Significant momentum is building behind the International Sustainability Standards Board (ISSB) Standards, with over 1,000 companies now referencing them in disclosures and 30 jurisdictions actively progressing towards embedding them within legal and regulatory frameworks. These findings, detailed in a progress report presented by the IFRS Foundation to the Financial Stability Board, underscore a pivotal shift from voluntary recommendations towards mandated sustainability reporting.
Key Findings from IFRS Foundation Report:
- TCFD Transition & Gaps: While 82% of companies globally disclose information aligned with at least one of the 11 Task Force on Climate-related Financial Disclosures (TCFD) recommendations, fewer than 3% report comprehensively against all eleven. This significant gap indicates investors often lack the full data needed to accurately assess and price climate-related risks and opportunities. The IFRS Foundation assumed monitoring of TCFD-aligned progress after the TCFD’s 2023 disbandment.
- ISSB Regulatory Momentum: Following endorsement by the International Organization of Securities Commissions (IOSCO) in July 2023, jurisdictions are rapidly advancing towards adopting or incorporating ISSB Standards (S1 and S2) into mandatory sustainability disclosure requirements. This shift is anticipated to substantially improve the availability of reliable sustainability information for global capital markets.
- Analysis of 30 Jurisdictions: A targeted analysis of regulatory frameworks in the 30 jurisdictions progressing with ISSB adoption reveals critical trends:
- Scope 3 Emissions Ubiquitous: All 29 jurisdictions with finalized or published climate disclosure proposals include Scope 3 greenhouse gas (GHG) emissions requirements. Some are offering transitional relief periods for implementation.
- Industry-Specific Disclosures Emerge: 28 jurisdictions are including or considering industry-specific disclosure requirements, a novel development for many. Only 2 jurisdictions initially suggest these be voluntary.
- Broadening Beyond Climate: Nearly 90% of jurisdictions have either introduced or are considering requirements covering all sustainability-related risks and opportunities over time, though initial focus often remains on climate.
- Alignment vs. Fragmentation Concerns: Many jurisdictions are aligning proposals closely with ISSB Standards to enhance disclosure comparability. However, stakeholders, particularly investors and multinational corporations, have expressed strong concerns to the IFRS Foundation about the risks of regulatory fragmentation if jurisdictions significantly modify the Standards. Companies in global supply chains strongly advocate for adherence to the ISSB’s global baseline to avoid reporting complexity.
- SASB Standards’ Critical Role: The introduction of industry-specific requirements highlights the importance of the Sustainability Accounting Standards Board (SASB) Standards (now part of the IFRS Foundation) as a vital component of the ISSB’s global baseline. These are deemed essential for the high-quality implementation of IFRS S1 (General Requirements for Disclosure of Sustainability-related Financial Information).
The report signals a decisive move towards regulated, comparable sustainability reporting globally, centered on the ISSB Standards. The focus now shifts to ensuring consistent implementation and mitigating fragmentation risks as jurisdictions finalize their requirements, paving the way for more robust investor decision-making based on standardized sustainability data.
Source: IFRS Foundation, 12 November 2024.