ISSB Furthers Agenda on Adoption of Sustainability Disclosure Standard

This roundtable was attended by representatives from Brazil, Chile, Egypt, Indonesia, Kazakhstan, Kenya, Nigeria, Mexico, Pakistan, South Africa, Sri Lanka, Uzbekistan, and Zimbabwe, with written comments received from Thailand and Papua New Guinea. The session focused on ensuring that an effective strategy is in place to build capacity within markets to enable the effective disclosure and use of sustainability-related information. The discussions also reflected on the ISSB plans to proportionally build relief for companies that need time to apply the standards effectively. 

Then, at its December 2022 meeting, ISSB set out a series of guidance and relief on Scope 3 GHG emission disclosures within its Climate-related Disclosures Standard (S2). The guidance is designed to help companies embed and improve their processes for measurement and disclosure of Scope 3 GHG emissions. At the meeting, ISSB agreed to set out a framework in S2 for the measurement of Scope 3 GHG emissions that will require the use of reasonable and supportable information that is available without undue cost or effort and incorporates the use of estimation. A company’s use of this framework would be accompanied by disclosures to enable investors to understand the basis for measurement of Scope 3 GHG emissions. ISSB also agreed on the following:

• ISSB agreed on relief including a temporary exemption for a minimum of one year following the effective date of Climate-related Disclosures Standard (S2). A company will also be able to include information that is not aligned with its reporting period, when that information is obtained from companies in its value chain with a different reporting cycle.
• ISSB agreed that in disclosing the Scope 2 GHG emissions, a company would be required to use the location-based method (reflecting the average emissions intensity of its local grid), along with relevant information about contractual instruments in relation to managing energy it has purchased.
• ISSB agreed to confirm and refine proposed requirements for financed emissions, intended to support preparers in the financial sector with the measurement and disclosure of emissions associated with their portfolios. Apart from this, the ISSB approved amended financed emission disclosures for activities associated with three industries—that is, Asset Management & Custody Activities, Commercial Banks, and Insurance.
• ISSB agreed to propose four projects for prioritization in its upcoming consultation—that is, biodiversity, ecosystems, and ecosystem services; human capital; human rights; and connectivity in reporting with the IASB. These four agenda are based on the feedback from investors and other market participants. 

ISSB had yet another meeting in Montreal that coincided with the COP15 Biodiversity Conference, during which ISSB articulated the relationship between sustainability matters and financial value creation to place a company in better position to explain to its investors how it is working sustainably within its business ecosystem. To address the natural ecosystem-related disclosures, ISSB decided to research incremental enhancements that complement the Climate-related Disclosures Standard (S2) and to consider the work of the Taskforce for Nature-related Financial Disclosure (TNFD) and other existing nature-related standards and disclosures. ISSB also announced the appointment of two Special Advisers, Karin Kemper and Geordie Hungerford, to provide strategic counsel on issues related to natural ecosystems and the human capital aspects of the climate resilience transition.

Keywords: International, Banking, ESG, Sustainable Finance, IFRS, Climate Change Risk, Reporting, Disclosures, Scope3 Emissions, ISSB