ISSB Issues Inaugural Climate Risk and Sustainability Disclosure Standards; Includes Proportionality2023-06-26
The International Sustainability Standards Board (ISSB) issued its inaugural standards—IFRS S1 and IFRS S2 — related to sustainability disclosures for capital markets worldwide. The Standards will help to improve trust and confidence in company disclosures about sustainability to inform investment decisions. The standards are designed to create a common language for disclosing the effect of climate-related risks and opportunities on a company’s prospects. These standards will likely for the basis for disclosures that will ultimately be incorporated by supervisors for credit unions.
IFRS S1 specifically provides a set of disclosure requirements designed to enable companies to communicate to investors about the sustainability-related risks and opportunities they face over the short, medium and long term. IFRS S2 sets out specific climate-related disclosures and is designed to be used with IFRS S1.
Together these standards support a comprehensive global baseline of sustainability-related disclosures that demonstrate the widespread demand for a consistent understanding of how sustainability factors affect companies’ prospects. The ISSB Standards are designed to ensure that companies provide sustainability-related information alongside financial statements—in the same reporting package.
Of importance to credit unions are the mechanisms included to address proportionality. This includes the use of reasonable and supportable information that is available without undue cost or effort and the consideration of an entity’s skills, capabilities, and resources. This standard should allow for the implementation of disclosures that minimize the cost and expenditures necessary by credit unions to prepare their reporting (once implemented at the national-level).
WOCCU has been advocating for the inclusion of proportionality measures into the standard at all levels of development, including directly with the ISSB, the Basel Committee, and the Financial Stability Board, all of whom have been consulted during the development of this standard.
Work now will turn to jurisdictions and companies to work with the Transition Implementation Group that is being launched to support implementation of the standard.
A copy of the proposal can be viewed here.