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  • Writer's pictureDaniel Goelzer

ISSB Agrees in Principle on its First Two Standards

In 2021, the IFRS Foundation announced the formation of the International Sustainability Standards Board (ISSB) to develop a comprehensive baseline of sustainability disclosure standards to meet investor information needs. The ISSB, which commenced operations in 2022, consolidated with two existing sustainability standard setting bodies, including the Value Reporting Foundation, the parent of the Sustainability Accounting Standards Board (SASB). Accordingly, SASB’s disclosure standards are now under the jurisdiction of the ISSB. See IFRS Foundation Announces the International Sustainability Standards Board and Consolidation with CDSB and SASB, November-December 2021 Update.


In a February 17 statement, the ISSB announced that it had unanimously approved in principle its first two standards – IFRS S1 (General Requirements for Disclosure of Sustainability-related Financial Information) and IFRS S2 (Climate-related Disclosures). These standards will be finalized and issued by June 30. The new standards, which were published as exposure drafts for public comment last year, will take effect in January 2024. However, since the ISSB itself has no direct authority to compel companies to use its standards, deadlines for mandatory compliance with the standards will be determined on a jurisdiction-by-jurisdiction basis.


S1 and S2 are foundational standards. S1 sets out the ISSB’s general requirements for disclosure and prescribes the core content for sustainability-related financial disclosures that permit investors to assess company value. S1 provides the basis for achieving a global baseline of sustainability disclosure by requiring that companies disclose material information about sustainability-related risks and opportunities. S1 requires companies to consider the industry-based SASB Standards for topics other than climate disclosure. S2 provides detailed requirements for investor-focused climate disclosures. It seeks to generate comparable climate-related disclosures, consistent with existing standards and frameworks, and particularly with the Task Force on Climate-Related Financial Disclosures (TCFD). S2 also includes industry-specific climate metrics based on the SASB standards as illustrative guidance.


The United States is unlikely, at least in the near term, to require compliance with ISSB standards. Indeed, as discussed in SEC Unveils its Climate Disclosure Proposals, March 2022 Update, the SEC is developing its own climate disclosure requirements. However, the ISSB’s standards are likely to be adopted in most of the rest of the developed world and, as a practical matter, U.S. public companies are likely to be under investor pressure to make ISSB disclosures. Companies currently complying with the TFCD recommendations and the SASB standards will have a head start on ISSB compliance. In any case, audit committees may want to follow the ISSB’s work and discuss with management voluntary disclosure under its standards.

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