Consultation reveals divergent views on ISSB’s next priority topic

Financial regulators and accounting organisations have urged the International Sustainability Standards Board (ISSB) to broaden its sustainability-related disclosure requirements, to move beyond just climate-related aspects. However, with over 300 responses received, stakeholders appear split on whether the ISSB should prioritise biodiversity or social issues for its next project.

The consultation response on where the ISSB should concentrate its focus for standard setting and research closed on 1 September, a few months after it finalised its general and climate standards, known as IFRS S1 and IFRS S2 respectively.

The standards have gained wide support from regulators. Sue Lloyd, vice-chair of the ISSB, referred to that support in a recent speech which addressed how the latest developments “completes” the work of the Task Force on Climate-Related Financial Disclosures.

The UK’s Financial Conduct Authority (FCA) was one of the stakeholders that advocated for prioritising nature, stating “there is a clear urgency to act” to globally address climate and biodiversity challenges. In its response, the regulator encouraged the ISSB “to build out a suite of investor material sustainability-related disclosure standards beyond climate”, and to develop guidance on transition plan disclosures.

The FCA also recommended leveraging existing work that would enable the development of nature standards, notably the Taskforce on Nature-Related Financial Disclosures (TNFD). It did note the “high interdependencies between sustainability topics” and therefore suggested a medium-term aim should be to consider a project that jointly develops reporting on human capital and human rights.

Global disclosure body, CDP, along with the Glasgow Financial Alliance for Net Zero and the European Securities and Market Authority, argued for prioritising nature and the TNFD.

CDP said: “Aligning with the TNFD will provide businesses with a cohesive comprehensive and globally recognised set of guidelines to measure and disclose their nature-related financial risks and opportunities.”

Of the responses advocating for human capital or human rights to be prioritised in the short term, Brazil’s Securities and Exchange Commission argued that social issues are the logical “next step” towards completing a set of sustainability disclosure requirements, especially considering the existing work already covering environmental information.

Japan’s financial services agency echoed this point, saying that companies are already addressing a range of sustainability issues including nature, but “advancing human capital disclosure would contribute to supporting the implementation” of the standards.

In addition, a letter coordinated by ShareAction and signed by 24 asset managers and owners stated that “the financial materiality of human capital and human rights-related topics – and the critical role of human rights due diligence in identifying business risks – has never been clearer”.

Claiming that “investors are in dire need of a unified social disclosure framework”, the letter warned that “by not integrating human capital and human rights, the ISSB risks the integrity of any disclosure standards which may arise from the research process”.