The International Sustainability Standards Board (ISSB), which operates under the International Financial Reporting Standards Foundation (IFRS), has announced the inaugural IFRS Sustainability Disclosure Standards. Comprising two sets of guidelines, the IFRS S1 and IFRS S2, the standards are designed to improve “sustainability-related disclosures in capital markets worldwide”, states IFRS.

The lack of standardisation in ESG data and reporting, as well as issues of greenwashing, have been top-of-mind concerns among regulators in recent years. These new standards mark the first time a “common language” has been created for “disclosing the effect of climate-related risks and opportunities”, and “will help to improve trust and confidence in company disclosures about sustainability to inform investment decisions”, says the IFRS in a press release.

A tale of two standards

The IFRS S1 sets out “a set of disclosure requirements” to help companies communicate to investors the sustainability-related risks and opportunities that could be expected over the short, medium, and long term. IFRS S2 sets out “specific climate-related disclosures and is designed to be used with IFRS S1”.

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Both guidelines are developed based on extensive market feedback, and are supported by G20, the Financial Stability Board, and the International Organisation of Securities Commissions (IOSCO). They can be used “in conjunction with any accounting requirements” and are “built on the concepts that underpin the IFRS Accounting Standards”, which IFRS claims are “required by more than 140 jurisdictions”.

Moving forward, the ISSB plans to work with jurisdictions and companies to support adoption. More details about the IFRS S1 and IFRS S2 are summarised here.