The International Sustainability Standards Board (ISSB) has issued its inaugural standards—
IFRS S1 and IFRS S2 —ushering in a new era of sustainability-related disclosures in capital markets
worldwide. The Standards will help to improve trust and confidence in company disclosures about
sustainability to inform investment decisions.
And for the first time, the Standards create a common language for disclosing the effect of climate related risks and opportunities on a company’s prospects.
About the Standards
IFRS S1 provides a set of disclosure requirements designed to enable companies to communicate to
investors about the sustainability-related risks and opportunities they face over the short, medium and
long term.
IFRS S2 sets out specific climate-related disclosures and is designed to be used with IFRS S1.
Both fully incorporate the recommendations of the Task Force on Climate-related Financial Disclosures
(TCFD).
Commonly Asked Questions
1. Why was the ISSB created?
There was strong demand for the IFRS Foundation to create the ISSB.A company’s ability to generate cash flows over the short, medium and long term is inextricably
linked to its interactions with stakeholders, society, the economy and the natural environment.
Companies were calling for a simplified disclosure landscape, seeking clarity and guidance about
how to communicate this story effectively.
Investors were calling for decision-useful, consistent and comparable sustainability information that
enables them to understand sustainability-related risks and opportunities.
As a result, capital markets were not working as efficiently as they could, adding cost and
complexity.
2. What approach has the ISSB taken to standard-setting?
The IFRS Foundation has a rigorous and respected due process that secures global market input
and jurisdictional buy-in. Furthermore, ISSB members represent diverse experiences and global
perspectives that have enhanced the ISSB’s standard-setting process. By consolidating and building upon the resources of other investor focused initiatives – SASB, IIRC,
CDSB and TCFD – the ISSB has been able to address fragmentation and secure international
support for a global baseline of sustainability disclosures.
The ISSB consults closely with the market, developing IFRS S1 and IFRS S2 so that they deliver a
comprehensive global-baseline of sustainability-related disclosures.
The ISSB has focused on interoperability with jurisdictional requirements, and with voluntary
standards – such as the GRI Standards – that are focused on broader objectives.
The ISSB has also delivered connections to financial statements, and with its sister body’s
standards – IFRS Accounting Standards.
As a result of the ISSB’s approach to standard-setting, IFRS S1 and IFRS S2 are proportionate, and
elicit assurable disclosures. They require industry-specific disclosures to highlight information most
relevant to investors.
3. What is IFRS S1?
IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information sets
out the general requirements for a company to disclose information about its sustainability-related
risks and opportunities that is useful to investors in making decisions relating to providing resources
to the company.
It sets out the core content for a complete set of sustainability-related financial disclosures,
establishing a comprehensive baseline of sustainability-related financial information to meet the
needs of global capital markets.
4. What is IFRS S2?
IFRS S2 Climate-related Disclosures sets out the requirements for a company to disclose
information about its climate-related risks and opportunities, while building on the requirements
described in IFRS S1.
IFRS S2 integrates the recommendations of the Task Force on Climate-related Financial
Disclosures (TCFD) and requires the disclosure of information about both cross-industry and
industry-specific climate-related risks and opportunities.
5. How have the Standards changed since the Exposure Drafts?
The ISSB has discussed 36 papers over 10 meetings to consider the 1,400 comment letters
received on IFRS S1 and IFRS S2.
We have published a feedback statement summarising the central matters that have been the
subject of feedback and discussion.
Key topics include interoperability, with the ISSB carefully weighing and incorporating interoperability
considerations throughout its decision making to achieve greater interoperability between the
Standards and jurisdictional requirements, and proportionality, with the ISSB introducing
proportionality mechanisms – such as the consideration of a company’s skills, capabilities and
resources, and the use of reasonable and supportable information available without undue cost and
effort. Feedback about industry-based materials was also considered, with the ISSB confirming the
requirement for a company to provide industry-based disclosures, and providing examples of
industry-based disclosure topics and metrics in illustrative guidance that entities must refer to and
consider.
6. How do the Standards approach materiality?
A company is asked to disclose material information about the sustainability-related risks and
opportunities that could reasonably be expected to affect its prospects.
The definition of material information is aligned with that used in IFRS Accounting Standards.
Information is material if omitting, misstating, or obscuring that information could reasonably be
expected to influence investor decisions.
7. Why should companies apply the Standards?
The ISSB expects that companies that apply IFRS S1 and IFRS S2 will benefit from using a global
disclosure baseline that:
- removes the alphabet soup of current ESG reporting
- helps companies streamline their sustainability reporting processes; and
- enables greater transparency of information, resulting in improved access to capital,
governance and strategy for companies
Likely benefits for companies are related to improved data quality, including higher-quality of
information from companies that are in the value chain of a reporting company.
Improved data quality is expected to have a positive effect on areas such as governance, strategy,
access to capital, cost of capital, reputation, and employee and stakeholder engagement.
Applying IFRS S1 and IFRS S2 will also help companies streamline their sustainability reporting
processes for meeting the needs of investors.
These benefits are largely confirmed by academic and market research and by the voluntary
standard-setters whose materials form the foundation of the Standards.
Importantly, this information is expected to help investors make better investment decisions.
8. How should my company start applying the ISSB Standards?
Companies have told us that useful first steps include:
- Evaluating internal systems and processes for collecting, aggregating and validating
sustainability-related information across the company and its value chain
- Consider the sustainability-related risks and opportunities that affect the business
- Getting familiar with the fundamental concepts within IFRS S1.
Importantly reporting processes and controls used for financial reporting are a relevant basis for
establishing necessary practices to apply the ISSB Standards.
9. What does this mean for the frameworks and standards I'm already using voluntarily?
While the ISSB has achieved consolidation in the landscape, a number of the standards and
frameworks you might already voluntarily use will still be important. This is because, so far, the ISSB
has issued standards on general requirements and climate, it has not yet covered other areas indepth.
Therefore, use of the SASB Standards will continue.
Furthermore, the CDSB Framework can still be used to help guide disclosures.
The ISSB is currently consulting through its agenda consultation on future projects, including around
integration in reporting. In the meantime, the Integrated Reporting Framework is a useful tool for
integrating and presenting reporting that includes disclosures prepared applying ISSB Standards
10. What services does the IFRS Foundation provide that can help?
The IFRS Foundation offers a broad range of relevant products and services, including supporting
the widespread adoption and implementation of ISSB Standards and integrated reporting.
For example, the IFRS Sustainability Alliance is diverse global network of members who explore and
develop best practices related to sustainability standards and integrated reporting.
The IFRS Foundation also offers an educational course - the FSA Credential.
Further information can be found on the IFRS Foundation website.
11. How does the IFRS Foundation work with GRI?
The IFRS Foundation has a Memorandum of Understanding with GRI through which we seek to
align our work programmes and standard-setting activities.
The agreement reflects the importance of ensuring compatibility and interconnectedness of investorfocused baseline sustainability information that meets the needs of the capital markets, with
information intended to serve the needs of a broader range of stakeholders.
The IFRS Foundation and GRI recognise the considerable public interest in aligning where possible
their respective work programmes, terminology and guidance, helping to reduce the reporting
burden for companies and to further harmonise the sustainability reporting landscape at an
international level.
12. What languages are the ISSB Standards being translated into?
We recognize the importance of translations for application of the Standards.
IFRS S1 and IFRS S2 and the accompanying materials will be translated into Spanish. Translations
in other languages are dependent on collaboration with national standard-setters. It is likely that
IFRS S1 and IFRS S2 will be translated in Arabic, French, Korean, Japanese and Portuguese,
Traditional Chinese and Turkish.
Other translations are likely to be considered in the coming months. The timing of publication of
translations is dependent on the availability of technical resources to the review the translation, not
necessarily the time needed for the translation.
The educational material of the capacity building programme might also be translated, on a case-by-case basis depending on the demand