What to Expect from the ISSB in 2024

30th January 2024


Claire Richards, ESG Principal Consultant, reviews what organisations can expect from the International Sustainability Standards Board (ISSB) in 2024 and how to prepare as jurisdictions start to adopt the International Financial Reporting Standards (IFRS) developed by the ISSB.

Milestone 1: January – Voluntary standards come into effect

The ISSB’s IFRS S1 and S2 standards have now come into effect. Organisations can now adopt S1 and S2 as voluntary standards for annual reporting periods beginning on or after 1st January 2024. IFRS S1 and S2 require organisations to disclose information about governance, strategy, and risk management processes, as well as metrics and targets, for material sustainability and climate-related risks and opportunities.

To support the widespread adoption of the new investor-focused standards, the ISSB released updated Sustainability Accounting Standards Board (SASB) standards to enhance international applicability by removing jurisdiction-specific references in December 2023. The ISSB also released resources to support the application of IFRS S2 by providing examples of how companies should consider the ‘nature and social aspects’ of climate-related risks and opportunities.

Importantly this milestone marks the official incorporation of the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), which disbanded in late 2023. The IFRS Foundation will now be responsible for monitoring companies’ climate-related disclosures.

The TCFD has been a trailblazer in raising the practice and quality of climate-related disclosures, with the ISSB building on this legacy. The incorporation of the TCFD recommendations into the ISSB’s Standards provides yet further simplification of the so-called ‘alphabet soup’ of disclosure initiatives for companies and investors.” – IFRS

What does this mean for businesses?

IFRS S1 requires businesses to disclose financial information concerning sustainability-related risks and opportunities, while IFRS S2 focuses on climate-related risks and opportunities in addition to cross-industry metrics, such as GHG emissions. To align with IFRS S1 businesses must adhere to the general reporting requirements that ensure investors information needs are met.

Many companies will be familiar with the disclosure of climate-related financial information as part of TCFD reporting. Companies already aligned with TCFD are in a great position to align with IFRS S2 as these are consistent with the four core recommendations and eleven disclosure requirements published by the TCFD. Those mandated to report in alignment with TCFD may be required to continue to do so and those who voluntarily report to TCFD can still use the TCFD framework.

Both IFRS S2 and the TCFD recommendations require organisations to conduct a climate risk and opportunity screening and materiality assessment to identify what is financially material to the business. IFRS S2 requires companies to disclose more detail on the governance, strategy and management of climate-related risks and opportunities. For example, the role of the board and management, dedicated controls and procedures, policies, and the integration of climate opportunity identification and assessment into the overall management process.

Businesses that are aligning with the Integrated Reporting framework or using SASB to identify material ESG risks and opportunities, or those currently adopting CSRD, are in a favourable position to start reporting with IFRS S1.

Who is this important for?

As IFRS S1 and S2 standards are voluntary, regulators will adopt the standards in different ways and take their own jurisdictions’ needs into account. The ISSB are aware of these expected jurisdictional differences and will be publishing an Adoption Guide to set out different pathways for adoption.

Regulators already taking the lead by committing to adopting disclosure rules based on the ISSB standards include the UK, Brazil, Mexico, Canada, Singapore, Hong Kong, and Japan.

CFOs and CSOs with businesses located, or operating, within these jurisdictions should be keeping a close eye on how these regulators plan to adopt ISSB’s standards over the coming months. For example, we know that the UK Government has endorsed IFRS S1 and S2 as part of its Green Finance Strategy.

Milestone 2: July 2024 – UK Sustainability Disclosure Standards endorsement decision due

In 2023, the UK Government committed to aligning its Sustainability Disclosure Standards (SDS) to ISSB’s Standards. This builds upon the UK’s long history of support for the IFRS Foundation’s financial reporting standards and recognises the non-profit as a well-established international standard-setter. The UK’s Green Finance Strategy set out how it plans to create a mechanism to adopt and endorse ISSB-issued standards and indicates they will “provide the basis for future obligations within company law and FCA [Financial Conduct Authority] requirements for listed companies.” – ICAEW

What does this mean for UK businesses?

UK businesses can prepare by ensuring robust processes and controls are in place that sufficiently monitor and manage sustainability risks and opportunities across the organisation and value chain.

An important implementation decision yet to be made is whether the standards will be applied on a ‘comply or explain’ basis, similar to the implementation approach of the TCFD for listed companies. This approach would require organisations to disclose the required information or explain why the information is absent from their annual report.

For the first year of ISSB-aligned reporting UK regulators are likely to consider the transitional reliefs outlined in IFRS S1, which initially favour climate-focused disclosures, but also grant leniency around scope 3 emissions and comparative information.

Who is this important for?

Similar to the implementation of the TCFD recommendations, the FCA will determine how the sustainability disclosure rules for UK listed companies will reference IFRS S1 and S2. However, decisions for mandating disclosure for UK registered companies and limited liability partnerships will be taken independently by the UK government.

What’s next?

We are expecting to see additional topical standards released by the ISSB such as IFRS S3. However, there has yet to be a formal announcement from the ISSB on what that topical standard will look like and when the draft standard will be released.

The Institute of Chartered Accountants in England and Wales (ICAEW) have urged the ISSB to set out their position on the next topical standard, while recognising the importance of focusing on the successful implementation of S1 and S2.

“ICAEW strongly encouraged the ISSB to prioritise supporting the implementation and uptake of IFRS S1 and S2 above all other activities. It would like the ISSB to set out a clear statement of intent following its agenda consultation regarding the development of S3 and beyond. There is a risk that if the ISSB does not take action swiftly in developing ‘S3’, the gap will be filled by standards from other bodies, which could amplify confusion in the market.” – ICAEW

How Anthesis can support

With significant changes to UK disclosure requirements in 2024, Anthesis will be working closely with clients to provide clarity on new obligations. Ever since the inception of the TCFD, Anthesis has been at the forefront of developing methodologies to support organisations in understanding their resilience to climate change, both the risks and opportunities. Our ISSB alignment offering extends beyond climate, using our experience across all areas of sustainability, industry, geography, and along the value chain.

Beyond the compliance considerations, our experienced reporting team have developed award-winning reports and can help you compellingly tell your sustainability story. We offer pragmatic, simple sustainability reporting solutions including:

  • ISSB Readiness Assessment
  • Risk and Opportunity Screening
  • Materiality Assessment
  • Scenario Analysis
  • Report Development, Copywriting, and Design

We are the world’s leading purpose driven, digitally enabled, science-based activator. And always welcome inquiries and partnerships to drive positive change together.