2024 or early 2025.

New Zealand pre-empted the ISSB by developing its own mandatory climate-related disclosure requirements through the Aotearoa New Zealand Climate Standards 1-3, in 2022. New Zealand companies are currently publishing climate-related disclosures[1] in line with the NZ CS, which are comprised of:

  • NZ CS 1 Climate-related Disclosures
  • NZ CS 2 Adoption of Aotearoa New Zealand Climate Standards
  • NZ CS 3 General Requirements for Climate-related Disclosures

These were established by the External Reporting Board (XRB), which closely monitored the ISSB’s development process and ensured a high degree of alignment between the NZ CS and the IFRS S1 and S2 standards. The XRB is continuing to monitor the development and implementation of the ISSB standards, and is open to further aligning the NZ CS with the standards in the future, especially as the ISSB releases additional industry-specific or thematic standards. In October 2023, the XRB published a comparison guide to demonstrate the alignment of the NZ CS and the ISSB standards. The XRB plans to publish a similar comparison guide against the Australian ASRS.

[1] The first tranche of reports are now publicly available on the New Zealand Government’s register: Climate Reporting Entities (companiesoffice.govt.nz)

In April 2023, the Stock Exchange of Hong Kong Limited (the Exchange) published a consultation paper seeking feedback on the implementation mandatory climate-related disclosures in line with IFRS S2 under its environmental, social and governance framework. The Exchange is now intending to take into account the finalised ISSB standards and the recommended approaches set out in the ISSB Adoption Guide in amending its Listing Rules and mandating climate-related disclosures. This is expected to be completed by 1 January 2025.

The Reserve Bank of India (RBI) has published the Draft Disclosure framework on Climate-related Financial Risks, 2024, which is proposed to implement mandatory climate disclosure requirements for commercial banks, cooperative banks, financial institutions, as well as non-banking financial companies in India. Proposed climate-related disclosure requirements have been developed in line with the four pillars of the TCFD and IFRS S2 – governance, strategy, risk management and metrics and targets – and would be phased in from FY2028 onwards.

The Advisory Committee on Sustainability Reporting (ACSR) launched a consultation from February to March 2024 on the implementation of the ISSB standards for listed and large non-listed companies in Malaysia. The consultation aimed to seek feedback on the scope and timing for implementation, transition reliefs, and assurance-related matters. It is expected that the ISSB standards will form the baseline for the National Sustainability Reporting Framework in Malaysia.

Publicly listed companies in the Philippines currently have mandatory sustainability reporting requirements on a ‘comply or explain’ basis. The Securities and Exchange Commission (SEC) is revising the Sustainability Reporting Guidelines to consider a range of global reporting frameworks, including the ISSB standards. The draft revised guidelines were released for comment in October 2024. Under the revised guidelines, listed companies will be required to submit Sustainability Reporting Narratives together with their annual reports, as well as a dedicated Sustainability Report Form, which would be comprised of sections on sustainability and climate-related risks, opportunities and exposures, and metrics (both cross-industry and industry-specific).

In December 2023, the Sustainability Working Group of the Accounting Standards Board published a recommendations paper outlining the study, consultations and recommendations for implementing the ISSB standards in Pakistan. No announcement has been made at present regarding implementing mandatory climate-related disclosures.

In August 2023, the Financial Supervisory Commission of Taiwan published a roadmap for Taiwan-listed entities to align with the ISSB standards – both S1 and S2. These will be adopted from 2026, after which the FSC will continue assessing and endorsing ay additional standards released by the ISSB. Mandatory reporting will be phased in based on capital thresholds, and the same transition reliefs as are in the ISSB standards will be applied. In addition, entities may disclose qualitative information for matters involving a high degree of uncertainty and difficulty in quantification.

South Korea is expected to adapt the ISSB standards into its ESG reporting requirements and is currently undertaking discussions with various regional standard-setting bodies. Implementation of the ISSB standards in South Korea is expected in 2026 or later.

Africa

South Africa has created a set of complimentary systems starting with the SA Green Finance Taxonomy, which defines what is to be considered a sustainable asset or project in the South African context. This feeds into the Johannesburg Stock Exchange Sustainability & Climate Disclosure guidance, which in turn aligns with the ISSB disclosure standards at an international level. What we are witnessing is the incremental infilling of identified gaps that when filled will enable local and international finance to flow towards increasingly sustainable projects inside our country.”

Gray Maguire, Senior Carbon Originator, Anthesis South Africa

The ISSB is gaining traction in Africa, with several key developments having taken place in recent times:

Nigeria

Nigeria is positioned to be another early adopter of the ISSB standards. The Financial Reporting Council (FRC) developed a Draft Roadmap Report for Adoption of Sustainability Disclosure Standards in Nigeria, which was open for consultation until March 2024. The Roadmap affirms the ISSB standards as the recommended framework for Nigerian entities, discusses assurance, monitoring and enforcement considerations, and proposes an IFRS disclosure roadmap for Nigerian entities.

Central America

Costa Rica

The College of Public Accountants of Costa Rica announced in December 2023 the adoption of the ISSB standards in full through a phased approach as follows:

  • Commencing 1 January 2024: voluntary for any entity
  • For the financial year ending 31 December 2025: mandatory for companies regulated by the National Council for Supervision of the Financial System (Consejo Nacional de Supervisión del Sistema Financiero/CONASSIF)
  • For FY ending 31 December 2026: mandatory for companies classified as large taxpayers

South America

Latin American jurisdictions have historically been leading the mandating of sustainability disclosures, with both Chile and Colombia having mandated TCFD disclosures and reporting in line with the standards published by the Sustainability Accounting Standards Board (SASB). Several South American nations are expressing growing interest in the ISSB standards. Recent developments in relation to the ISSB standards include:

  • Superintendency of Banks of Panama announced support for the ISSB in October 2023.
  • The IFRS Foundation published the Spanish and Brazilian Portuguese translation of IFRS S1 to support uptake of the standard across South America.
  • The Inter-American Development Bank and Latinex co-hosted an event focused how the IFRS Accounting and Sustainability Disclosure Standards can support a more resilient and competitive financial sector.

Brazil

Brazil became the first South American country to adopt the ISSB standards in October 2023 when the Brazilian Ministry of Finance and the Comissão de Valores Mobiliários (CVM), the country’s securities regulator, announced that the ISSB standards would be incorporated into the Brazilian regulatory framework.

The CVM released Resolution No. 193, which sets out that publicly listed companies, securitisation firms and investments funds may choose to voluntarily disclose in line with IFRS S1 and S2 from 2024, while mandatory disclosures will be required for listed companies from 1st January 2026. A stringent assurance pathway has also been outlined beginning with limited assurance until the end of FY2025, after which reasonable assurance over disclosures will be required.

IFRS S1 and S2 will be implemented through the Brazilian Sustainability Pronouncements Committee (CBPS)’s technical pronouncements, which are currently in draft form and open for consultation until June 2024:

  • CBPS Technical Pronouncement 01 General Requirements for Disclosure of Financial Information Related to Sustainability
  • CBPS Technical Pronouncement 02 Climate-related Disclosures

Middle East

Turkey

In December 2023, Turkey’s Public Oversight, Accounting and Auditing Standards Authority (KGK) announced that businesses meeting certain asset, revenue or employee thresholds, and regulated banks will be subject to mandatory sustainability disclosure requirements. The KGK has adopted IFRS S1 and S2 in Turkish, published as the Turkish Sustainability Reporting Standards (TSRS) 1 on general sustainability disclosures and TSRS 2 on climate-related disclosures. Sustainability disclosures will be subject to assurance under the International Auditing and Assurance Standards Board (IAASB)’s upcoming International Standard on Sustainability Assurance (ISSA) 5000: General Requirements for Sustainability Assurance Engagements.

Timeframes for mandatory reporting are as follows:

  • 2024: First reporting period
  • 2025: First sustainability reports published
  • 2026: Beginning of assurance audits on sustainability reports

Global collaboration

The ISSB is actively engaging with national and regional standard setters to facilitate the implementation of a global baseline of sustainability disclosures. With jurisdictions around the world starting to consult on and finalise the adoption of IFRS S1 and S2 into national regulatory frameworks to varying extents, the IFRS Foundation is developing an Adoption Guide to support these efforts. A high-level roadmap to the Adoption Guide has been published, which documents the mechanisms available to support implementation.

The ISSB is focusing on four key areas to enable globally aligned adoption, i.e.: proportionality, transition reliefs, consistency in phasing in and scaling requirements, and capacity building to support implementation.

Key challenges that the ISSB and IFRS Foundation are likely to see in the global uptake of the ISSB standards include:

  • Jurisdictional alignment: While the development of globally applicable standards consolidating several former best practice frameworks is a welcome step to standardising sustainability disclosures around the world, the inherent variations in jurisdictional contexts and market preparedness mean that modifications of the standards to some extent will be inevitable. The ISSB is emphasising the importance of maintaining a high level of alignment to ensure global comparability, which has been the key driver behind the development of the standards.
  • Capacity building: Fully aligning with the requirements of IFRS S1 and S2 will present a significant reporting burden for companies which have not previously considered and assessed climate or sustainability-related matters. Mandatory reporting regimes are largely being designed through phased approaches in recognition of varying levels of maturity. National regulators and standard-setters will need to supplement this with sufficient capacity building, guidance and implementation support to ensure that the implementation of mandatory reporting achieves the aim of enhancing the understanding of climate and sustainability-related financial impacts and the management of these issues.

The development of the ISSB standards and subsequent global uptake represent significant steps towards a more transparent and accountable global business environment. As jurisdictions around the world continue to engage with the ISSB standards, we can expect a new era of sustainability reporting to emerge. Companies around the world reporting on their climate-related disclosures should think beyond mere compliance, to focus on the wealth of opportunities, innovations, and efficiencies that arise from understanding and managing their climate and sustainability challenges. Proactively managing these risks will not only drive sustainable performance but also position businesses for resilience and prosperity in the years ahead.

How Anthesis can support

Anthesis helps organisations cut through the complexity of reporting frameworks and focuses on what matters to key stakeholders, with an end-to-end offering that sets the stage for ISSB-aligned disclosure, risk management and value creation.

While many organisations have carried out single materiality assessments to help shape their ESG strategies, most have not focused in on financial materiality of sustainability-related risks and opportunities. As a crucial step towards ISSB-aligned reporting, our materiality process helps organisations focus in on and prioritise sustainability-related risks and opportunities that could affect the organisation’s prospects. Our ISSB alignment offering extends beyond climate, using our experience across all areas of sustainability, industry, geography, and along the value chain.

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