With the International Sustainability Standards Board’s (ISSB) inaugural standards having been released (IFRS S1 General Requirements for Disclosure of Sustainability-Related Financial Information and IFRS S2 Climate-related Disclosures), the TCFD’s work is complete.  Therefore, the Financial Stability Board (FSB) has requested that the ISSB assume responsibility for monitoring progress on climate-related financial disclosures by companies as of 2024.

This announcement does not change mandatory requirements in respect of TCFD disclosures.

Access the announcement on the TCFD’s website.

Earlier this year, the ISSB Standards were endorsed by the global body for international securities regulators—IOSCO—and since then companies, jurisdictions, and other market players from around the world have been paving the way towards adopting or using the ISSB Standards.

Corporate membership groups representing thousands of companies globally have signed the statement, joined by more than 140 companies preparing public disclosures who also chose to demonstrate support directly. Companies have been calling for standards that enable them to communicate to investors comprehensive information about their climate resilience strategy.

The ISSB’s key partners in the sustainability disclosure landscape including the Global Reporting Initiative (GRI), CDP and the Taskforce on Nature-related Financial Disclosures (TNFD) also reaffirmed their support for the work of the ISSB. The ISSB continues to work closely with these partners to reduce market fragmentation in the sustainability disclosure landscape. 

Review the press release on the IFRS website.

ISO 14000 Environmental management and greenhouse gas emission standards aid companies in fulfilling sustainability and climate commitments, facilitating alignment with IFRS S2 disclosures. Firms with these management system standards are well-positioned to engage with investors using ISSB Standards.

As ISO Standards support consistent approaches internationally in the internal management of sustainability-related matters, ISO supports the work of the ISSB to establish a truly global baseline of sustainability-related financial disclosures.

Furthermore, ISO and the IFRS Foundation are committed to advancing capacity building initiatives that focus on supporting organisations to build internal expertise and understanding that advance practices and reporting.

Access the press release on the IFRS website.

The introduction to the guidance notes:

“With the introduction of mandatory climate-related disclosures climate reporting entities will need to help users understand whether, how, and to what extent, climate-related matters are reflected in an entity's financial statements. Financial statements and climate-related disclosures supplement and complement each other and together should present a coherent picture”

The publication analyses the coherence between financial statements and climate-related disclosures in three broad chapters:

1. Impact of climate-related matters in financial statements
2. Coherence between financial statements and climate-related disclosures
3. Differences between financial statements and climate-related disclosures

It also offers an appendix on the coherence principle.

Access the XRB guide here

The topics discussed include:

• recent progress towards jurisdictional adoption of IFRS S1 and IFRS S2,
• updates on recent progress some of their partners have made,
• an update on capacity building and translations,
• recent meetings with key stakeholders,
• an update from their October board week; and
• preliminary common themes from feedback to their agenda consultation.

The update and the podcast can be accessed on the IFRS Foundation website.

This year, it is titled "Delivering Impact in a Time of Complexity", marking the eleventh instalment of the ‘Reporting matters’ publication. It introduces an evolved evaluation framework designed to guide companies in an era of rapidly evolving reporting regulations and increased stakeholder expectations.

Access the report on the WBCSD website.

On the topic of connectivity, the standard setters highlight that close alignment and connectivity between financial and sustainability reporting is paramount to ensure that the information produced for investors is compatible and comparable. They also note that communicating the ISSB’s long-term objectives and clarifying how these relate to the IASB’s roadmap was a critical next step.

The standard setters submitted individual responses to the ISSB agenda consultation, but felt that it was necessary to combine their statements in an additional joint letter given their shared concerns:

• Feedback from UK stakeholders, as well as the UKEB’s own research, indicate that close alignment and connectivity between financial and sustainability reporting should be a priority for both Boards and they do not consider that this is yet complete.
• The AcSB strongly encourages the ISSB to continue working together with the IASB to prioritise issues related to connectivity in reporting.
• The MASB is of the view that connectivity is paramount to ensure high quality and compatible information in financial statements and in sustainability disclosures.
• The Australian Accounting Standards Board recommends that the ISSB focus on the development of additional guidance on connectivity to better support comparability.
• The XRB highlights that simply relying on generic aspirations for ‘connectivity’ or ‘interoperability’ may undermine the credibility of the work of the ISSB.

Access the report on the UKEB website.

The National Standard-setters (NSS) noted three key areas of concern for the ISSB to consider:

• Connectivity with accounting standards – all considered that close alignment and connectivity between financial and sustainability reporting is paramount to ensure that the information produced for investors is compatible and comparable.
• Strategic roadmap – communicating the ISSB’s long-term objectives and clarifying how these relate to the IASB’s roadmap was a critical next step.
• Implementation priority – the highest priority of the ISSB should be the successful implementation of the inaugural standards.

Access the letter on the UKEB website.

Specifically, the podcast discusses:

• Support for IFRS S1 and IFRS S2 implementation.
• Engagement with jurisdictions and forming a strategy for the adoption of the ISSB.
• ISSB’s future priorities.

Access the podcast on Youtube.

The first report Climate-Related Matters: Summary of Connectivity Research provides an overview of recent third-party research into connectivity challenges between TCFD disclosures (a proxy for the disclosures required by IFRS S2) and the financial statements.

The research revealed:

• There is an overall lack of connectivity between climate-related narrative disclosures and their associated disclosures in the financial statements.
• While there has been an increase in the occurrence of climate-related disclosures the quality of disclosures remains low.
• More transparency is required regarding climate-related estimates and judgements used to prepare financial statements.

The second report A Study in Connectivity: Analysis of 2022 UK Company Annual Reports provides a deep-dive analysis from an investor’s perspective of potential connectivity challenges and includes stakeholder feedback on possible causes.

Access the two reports on the UKEB website.

• Climate-Related Matters: Summary of Connectivity Research
• A Study in Connectivity: Analysis of 2022 UK Company Annual Reports