ISSB ESG Reporting: Understanding IFRS S1 and IFRS S2

November 20, 2023

The International Sustainability Standards Board (ISSB) is a pivotal global entity tasked with developing and issuing standards for sustainability-related financial disclosures. The IFRS Sustainability Disclosure Standards play a crucial role in creating a unified framework for sustainability reporting.

Overview of the ISSB

The International Sustainability Standards Board (ISSB) was created in 2021 by the IFRS Foundation. Following strong market demand, the ISSB developed sustainability standards that aim to provide a global baseline of sustainability disclosures focused on the needs of investors and the financial markets. These sustainability disclosure standards improve the reliability and comparability of sustainability-related financial disclosures.

The ISSB is a pivotal global entity tasked with developing and issuing standards for sustainability-related financial disclosures. Established to address the increasing demand for reliable and comparable sustainability information, the ISSB aims to create a global baseline for sustainability reporting. This baseline is designed to meet the needs of investors and financial markets, ensuring that companies provide consistent and useful sustainability disclosures. By setting these standards, the ISSB helps bridge the gap between sustainability performance and financial markets, fostering transparency and informed decision-making among key stakeholders.

Development of the ISSB’s Standards

The development of the ISSB’s standards is a meticulous process that involves extensive stakeholder engagement, thorough research, and detailed analysis. Building on the foundations laid by market-led, investor-focused initiatives such as the Climate Disclosure Standards Board (CDSB) and the Task Force for Climate-related Financial Disclosures (TCFD), the ISSB ensures that its standards are both cost-effective and decision-useful. These standards are crafted to provide a global baseline for sustainability disclosures, enabling companies to report their sustainability-related financial information in a manner that is both comprehensive and accessible. This rigorous development process ensures that the standards are market-informed and aligned with the needs of investors.

The ISSB's work is backed by the G7, the G20, IOSCO, the Financial Stability Board, African Finance Ministers and by Finance Ministers and Central Bank Governors from over 40 jurisdictions. It aims to develop standards for a global baseline of sustainability disclosures. It targets the informational needs of investors and enables companies to provide comprehensive sustainability information to global capital markets. In addition, it aims to facilitate interoperability with jurisdiction-specific disclosures and/or aimed at broader stakeholder groups.

Relationship with Other Reporting Frameworks

The ISSB’s standards are designed to be interoperable with other prominent reporting frameworks, such as the European Sustainability Reporting Standards (ESRS), the Global Reporting Initiative (GRI).

Through collaboration with these organizations, the ISSB ensures that its standards are aligned with their requirements, making it easier for companies already reporting under these frameworks to adopt ISSB standards. Additionally, the ISSB’s work complements that of the International Accounting Standards Board (IASB), which sets globally accepted accounting standards. By focusing on sustainability-related financial disclosures, the ISSB provides a comprehensive framework that integrates seamlessly with the IASB’s financial reporting standards, enabling companies to present a holistic view of their financial and sustainability performance.

What are the IFRS S1 and IFRS S2 disclosure requirements

The first two ISSB Standards, IFRS S1 (General Requirements for Disclosure of Sustainability-related Financial Information) and IFRS S2 (Climate-related Disclosures) are effective for reporting periods beginning after 1 January 2024.

ISSB defines the standards as below;

IFRS S1 proposes general requirements for an entity to disclose sustainability-related financial information about its sustainability-related risks and opportunities. It emphasizes the importance of integrating risk management frameworks with ESG considerations as per the requirements of IFRS S1 and S2.
IFRS S2 requires an entity to disclose its climate-related risks and opportunities that may be useful to clients of general purpose financial reports in making decisions relating to providing resources to the entity.‍

Jurisdictional Transposition of the ISSB standards

The IFRS S1 and IFRS S2 standards are designed to be adopted by national jurisdictions to provide a global baseline for ESG reporting. Governments are free to make amendments to the standards or adopt them as standards. See below the updated list of countries adopting the ISSB standards, with more information found here.

Adopted Jurisdictions and when companies will report on ISSB standards

Australia - Adopted (criteria based on revenue) - First disclosures from 1 Jan 2025 (largest companies)
Bangladesh - Adopted (banks & financial institutions) - First disclosures in 2024
Brazil - Adopted (listed securities) - First disclosures in 2026
Canada - Adopted (public companies) - First disclosures in 2025
Costa Rica - Adopted (large taxpayers) - First disclosures in 2027
Kenya - Adopted (public companies) - First disclosures in 2025
Malaysia - Adopted (listed securities) - First disclosures in 2026
Nigeria - Adopted (public companies) - First disclosures in 2027
Sri Lanka - Adopted (largest 100 listed securities) - First disclosures in 2026
Turkey - Adopted (criteria based on revenue & employee size) - First disclosures in 2025
Zambia - Adopted (public companies) - First disclosures in 2025
Zimbabwe - Adopted (listed securities - First disclosures in 2024

Jurisdictions with pending adoption of the ISSB standards

Bolivia
Botswana
Chile
China
Hong Kong
India
Indonesia
Japan
Mexico
Pakistan
Philippines
Rwanda
Singapore
South Africa
South Korea
Taiwan
Thailand
United Kingdom

Sustainability Reporting Process

The reporting process of IFRS S1 & S2 is the same as for GRI and SASB; organisations will disclose to the IFRS S1 & S2 alongside their financial reporting year. Integrating financial statements with sustainability-related disclosures is crucial for ensuring transparency and comparability in financial markets.

TCFD: IFRS S2 fully incorporates the Task Force on Climate-Related Financial Disclosures (TCFD) recommendations
SASB: IFRS S1 & S2 can be used in conjunction with SASB Industry Specific Standards to provide investors with the information they need about sustainability-related risks and opportunities
CDP: IFRS S2 is also fully incorporated into the annual CDP disclosure questionnaire to encourage interoperability between corporate annual sustainability reporting and the voluntary CDP questionnaire

International Sustainability Standards Board with Nossa Data

Nossa Data is accredited to support the IFRS S1 and IFRS S2 standards for companies to respond to within the platform. Clients have access to IFRS Sustainability standards templates and can produce a disclosure to be included in their general purpose financial reports.

Benefits include:

Interoperability with existing ESG reporting standards, such as: CDP, ESRS (CSRD), TCFD, SASB, GRI, UNGC
Time-saving gap analysis & disclosure preparation through AI and collaborative workflows
Implementation guidance at indicator-level
IFRS-approved outputs based on Nossa Data's IFRS accreditation

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