New ISSB disclosure rules set for June

The International Financial Reporting Standards (IFRS) Foundation’s International Sustainability Standards Board (ISSB) have recently announced that their finalised global climate and sustainability reporting standards will be released in June 2023. 

What are the reporting standards?

Officially launched at Glasgow’s COP26, the IFRS Foundation’s ISSB is working to form universal standards for reporting, which will help ensure investors, stakeholders, creditors, and other parties have all the comparable information they need to determine the level of risk in a business. To do this, the ISSB has formed a working group with representatives from different countries/jurisdictions, including the UK, Japan, EU, USA and China. 

The ISSB’s goal is that international regulators will endorse the disclosure standards for mandatory and voluntary use worldwide – a unique dual adoption methodology. The board has been working closely with International Organization of Securities Commissions (IOSCO), and anticipates their endorsement soon. 

Sue Lloyd, ISSB Vice Chair said “Now we know that many jurisdictions will require to adopt our standards and that’s fantastic but we’re also very interested in voluntary applications of our standards for the fact that investors and companies want our standards to be used around the world which is really important to us… So market engagement that facilitates the choice to use the ISSB standards around the world is really important and we are busy establishing our market engagement, our strategy and working really closely with investors to get the support for our standards.”

ISSB’s global reach should help promote adoption and could spread, at asset owners’ insistence, to private firms, supporters say.

Next steps for the ISSB

Following the release of the initial standards this year, the board will consult on a series of issues, including reporting on biodiversity, human capital and human rights, as well on the connectivity of financial reporting with sustainability reporting.

The Chair of International Organization of Securities Commissions (IOSCO), Jean-Paul Servais, said, “the aim should be that in 2024, financial reporting and sustainability reporting will go together. And that’s an excellent point to keep in mind. If you are a business leader, be ready to report on both in 2024.”

What does this mean for you?

SI Engage fully supports the development of universally comparable, consistent and high-quality corporate sustainability and climate-related disclosures. It will better enable investors to incorporate ESG risks and opportunities and consider sustainability outcomes in their investment decisions.

These developments mean that come January 2024, there will be global standards from the ISSB on reporting for:

  1. General Requirements for Disclosure of Sustainability-related Financial Information
  2. Climate-related Disclosures

The standards will apply to publicly held asset management firms and could give asset owners a clearer picture of their asset managers’ ESG achievements. Stakeholders should look out for jurisdiction-specific implementations across Europe over the next 5 years – beginning with larger entities covered under The EU’s Corporate Sustainability Reporting Directive (CSRD). 

The standards could significantly impact how investments are assessed going forward. By forming universal standards for reporting across multiple countries/jurisdictions, investors will now have access to more accurate information when evaluating associated risk levels – enabling better-informed decisions that could lead to greater returns and environmental impact over time.

Keep an eye out for further updates on these changes as we get closer to June 2023!

 

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