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  • Writer's pictureDaniel Goelzer

ISSB Issues its Inaugural Disclosure Standards

On June 26, the International Sustainability Standards Board (ISSB) issued its first two sustainability standards – IFRS S1 (General Requirements for Disclosure of Sustainability-related Financial Information) and IFRS S2 (Climate-related Disclosures). Use of the ISSB standards is not mandatory in the United States, but they are likely to be adopted in most of the rest of the developed world and to become de facto global standards. Many U.S. companies are likely to make ISSB disclosures voluntarily, either in response to investor demand or as a way of providing disclosures that are comparable to those of peer companies. IFRS S1 and IFRS S2 are effective for annual reporting periods beginning on or after January 1, 2024, with earlier application permitted. See ISSB Prioritizes Climate Reporting and Defers Other Disclosures, April 2023 Update.


IFRS S1 is a general standard. It requires an entity to disclose information about all sustainability-related risks and opportunities that could reasonably be expected to affect the entity’s cash flows and its access to finance or cost of capital over the short, medium, or long term. These disclosures are collectively referred to as “sustainability-related risks and opportunities that could reasonably be expected to affect the entity’s prospects.” IFRS S1 sets out general requirements for the content and presentation of sustainability disclosures so that the information disclosed is useful in making decisions relating to providing resources to the entity. In particular, IFRS S1 requires an entity to provide disclosures about –

  1. Governance. The governance processes, controls, and procedures the entity uses to monitor, manage, and oversee sustainability-related risks and opportunities.

  2. Strategy. The entity’s strategy for managing sustainability-related risks and opportunities.

  3. Risk Management. The processes the entity uses to identify, assess, prioritize, and monitor sustainability-related risks and opportunities.

  4. Metrics and Targets. The entity’s performance in relation to sustainability-related risks and opportunities, including progress towards any targets the entity has set or is required to meet by law or regulation.

IFRS S2 specifically addresses climate disclosures.It requires an entity to disclose information about climate-related risks and opportunities that could reasonably be expected to affect the entity’s prospects. IFRS S2 applies to climate-related risks to which the entity is exposed which are either (i) climate-related physical risks or (ii) climate-related transition risks, and to climate-related opportunities available to the entity. IFRS S2 sets out the requirements for disclosing information about an entity’s climate-related risks and opportunities under the four categories described in IFRS S1 (i.e., governance, strategy, risk management, and metrics and targets.) IFRS S2 seeks to generate comparable climate-related disclosures, consistent with existing standards and frameworks, and particularly with the recommendations of the Task Force on Climate-Related Financial Disclosures. IFRS S2 also includes as illustrative guidance industry-specific climate metrics based on the standards of the Sustainability Accounting Standards Board.

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