IFRS Sustainability Disclosure Standards: ISSB reviews comments received and plans redeliberations

Keywords: Mazars, Thailand, Sustainability, ISSB, IFRS S1, IFRS S2, TCFD

Although the Board was not asked to make any decisions on the content of the standards this month, it set out a plan for redeliberations, with a view to establishing a global baseline of recognised international standards used across the world by the end of the year, to be published in early 2023.

The ISSB received more than 700 comment letters on IFRS S1, and slightly fewer on IFRS S2. The summary of responses, prepared by the technical staff, highlighted the following key points:

• broad stakeholder support for the ISSB’s overall purpose, for IFRS S1 as an overarching standard setting out the general principles to be applied to all IFRS Sustainability Standards, and for IFRS S2 as a standard that would address the urgent need for disclosures on climate-related challenges;
• general support for drawing on the recommendations of the TCFD (Task Force on Climate-related Financial Disclosures) to structure the standards, based on the four pillars of governance, strategy, risk management, and metrics and targets;
• a need for guidance and illustrative examples to enable efficient implementation of the proposals, e.g. how to identify significant sustainability-related risks and opportunities. Stakeholders also requested clarification of some terms and concepts, particularly the definition and application of materiality concept;
• the need to permit gradual implementation of the proposals, depending on the capability and preparedness of companies across the world (scalability). At the September meeting, the ISSB began to identify some strategies and mechanisms that would enable progressive implementation of the disclosure requirements set out in the standards;
• the need to work with the IASB in order to improve the connectivity and consistency of disclosures within and outside the financial statements;
• the need to work closely with jurisdictions around the world that are simultaneously developing local sustainability standards, including the European Union and the United States, in order (among other things) to use identical terminologies where possible and appropriate, and to ensure that the global baseline is fully interoperable in practical terms with the requirements of other international standards;
• the need to rework some of the more technical proposals set out in the standard on climate-related disclosures. For example, the minor amendments made by the ISSB to the industry-based standards developed by the Sustainability Accounting Standards Board – which were presented as an appendix to the draft IFRS S2, but which would be mandatory – were generally felt to be insufficient to enable IFRS S2 to be applied efficiently in all jurisdictions (i.e. outside the United States).

The ISSB will continue to analyse stakeholder feedback at its next meeting in October.

This month, the ISSB identified the following priority topics for the upcoming redeliberations:

• topics relating to both IFRS S1 and IFRS S2:
  • scalability of disclosure requirements;
  • current and anticipated effects of sustainability-related and climate-related risks and opportunities on an entity’s financial performance, financial position and cash flows;
• topics relating to IFRS S1:
  • enterprise value;
  • breadth of disclosures required;
  • “significant” sustainability-related risks and opportunities;
  • identifying significant sustainability-related risks and opportunities and disclosures (including using materials prepared by other standard-setters);
  • implementation of the materiality assessment;
  • related information (cf. the principle of connectivity of information); and
  • frequency of sustainability reporting;
• topics relating to IFRS S2:
  • strategy and decision-making, including transition planning;
  • climate resilience;
  • greenhouse gas emissions; and
  • industry-based requirements, including financed and facilitated emissions.

The ISSB will begin its redeliberations on the first two IFRS Sustainability Disclosure Standards at its October meeting.