Consultation on Agenda Priorities

The staff previously stated the ISSB’s intention to publish the RFI in the Q4 of 2022. Due to the need to strongly emphasise foundational activities—and the importance of IFRS S1 and IFRS S2 the staff now expect to publish an RFI in the first half of 2023.

General Sustainability-related Disclosures

This is the first decision-making session of the ISSB in relation to the exposure drafts. The staff recommend that the ISSB confirm that information is being provided to meet the information needs of the primary users of general purpose financial reporting who are “existing and potential investors, lenders and other creditors”, in alignment with the IASB’s Conceptual Framework and remove “enterprise value” from the objective and from the definition of materiality which would create alignment with the IASB’s Conceptual Framework but not fundamentally change the focus of the required disclosures. Additional resources and language would clarify the concept of enterprise value and the scope of sustainability-related financial information required. The staff also recommend introducing a requirement to disclose the process of identifying and disclosing material information and/or materiality judgments. The ISSB will also consider whether the term “significant” is needed to achieve the objective of IFRS S1.

Climate-related Disclosures

The staff recommend that the ISSB confirm the requirements for an entity to disclose: its absolute gross Scope 1 and Scope 2 GHG emissions generated during the reporting period, including separate disclosure for the consolidated accounting group and unconsolidated investees; and its Scope 3 GHG emissions, considering the 15 Scope 3 GHG emissions categories described in the Greenhouse Gas Protocol Corporate Value Chain (Scope 3) Accounting and Reporting Standard. The ISSB will consider ways to help entities meet the Scope 3 disclosure requirements, such as deferring the effective date for this disclosure or developing additional guidance. The staff also recommend that the ISSB proceeds with the proposal that entities use the GHG Protocol Corporate Standard. However, entities that have been using a different measurement methiod would be permitted to do so during a transtion period, or while a jurisdiction requires use of that other method.

General Sustainability-related Disclosures and Climate-related Disclosures

The ISSB will be asked to consider some drafting changes that the staff think would improve the interoperability with proposals published in Europe and the US. The staff recommend that the ISSB confirm the use of the TCFD pillars for structuring the core content in IFRS S1 and IFRS S2 and confirm the meaning of the global baseline. In addition to the recommendations in the other papers, the staff recommend that the ISSB confirm that time horizons not be defined for short, medium and long term; that disclosures be required about the effects of climate-related risks and opportunities on the entity’s financial position, financial performance and cash flows for the reporting period (i.e. the current effects); that disclosures are not required to be reported separately for physical risks, transition risks and climate-related opportunities; that separate disclosures be required about assets subject to physical and transition risks and climate-related opportunities, in the form of metrics; the disclosures proposed in in relation to climate resilience; add a requirement to disclose whether and how an entity uses climate-related scenario analysis to inform the identification of climate-related risks and opportunities; and use the term “carbon credit” instead of “carbon offset”.

Industry-based Materials

The ISSB will discuss and begin alignment around the strategy for integrating industry-based materials into IFRS Sustainability Disclosure Standards, including the role of the SASB Standards in [draft] IFRS S1, the industry-based requirements in Appendix B of [draft] IFRS S2, improving the international applicability of the SASB Standards, the ISSB’s upcoming consultation on agenda priorities and advancing SASB projects inherited by the ISSB. The staff are not asking the ISSB to make any decisions in this session.

Consultation on Agenda Priorities

Update on Planned Approach (Agenda Paper 2)

This paper provides the ISSB with an update on the planned approach to and timing of its consultation on agenda priorities and the publication of a request for information (RFI).

The ISSB will not be asked to make any decisions in this session. However, ISSB members will have the opportunity to provide their thoughts and feedback on the planned approach which will inform a subsequent discussion with the ISSB at a later decision-making meeting.

Recommended approach

The staff recommends that the RFI:

• Outlines the work to build on the foundation established by IFRS S1 and IFRS S2, once finalised
• Sets out proposals for new research and standard-setting for stakeholder input to inform the board’s decisions on the future work plan

These two primary categories of work set out above are broadly aligned with the two aspects of the ISSB’s ‘strategic balance’ discussed at the July 2022 ISSB meeting, i.e. ‘advancing and enhancing existing materials’ and ‘developing new materials.’ Based on clear feedback from the ISSB and stakeholders, the staff recommends that the ISSB initially devote a majority of its resources to work meant to build on the foundation established by IFRS S1 and S2, which may limit the ISSB’s capacity to add a significant number of new research and standard-setting projects in its initial two-year work plan.

Recommended timeline

The staff previously stated the ISSB’s intention to publish the RFI in the Q4 of 2022. Due to the need to strongly emphasise foundational activities—and the importance of IFRS S1 and IFRS S2 in that context—the staff will propose a timeline for the RFI that allows for significant re-deliberations on [draft] IFRS S1 and [draft] IFRS S2. These deliberations might affect the work plan (e.g. decisions on Appendix B of [draft] IFRS S2). Thus, the RFI can more appropriately reflect what is—and what is not—included in IFRS S1 and IFRS S2, as well as any ISSB decisions on other key aspects relevant to the foundational work (e.g. the role of industry-based materials). The staff expectation is that this would result in the publication of the RFI in the first half of 2023. 

Our pre-meet­ing summaries is available on our October meeting notes page and will be sup­ple­mented with our popular meeting notes after the meeting.