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Accelerating Transparency: ISSB Issues Inaugural Standards

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ISSB Standards Unveiled: A Milestone in Sustainability Reporting.

It’s been a landmark couple of weeks for sustainability reporting. Now that the ISSB Standards have been issued, many companies are wondering what this development means for emissions disclosure. In this edition of Climate Decoded, we speak with Emily Pierce, Chief Global Policy Officer at Persefoni, to delve into the ISSB’s inaugural standards, how they will help accelerate the global drive towards more transparent and reliable corporate emissions disclosures, and what companies can do to stay ahead of the curve. 

Q: The ISSB Standards have been launched. Why was that such a milestone? 

A: On June 26th, the International Sustainability Standards Board (ISSB) issued its inaugural global sustainability disclosure standards: General Requirements for Disclosure of Sustainability-related Financial Information (IFRS S1) and Climate-related Disclosures (IFRS S2). This release marks a significant stride towards a new common language and global baseline for sustainability reporting. The standards aim to enhance transparency, comparability, and reliability in sustainability reporting while tying such information into financial reports.

The status quo of sustainability reporting has been insufficient for investors and inefficient for companies. The ISSB Standards offer a once-in-a-generation opportunity to catalyze comparable sustainability disclosures across the globe. Additionally, there is the opportunity to mobilize the trillions of dollars of capital that are seeking sustainable investment opportunities. When companies can speak the same language on sustainability issues across borders, they will be empowered to translate action into a competitive advantage. 

Q: Most companies are familiar with the TCFD, and it is the basis for many climate disclosure rules around the world. How do the TCFD and ISSB fit together?

The Task Force on Climate-Related Financial Disclosures (TCFD) has been instrumental in laying the foundation for climate-related financial disclosures since the TCFD Recommendations were first published in 2017. The ISSB standards build on the existing TCFD framework’s four pillars of governance, strategy, risk management, and metrics and targets. If an organization has already been reporting using TCFD recommendations or Sustainability Accounting Standards Board (SASB) standards, it is well-positioned to start reporting based on the ISSB standards, which are built upon these existing frameworks.


The Financial Stability Board (FSB), an international body comprised of banks, treasuries, and securities regulators that promotes global financial stability, called for the creation of the TCFD in 2015. Last Thursday, the FSB issued a press release officially thanking the TCFD for their work in getting us to where we are on climate-related financial disclosures, and “passed the baton” from the TCFD to the ISSB. This is a clear message that the ISSB will now continue the legacy of the TCFD as the primary global framework for climate disclosure.

Q: What do the ISSB Standards say about emissions disclosures? 

A: The TCFD included recommendations for emissions disclosures, but market practices were not keeping pace with investor needs. The ISSB standards will steer the markets to meet those needs by setting clear expectations for emissions disclosures, and providing more detailed guidance to standardize practices. 

To provide investors with comparable information, the standards include a requirement to disclose their absolute greenhouse gas emissions for scopes 1, 2, and 3, measured in accordance with the Greenhouse Gas Protocol Corporate Standard (with limited exceptions for jurisdictional protocols). IFRS S2 will also drive more consistency and comparability in carbon accounting by requiring that companies speak the same language for measuring and disclosing their GHG emissions.

IFRS S2 also requires disclosures about how and why specific inputs, assumptions, and estimation techniques, including any changes made from prior calculations. This will drive enhanced transparency and reliability for investors, as companies will need to show the details of their carbon accounting processes to support their emissions disclosures. 

To support the implementation of this reporting, the ISSB has also developed GHG emissions application guidance to help companies navigate topics that might arise, such as handling reporting period differences, using global warming potential values, what to consider when disclosing measurement approaches, inputs, assumptions, and much more. 

Q: How does the ISSB address scope 3?

A:  IFRS S2 affirms what investors around the globe have been saying: comprehensive emissions metrics, including scope 3 GHG emissions, are essential to ensuring that climate-related disclosures properly capture companies’ climate-related financial risks and opportunities. The ISSB recognizes that scope 3 is key, but also understands that it is a challenge. To help companies meet that challenge, the ISSB Standards include provisions that will allow companies to improve their disclosures as they build their scope 3 capabilities, providing stepping stones to a clear destination. The reliefs include:

  • A phase-in for scope 3, with the requirement starting after the first year a company applies the ISSB standards;
  • Provisions allowing the use of  estimates for entities in the value chain with different reporting cycles; and
  • Transitional relief for companies currently using different measurement protocols.

For scope 3, companies will need to determine and disclose the categories included in their measurements. There is no need to fear, however, as the ISSB included a scope 3 measurement framework in the Application guidance to help companies get started. 

The framework provides guidance for companies as they consider options for estimates and other data inputs, weighing the benefits of using primary data. The ISSB does not set specific requirements for calculation inputs, , but it does prioritize data based on the following characteristics (in no particular order):

  • Data based on direct measurement
  • Data from specific activities within the entity’s value chain
  • Timely data that faithfully represents the jurisdiction of, and the technology used for, the value chain activity and its greenhouse gas emissions
  • Data that has been verified

Management should apply judgment in developing its calculation approach and should consider the trade-offs, such as choosing between more timely data and data that better represents the value chain activity and emissions. The disclosures about those choices will help investors understand how the entity prioritizes data quality and why it selected a given measurement approach. Investors will also have more insight into the extent to which specific activities within the value chain and verified data are used for measuring scope 3 emissions. 

Q: How does the ISSB address financed emissions?

A: IFRS S2 also includes a specific provision for financed emissions, requiring companies that conduct asset management, commercial banking, or insurance activities to include Category 15 - financed emissions.  The ISSB’s Basis for Conclusions explains that this provision was included because financed emissions are a particularly important category for financial institutions to measure and report as they are “often the most significant part of their greenhouse gas emissions category.” 

These disclosures should follow the methodologies outlined by the Partnership for Carbon Accounting Financials (PCAF). Specifically, asset management entities should disclose the total amount of assets under management (AUM) included in the financed emissions calculation, the percentage of AUM included, and the methodology used for calculating financed emissions. Commercial banking entities should provide the same disclosures, but disaggregated by industry and asset class, including information on gross exposure to each industry and the methodology used for allocation. Insurance entities should follow similar disclosures but provide information specific to the insurance industry, including gross exposure and the methodology used for calculation.

Q: What can companies look out for next following the release of the ISSB Standards?

A: The ISSB Standards and Application Guidance give companies a clear road map for what is expected. But they can also look forward to more support. The ISSB plans to provide guidance and support materials to assist companies in implementing the standards effectively. 

The ISSB also recognizes that their responsibilities continue beyond standard-setting, and that effective capacity building requires global collaboration. The IFRS’s Partnership Framework was established at COP27 to support companies, investors, and other stakeholders as they prepare to use the standards. Through the  Framework, the ISSB will leverage the support of public and private organizations, both global and local, to help companies around the world prepare to meet these new disclosure standards.  
The ISSB will also continue to collaborate with other standard-setting organizations, regulators, and other stakeholders to support implementation. This includes helping companies navigate additional reporting obligations they may face, like the European regulatory requirements under the Corporate Sustainability Reporting Directive or expectations for additional sustainability information pursuant to the Global Reporting Initiative standards. 

Companies who want to be ahead of the curve can start preparing to report under the ISSB standards now. The standards are here and ready for use on a voluntary basis. They reflect market expectations, and companies that move quickly to meet those expectations will have a competitive advantage.

In addition, regulation is likely to evolve rapidly around the globe. Many countries have already signaled their intention to incorporate the standards into new or existing regulations. Nigeria, Ghana, and Zimbabwe have been early adopters, and Hong Kong and Singapore’s Exchanges have released consultations on ISSB-aligned reporting requirements. Countries including the UK, Japan, Canada, and Australia have also established processes for considering the standards.

The International Organization of Securities Commissions (IOSCO) has announced that it is completing its formal review process, and will issue a decision about endorsement. IOSCO endorsement would send a strong signal to the market that the ISSB standards rise to the challenge of meeting investor needs for sustainability-related information. IOSCO has over 130 members, and IOSCO endorsement would encourage them to consider the ISSB standards as the supporting framework for their own requirements. IOSCO also plans to support its members along the way through capacity-building.

These global regulatory processes will take different forms and happen on different timelines, but they will be guided by the ISSB standards and are just around the corner. Companies that see the path ahead and prepare for it will be one step ahead.

Climate & ESG News Roundup

Singapore Proposes Requiring ISSB-Aligned Climate Disclosures Starting in Fiscal Year 2025 

On July 6, the Accounting and Corporate Regulatory Authority (ACRA) and Singapore Exchange Regulation launched a public consultation on new sustainability reporting requirements. Under these requirements, Singapore-listed companies will need to create ISSB-aligned climate disclosures starting in fiscal year 2025. Non-listed companies with at least $1 billion in revenue will need to create ISSB-aligned climate disclosures starting in fiscal year 2027, capturing approximately 300 additional companies. The proposal will require companies to report on scope 3 (with a 1-2 year phase-in) and attain limited assurance on scope 1 and 2 emissions (with a 2-year phase-in).

This proposal marks a major shift in Singapore climate disclosure requirements. As of today, listed issuers in Singapore are already required to publish sustainability reports, and starting in fiscal year 2023, listed issuers in prioritized industries are already "progressively required to provide TCFD-aligned" climate-related disclosures.

The new proposal increases the rigor and reach of climate reporting requirements in four key ways. 

  1. It expands the scope of disclosure requirements as companies are forced to move from generic or TCFD-aligned sustainability reports to ISSB-aligned disclosure with mandatory scope 3 emissions. 
  2. It expands the scope of companies subject to mandatory climate disclosure requirements from listed companies in five key sectors to all listed companies and large non-listed companies. 
  3. It requires the same reporting and filing timelines as financial statements and creates additional legal responsibilities for companies, directors, and/or officers to ensure accountability for those disclosures. 
  4. It requires external assurance of scopes 1 and 2 emissions, forcing companies to approach their emissions disclosure in an auditable and thorough manner. 

It's also notable that the proposal today is co-proposed by the ACRA, demonstrating the additional rigor being brought to climate disclosure.

Mandatory Climate-Related Financial Risk Disclosures on the Horizon for Australian Companies

The Australian government has announced its intent to mandate climate-related financial disclosures for financial institutions and companies beginning as early as 2024, according to the Treasury's recent consultation paper. Under this proposal, companies will follow requirements similar to the ISSB, as Australia has stated their intentions for the requirements to “be aligned as far as practicable with the final standards developed by the ISSB,” including disclosing their transition plans and use of scenario analysis. 

Companies will be required to report scope 1 and 2 emissions, material scope 3 emissions, and other metrics according to their industry. According to the proposal, reporting companies will be allowed an extra year for scope 3 reporting, as well as extra time to shift their scenario analysis from qualitative to quantitative. According to the paper, stakeholders who responded to the initial consultation were almost all supportive of mandatory climate-related risk disclosures.

Record-Breaking Global Temperatures

Last week, global temperatures broke records, with the global average daily temperature reaching 63.01 degrees Fahrenheit (17.23 degrees Celsius), according to US National Centers for Environmental Prediction (NCEP) data. The previous record, according to the NCEP, was 62.46 Fahrenheit (16.92 Celsius) in August 2016. Scientists warn that these high temperatures will persist as summer continues for the earth’s northern hemisphere and the natural climate phenomenon, El Niño, develops in the Pacific Ocean. Grantham Institute for Climate Change and the Environment’s senior climate science lecturer, Friederike Otto, stresses the urgency of taking climate action, stating that “we have to stop burning fossil fuels, not in decades, now” or risk losing entire ecosystems and many people’s livelihood. 

According to the US Environmental Protection Agency, some estimates find that more than 1,300 people in the US die due to extreme heat, and as NBC News points out, many of the victims are unhoused people. Other effects of climate change include sea level rise, erosion, flooding, increased ocean acidity, increased and more severe wildfires, tree diseases, drought, and insect breakouts, according to NASA. These effects threaten infrastructure, public health, agriculture, biodiversity, access to fresh water and energy, air quality, and more.

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