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    ISSB Proposes Standards on Sustainability and Climate Disclosures

    March 31, 2022

    The International Sustainability Standards Board (ISSB) proposed general sustainability-related disclosure requirements and the climate-related disclosure requirements. Various international organizations, including the International Organization of Securities Commissions (IOSCO) and the Hong Kong Monetary Authority (HKMA), have welcomed the two draft standards from ISSB. ISSB also set out the plan for how its work will build on the Sustainability Accounting Standards Board (SASB) Standards and industry-based standard-setting processes.

    Proposed ISSB standards

    The proposals build on the recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD) and incorporate industry-based disclosure requirements derived from SASB Standards. The consultations end on July 29, 2022, with ISSB planning to review the feedback in the second half of 2022 and issue the final standards by year-end. Both proposed IFRS standards will form a comprehensive global baseline of sustainability disclosures designed to meet the information needs of investors in assessing enterprise value. The proposed IFRS standard on general sustainability-related disclosure requirements includes disclosure of information on:

    • a company’s consideration of its governance, strategy, and risk management and the metrics and targets it uses to measure, monitor, and manage significant sustainability-related risks and opportunities.
    • how to identify and develop appropriate disclosures about sustainability-related risks and opportunities, including cross-industry and industry-based metrics, not addressed by an IFRS Sustainability Disclosures Standard.
    • material information about sustainability-related risks and opportunities across a company’s value chain. The information relevant to a company would depend on many factors, such as the company’s activities or the industry to which it belongs, the locations in which it operates, its products and manufacturing processes, and the nature of its reliance on employees and supply chains.
    • how sustainability-related financial information relates to information in its financial statements.
    • frequency of reporting, location of information, the reporting entity and the related financial statements, use of financial data and assumptions, sources of estimation and outcome uncertainty, errors, and statement of compliance.

    The proposed IFRS standard on climate-related disclosure requirements sets out the specific requirements for the identification, measurement, and disclosure of climate-related financial information and includes disclosure of information on:

    • the governance processes, controls, and procedures a company uses to monitor and manage climate-related risks and opportunities.
    • how climate change could reasonably be expected to affect a company's business model, strategy, and cash flows over the short, medium, or long term; its access to finance; and its cost of capital.
    • climate-related physical and transition risks and opportunities including how a company plans to achieve any climate-related targets, how it expects to adapt or mitigate climate-related risks, and whether carbon-offsetting is part of its plan.
    • using climate-related scenario analysis to assess a company's risks and opportunities and disclose how its climate-related analysis aligns with the latest international agreement on climate change.
    • how significant climate-related risks and opportunities have affected a company's most recently reported financial position, financial performance, and cash flows and explain how this expects the company's financial position over time, given its strategy to address significant climate-related risks and opportunities.
    • how processes to identify, assess, and manage climate-related risks and opportunities are integrated into the company’s overall risk management process.

    ISSB plans

    In addition to releasing the draft standards, the ISSB Chair Emmanuel Faber and Vice-Chair Sue Lloyd communicated plans for building upon the SASB Standards and for embedding SASB’s industry-based standards development approach into the ISSB’s standards development processSASB Standards, including the industry-based approach used by SASB, will be built upon and supported in the following ways:

    • ISSB will embed the industry-based approach used by the SASB into its standard-setting process. This approach is valued by investors for producing decision-useful information and by preparers for producing cost-effective standards.
    • ISSB included SASB Standards in the recently issued draft standards on climate disclosures and general requirements for sustainability disclosures. SASB Standards are the source of the industry-based requirements in the draft on climate disclosures and, on finalization, these would become a required component of the ISSB’s Climate Standard. Similarly, in the absence of specific IFRS Sustainability Disclosure requirements, the ISSB sustainability disclosures standard requires companies to consider SASB Standards to identify sustainability-related risks and opportunities and to develop appropriate disclosures. This enables IFRS Sustainability Disclosure Standards to make use of the range of sustainability-related risks and opportunities covered by the SASB Standards from inception with the status of implementation guidance.
    • As part of the commitment to improving international applicability of SASB Standards, addressing international applicability of the suite of SASB Standards is a priority for the ISSB and forms part of the ISSB’s initial work plan. In line with this commitment, the recently issued climate disclosures draft standard includes proposals to improve the international applicability of the SASB’s industry-based climate-related requirements. SASB’s ongoing work on international applicability (beyond climate) will be transitioned to the ISSB with the aim of the ISSB producing proposed changes to the SASB Standards as soon as practicable. ISSB intends to improve the international applicability of the SASB Standards prior to the finalized version of the recently proposed general sustainability disclosure requirements standard coming into effect.
    • SASB Standards will serve as the starting point for the ISSB’s industry-based requirements. On consolidation of the VRF, the SASB Standards will become materials of the IFRS Foundation with the status of implementation guidance. On consolidation of the VRF, the ISSB will assume responsibility for the evolution and enhancement of SASB’s 77 industry-based Standards.
    • Ongoing projects of SASB will be transitioned to the ISSB and continued. SASB is expected to publish proposed changes arising out of several of its ongoing projects prior to the ISSB, assuming responsibility for the SASB Standards and these proposed changes; in addition, the climate and human capital research projects and other current SASB projects will be transitioned to the ISSB. The IFRS Foundation intends to progress these projects as resourced, while the consultation on the ISSB’s agenda planned for 2022 will inform their detailed delivery plan.


    Keywords: International, Banking, Disclosures, TCFD, IFRS, SASB, IOSCO, Climate Change Risk, ESG, Sustainable Finance, ISSB, Headline

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