The IFRS Foundation disclosed significant progress towards the establishment of a consistent global baseline for a corporate sustainability reporting system and revealed that jurisdictions representing more than half of the global economy have made public steps to align with the International Sustainability Standards Board’s (ISSB) disclosure standards.
The IFRS Foundation’s International Sustainability Standards Board (ISSB) was launched in November 2021 at the COP26 climate conference, with the objective of developing IFRS Sustainability Disclosure Standards to provide investors with information about companies’ sustainability risks and opportunities. The IFRS released the inaugural general sustainability (IFRS S1) and climate (IFRS S2) reporting standards in June 2023.
Following the release of the standards last year, IOSCO, the leading international policy forum and standards setter for securities regulators urged regulators to incorporate the standards into their sustainability reporting regulatory frameworks. The IFRS Foundation has now reported that, to date, more than 20 jurisdictions have decided to apply the ISSB standards or are taking steps to introduce these in their own frameworks, with the jurisdictions representing nearly 55% of global GDP, more than 40% of global market capitalization, and over half of global greenhouse gas emissions.
Most recently, China’s Ministry of Finance issued proposed sustainability reporting standards for businesses, based primarily on the ISSB standards. The IFRS noted that the U.S. Securities and Exchange Commission (SEC) has acknowledged similarities between the ISSB standards and the climate disclosure rules. However, the SEC has so far declined to recognize the ISSB Standards for use as an alternative to the new rules.
The IFRS also announced the launch of the “Inaugural Jurisdictional Guide for the adoption or other use of ISSB Standards,” a new guide aimed to help jurisdictions design and plan their journey towards the use of the ISSB standards, including descriptions of various approaches to adoption, including full adoption, partial adoption, and permission to use. The introduction of the Standards into regulatory frameworks will enable capital markets to assess and price climate and other sustainability-related risks and opportunities appropriately.
In a reaction to this announcement, the ISSB Chair Emmanuel Faber stated that:
“From major economies to emerging markets, jurisdictions around the world such as Brazil, Costa Rica, Japan, Nigeria, and the UK are recognising the value of the ISSB Standards. Supporting completion of their regulatory processes, as well as the engagement with other jurisdictions around the world, is our priority in the near future in creating the global baseline of proportionate, high-quality sustainability-related financial disclosures.”