This is part 1 of a series of educational posts from the IFoA’s Climate Change Disclosures Working Party about climate reporting topics. Here the working party gives an introduction to ISSB and a brief overview of its recent publications (IFRS S1 and S2).
The International Sustainability Standards Board (ISSB) is the standard-setting body under the IFRS Foundation responsible for creation and development of sustainability-related financial reporting standards. This was formed in 2021 from a culmination of consolidation of different sustainability-focused reporting bodies across the last decade, including the Climate Disclosure Standards Board (CDSB) and the Value Reporting Foundation (which in turn was a merger of SASB and IIRC).
The ISSB’s 4 key objectives are:
ISSB now governs the SASB Standards and encourages companies to continue to use these standards until these have been replaced by IFRS Sustainability Disclosure Standards. These standards are a key starting point for development of the IFRS Sustainability Disclosure Standards (see below).
The Integrated Reporting Framework was part of the Value Reporting Foundation mentioned above and provides a connection between financial statements and sustainability-related financial disclosures. (See: IFRS Foundation completes consolidation with Value Reporting Foundation.). As it states on the IFRS website, “The IASB and the ISSB will work together to agree on how to build on and integrate the Integrated Reporting Framework into their standard-setting projects and requirements.”
In June 2023, the ISSB issued its inaugural standards: IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2 Climate-related Disclosures. Both are effective for annual reporting periods beginning on or after 1 January 2024.
The objective of IFRS S2 requires an entity to disclose information about its climate-related risks and opportunities that is useful to users of general-purpose financial reports in making decisions relating to providing resources to the entity. (See: IFRS S2 Climate-related Disclosures.)
IFRS S2 requirements have been grouped as per the same 4 pillars of the TCFD Framework
(that is, governance, strategy, risk managements, metrics and targets).
Key issues for actuaries disclosing under IFRS S2 include climate scenario analysis, more specifically on modelling methodology and scenario selection. In particular, the International Actuarial Association (IAA) is in the process of drafting and issuing its International Standards of Actuarial Practice (ISAPs) to incorporate guidance on IFRS S2 (ISAP 8). Specifically, the ISAP may address development and uncertainty in climate scenario analysis and disclosure of such results.
Potential consideration is required on industry-based metrics as well. ISSB has issued supplementary Industry-based Guidance on Implementing IFRS S2 papers to address this.
ISSB will be taking over from TCFD for the responsibility of monitoring company climate-related disclosures from 2024.
It is expected that many other countries will adopt ISSB guidelines, either directly as mandatory requirements, or indirectly to create their own local standards based on these. We expect new ISSB standards to continue to be published in the near future.
We are awaiting finalisation of IAA’s ISAP 8 which gives guidance on IFRS S2. The deadline for comments is currently 23 August 2023.
Below is a list of websites which we hope that you find useful.
IFRS S2 Climate-related Disclosures
ISSB publishes IFRS S2 'Climate-related Disclosures' – IASplus (iasplus.com)
What are your thoughts on the points raised in this article? We would love to hear your views in the comments on the IFoA's Sustainability Finance Community LinkedIn page.
To find out more, visit: Sustainability: research working parties
The views expressed in this post are those of the individual authors, and not necessarily those of the Institute and Faculty of Actuaries or those of their employers. Information within this post is correct as at the date of writing (i.e. end of July 2023). Hence, there may be subsequent updates which are not reflected. Any reader should still reference the underlying legislation and standard, and should there be any conflict, the underlying information in the relevant standard or legislation supersedes any information presented in this post.