During its April 2026 session held in Beijing, the International Sustainability Standards Board (ISSB) approved moving forward with a public consultation on draft guidance addressing disclosures related to nature.
This guidance is expected to be issued as an IFRS Practice Statement, intended to supplement IFRS S1 and IFRS S2 without modifying their current provisions. The document will also incorporate concepts from the Taskforce on Nature-related Financial Disclosures (TNFD) framework.
Impacts
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Financial Reporting Integration: Although the Practice Statement would be non-mandatory guidance, full adoption is expected of companies choosing to apply it. This will require management to identify and quantify nature-related risks (e.g., biodiversity loss, water scarcity, land use changes) that could affect future cash flows, asset valuations, or impairment assessments. Disclosure may extend to assumptions about regulatory changes or physical risks embedded in financial forecasts.
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Tax and Compliance Considerations: While nature-related disclosures are primarily sustainability-driven, they may intersect with tax positions – for example, where environmental remediation liabilities, carbon credit schemes, or government grants for conservation affect taxable income. Firms should monitor whether tax authorities begin referencing nature-related disclosures in audits of environmental taxes or transfer pricing related to natural resource use.
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Audit and Assurance Implications: External auditors will need to assess whether nature-related information, if material to financial statements or included in a separate sustainability report, is consistent with IFRS S1 principles. The Practice Statement could create new areas requiring audit evidence – such as data on supply chain impacts on ecosystems – elevating risk assessment and internal control evaluation for affected entities.
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Operational Compliance: The ISSB expects the Practice Statement to be followed in full, similar to a standard, despite its formal guidance status. This increases the bar for corporate reporting systems, particularly for companies already subject to mandatory ISSB adoption under local regulations.
Practical Issues
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Data Availability and Measurement Challenges: Nature-related risks often involve complex, location-specific data (e.g., species dependency, water stress indices, land cover change). Many entities lack existing information systems or third-party verification processes for such metrics, creating a significant implementation gap ahead of the expected October 2026 consultation draft.
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Judgment and Materiality Application: Determining which nature-related risks are “material” under IFRS S1 requires entity-specific analysis. The Practice Statement may provide illustrative examples, but preparers will face subjective decisions – especially for indirect impacts through supply chains or joint ventures – increasing the risk of inconsistent application across entities.
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Transition Burdens During ISSB Adoption: Many jurisdictions and companies are still implementing IFRS S1 and S2 on climate. Adding nature-related guidance in parallel raises the risk of competing priorities, resource strain, and potential reporting fatigue. The ISSB explicitly aims to reduce disruption, but practical coordination remains a client concern.
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Uncertain Future Standard-Setting: The Practice Statement is positioned as an interim solution, with flexibility for a formal IFRS standard later. This creates planning uncertainty – firms may hesitate to build permanent systems around guidance that could evolve, yet full application is expected in the interim.
Action Points
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Monitor the October 2026 consultation: Clients subject to or preparing for ISSB adoption should engage with the draft Practice Statement when published, particularly to assess data readiness for nature-related metrics.
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Consider early alignment with TNFD framework: Since the ISSB builds on TNFD work, entities should review TNFD’s recommended disclosures as a preparatory step, even before formal ISSB guidance is finalised.
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Review current risk assessment processes: Update enterprise risk management and internal control frameworks to capture nature-related risks affecting business performance, especially where financial statement estimates rely on environmental assumptions.
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Plan for flexible reporting systems: Invest in scalable data architectures that can accommodate both climate and nature-related metrics, allowing for future evolution from a Practice Statement to a full ISSB standard.
Source: IFRS, 23 April 2026.