Update on Planned Approach (Agenda Paper 2)

This paper provided 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 was not asked to make any decisions in this session. However, ISSB members had 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 recommended 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 IFRS 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.

ISSB discussion

The Chair highlighted the integral nature of interoperability to the ISSB’s mission and recommended that interoperability matters are part of the fundamental agenda going forward.

Several ISSB members made comments and suggestions surrounding the additional work related to continuing research and outreach to identify and assess IFRS S2 for areas of enhancement outlined in the agenda paper (i.e. materials to support capacity building, core concept and digital taxonomy). One ISSB member commented that this additional research may take longer than the two-year timeline due to the complex nature of climate change. Other ISSB members added that it is important to consider whether prioritising additional research on climate related topics over other areas is aligned with public/user interest. Further, ISSB members highlighted the need for IFRS S2 to adequately capture climate-related risks and opportunities, thus they questioned whether these additional topics should be considered within IFRS S2 or as a future off-shoot of the standard.

One ISSB member raised the importance of recognising that ‘capacity building’ needs to enable emerging countries and SMEs to be able to have an accelerated timeline in adopting IFRS S1 and IFRS S2. Another ISSB member added that it will be important to build out what ‘capacity building’ encompasses in terms of strengthening implementation guidance. However, the majority of ISSB members agreed that supporting the adoption, application and usefulness of IFRS S1 and IFRS S2 were foundational to the ISSB’s work.

One ISSB member suggested that the focus on building the foundation established by IFRS S1 and IFRS S2 will limit the capacity of the ISSB to add a significant number of new research and standard setting projects within the two-year work plan; being clear about this language will ensure the public is not disillusioned about the capacity of the ISSB.

The ISSB members all voted in agreement with the recommended approach following the below two primary categories of work:

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

The members then voted on whether they agreed that the following should be included in the foundation:

• Work to make the SASB standards more internationally applicable—all members voted in favour
• Work to support the adoption, application, and usefulness of IFRS S1 and IFRS S2—all members voted in favour, with the caveat that the definition of capacity building needs to be further considered
• Work to present a coherent and comprehensive system of disclosures, performed in coordination with the IASB and other bodies—all members voted in favour
• Continuing research and outreach to identify areas of enhancement to IFRS S2—11 out of 14 members voted in favour of additional research and outreach, with the caveat that this research is subject to specific targeting

In relation to the proposed timeline to publish the RFI within the first half of 2023, the majority of ISSB members were in favour of this timeline extension. The Chair commented that it is important to be mindful of the resources that the ISSB has available when considering the feasibility of timelines. An ISSB member added that the staff should consider efficient ways to gather feedback that would simplify the overall process.

A number of ISSB members made comments related to the inclusion of corporate governance in the preliminary list of subject matters identified in the July meeting. The Chair commented that the ISSB needs to be mindful of what specific areas of corporate governance it needs to prioritise. An ISSB member added that governance over environmental and social issues would already be included in IFRS S1 and IFRS S2, therefore there is a question as to whether an additional governance piece is decision useful to investors. Another ISSB member further clarified that the decision to add corporate governance to the preliminary list of subject matters would allow staff to perform additional research, scoping and obtain stakeholder feedback to form a basis for the ISSB members to then decide on whether it is added to the consultation.