ISSB to publish reporting standards by June

International Sustainability Standards Board (ISSB) chair Emmanuel Faber stated that the group expects to finalise climate reporting standards by June 2023, with businesses being able to use the standards for reporting in 2024. Faber’s comments echoed similar statements from the chair of the ISSB’s parent, the International Financial Reporting Standards Board.

Speaking on a podcast last month,  Faber said the ISSB will complete redeliberation of the standards, the process by which the group revises the standards following the receipt of comments, in February. The standards will then be balloted, with a vote to finalise the standards by June.

The ISSB released the standards for comment in two parts in March 2022. S1 covers general requirements for disclosing sustainability-related financial information, while S2 specifically covers climate-related disclosures. The proposal sets out the general requirements for disclosing sustainability-related financial information and reporting on all related risks and opportunities, and generally builds on standards issued by the Task Force for Climate-related Financial Disclosures (TCFD). They include the requirement that “financial reporting shall include a complete, neutral and accurate depiction of its sustainability-related financial information”.

However the ISSB’s proposal was criticised by several groups, including banks and the European Securities and Markets Authority, for failing to adopt a double materiality standard. Double materiality describes how corporate information can be important both for a firm’s financial value and its impact on the climate and environment. It is unclear whether ISSB’s final standards will include double materiality.

Once finalised, the ISSB’s standards are likely to be incorporated into many regulatory disclosure requirements. The European Financial Reporting Advisory Group that is developing standards for the EU has aligned its proposed standards with the ISSB’s proposal, and the UK government intends that the ISSB’s final standards “will form the central component of the UK’s Sustainability Disclosure Requirements”. The International Organisation of Securities Commissions, the multilateral association for market regulators,  “will move promptly” to vote on whether to endorse the standards. However, the Securities and Exchange Commission in the US is unlikely to adopt the standards in its forthcoming climate disclosure rule, which it has based in part on TCFD standards.

The ISSB was established in November 2021 with the aim of developing “high quality, transparent, reliable and comparable” disclosure standards related to corporations’ climate and other ESG-related activities.