ESMA Responds to ISSB Exposure Drafts on Sustainability Disclosures
The European Securities and Markets Authority (ESMA) published its response to the exposure drafts from the International Sustainability Standards Board (ISSB). The response addresses the general requirements for disclosure of sustainability-related financial information (IFRS S1) and the climate-related disclosures (IFRS S2).
In the response letter, ESMA welcomes the initiative of the IFRS Foundation to consolidate some of the existing standard-setting and framework initiatives and strongly supports the work of the ISSB to reach a common set of internationally accepted high-quality sustainability reporting standards that could serve as a global baseline. ESMA notes that while assessing the proposals in the exposure drafts, it has considered two main aspects on the suitability of the proposed requirements to serve well the information needs of investors. One of these aspects relates to the investors that operate in the European Union markets and are subject to the European Union-specific disclosure obligations; the other one relates to the potential for convergence of the ISSB proposed requirements with the draft European Sustainability Reporting Standards (ESRS) developed by the European Financial Reporting Advisory Group (EFRAG). Based on its analyses, ESMA is requesting the ISSB to reconsider its proposed requirements in the following five areas:
- Notion of sustainability-related financial information—ESMA states that the ISSB proposals do not define the sustainability-related matters addressed in the standards and recommends that the ISSB converges the scope and definition of what is meant by ""sustainability" with other major standard-setting initiatives.
- Overall approach to materiality—ESMA recommends that the terminology in context of the identification of risks and opportunities be clarified and made consistent across the standard. ESMA would also like the role of external "impacts" in assessing enterprise value creation to be clarified and made consistent with the impact identification process of other standard-setting initiatives (such as the ESRS).
- Use of entity-specific disclosures and metrics—ISSB envisages issuers being able to determine their own metrics and disclosures either to complement those already envisaged by an IFRS sustainability standard or where there is a lack of specific requirements as regards a certain matter. In ESMA’s view, where such metrics could qualify as "adjusted" versions of those mandated by the individual ISSB standards, they should be accompanied by adequate disclosures.
- Use of sector-specific guidance from the Sustainability Accounting Standards Board (SASB)—ESMA recommends that ISSB should consider how to introduce SASB guidance as part of its mandatory requirements in the climate-reporting standard, while excluding parts of the guidance not necessarily related to climate, amending aspects of the guidance not wholly suitable for global application given their jurisdiction-specific connotations, and considering a phased application of such requirements.
- Transition plans and emissions offsets—ESMA recommends that the ISSB should complement its requirements with additional key details critical to achieving the comparability and relevance of reported information and improve the convergence with the draft ESRS proposals.
Related Link: ESMA Response (PDF)
Keywords: International, Europe, Banking, Disclosures, ESG, Climate Change Risk, Sustainable Finance, ISSB, Exposure Draft, IFRS, ESRS, EFRAG, SASB, Reporting, ESMA
Featured Experts

María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer

Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.

Michael Denton, PhD, PE
Dr. Denton provides industry leadership in the quantification of sustainability issues, climate risk, trade credit and emerging lending risks. His deep foundations in market and credit risk provide critical perspectives on how climate/sustainability risks can be measured, communicated and used to drive commercial opportunities, policy, strategy, and compliance. He supports corporate clients and financial institutions in leveraging Moody’s tools and capabilities to improve decision-making and compliance capabilities, with particular focus on the energy, agriculture and physical commodities industries.
Previous Article
CPMI and IOSCO Issue Guidance on Stablecoin ArrangementsRelated Articles
EBA Proposes Standards for IRRBB Reporting Under Basel Framework
The European Banking Authority (EBA) proposed implementing technical standards on the interest rate risk in the banking book (IRRBB) reporting requirements, with the comment period ending on May 02, 2023.
FED Issues Further Details on Pilot Climate Scenario Analysis Exercise
The U.S. Federal Reserve Board (FED) set out details of the pilot climate scenario analysis exercise to be conducted among the six largest U.S. bank holding companies.
US Agencies Issue Several Regulatory and Reporting Updates
The Board of Governors of the Federal Reserve System (FED) adopted the final rule on Adjustable Interest Rate (LIBOR) Act.
ECB Issues Multiple Reports and Regulatory Updates for Banks
The European Central Bank (ECB) published an updated list of supervised entities, a report on the supervision of less significant institutions (LSIs), a statement on macro-prudential policy.
HKMA Keeps List of D-SIBs Unchanged, Makes Other Announcements
The Hong Kong Monetary Authority (HKMA) published a circular on the prudential treatment of crypto-asset exposures, an update on the status of transition to new interest rate benchmarks.
EU Issues FAQs on Taxonomy Regulation, Rules Under CRD, FICOD and SFDR
The European Commission (EC) adopted the standards addressing supervisory reporting of risk concentrations and intra-group transactions, benchmarking of internal approaches, and authorization of credit institutions.
CBIRC Revises Measures on Corporate Governance Supervision
The China Banking and Insurance Regulatory Commission (CBIRC) issued rules to manage the risk of off-balance sheet business of commercial banks and rules on corporate governance of financial institutions.
HKMA Publications Address Sustainability Issues in Financial Sector
The Hong Kong Monetary Authority (HKMA) made announcements to address sustainability issues in the financial sector.
EBA Updates Address Basel and NPL Requirements for Banks
The European Banking Authority (EBA) published regulatory standards on identification of a group of connected clients (GCC) as well as updated the lists of identified financial conglomerates.
ESMA Publishes 2022 ESEF XBRL Taxonomy and Conformance Suite
The General Board of the European Systemic Risk Board (ESRB), at its December meeting, issued an updated risk assessment via the quarterly risk dashboard and held discussions on key policy priorities to address the systemic risks in the European Union.