Australian financial sector warns of deviation from the ISSB baseline
15 Feb 2024
Three important members of the Australian finance sector have advised the Government not to deviate from the global baseline of the International Sustainability Standards Board (ISSB) when requiring climate-related financial disclosures.
In January 2024, the Australian Government published an exposure draft legislation, in which all mentions of "sustainability" in the Australian equivalent of IFRS S1 are replaced with "climate". In addition, the scope of that equivalent standard would be reduced to climate-related financial disclosures. The draft legislation also contains a proposal to dilute IFRS S2 for financial institutions by only requiring them to consider the applicability of disclosures related to their financed emissions.
The Australian Sustainable Finance Institute (ASFI) demands full alignment with the ISSB's standards as the baseline for Australia’s sustainability disclosure regime. In ASFI's view, this would help ensure "global interoperability" and streamlining of reporting requirements particularly for financial institutions that operate across multiple jurisdictions. They consider the AASB's decision to focus their standards on climate only to be an "unnecessary deviation" from the ISSB's standards. ASFI demands that IFRS S1 is adopted in its entirety "as soon as practicable" to ensure continued international alignment and to prepare the market for introduction of any future ISSB standards. The deviation from IFRS S2 is "a significant departure", according to ASFI, that could undermine "the value and efficacy" of the disclosures regime.
According to Principles for Responsible Investment (PRI) both IFRS S1 and IFRS S2 should be adopted as a baseline to ensure comparability and interoperability of data across regions. Modifications should only be made if they contribute to improved disclosures and do not detract from the global standard set by the ISSB's standards.
The Investor Group on Climate Change (IGCC) noted that modifications should be building on the baseline and cautioned against removing parts of the standards or restructuring them. In the IGCC's view, this creates an "unnecessary barrier" to producing quality and comparable disclosures. It also creates the risk of compromising the "integrity of the baseline" and adding complexity for both reporters and users operating across markets.
Please see below for links to all three letters on the respective websites of the authors:
