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Freshfields Sustainability

| 2 minutes read

The International Sustainability Standards Board – global update

A year after forming, the International Sustainability Standards Board (commonly know as the ISSB) moves closer to publishing consolidated sustainability disclosure standards. Formed at COP26 by the IFRS Foundation, the ISSB cuts across borders and creates a forum for collaboration on universal sustainability standards. The aim of these standards is to bring together existing disclosure frameworks to deliver a consistent baseline for reporting. The standards strive to be agnostic between GAAP and IFRS reporting standards to allow greater uptake across the globe.

Teresa Ko, Freshfields Bruckhaus Deringer’s China chairman and corporate partner, currently serves as Co-Vice Chair of the IFRS Foundation and has been involved in the establishment of the ISSB as a member of the Steering Committee.

At COP27 this year, the ISSB announced a number of developments:

  • Carbon Disclosure Project (CDP) will incorporate the ISSB climate disclosure standard into its environmental disclosure platform from 2024. CDP, founded in 2000, was the first platform to leverage investor pressure to influence corporate disclosure on environmental impact. It currently has 17,000+ voluntary users around the world.
  • ISSB’s climate disclosure standards S2 proposes to require not only scope 1 and 2, but also scope 3 emissions as well as climate-related scenario analysis and “financed” and “facilitated” emissions. This means that greenhouse gas emissions from asset managers, commercial banks, insurers and investment banks' lending, investments and financing activities will all have to be disclosed. Research has shown that in financial institutions Scope 3 accounts for 99.98% of their emissions, so this requirement will help to understand their funding exposure and transition risk.
  • A partnership framework for capacity-building to support implementation of the global baseline and to ensure accelerated readiness for jurisdictions to adopt ISSB’s standards, especially in developing and emerging markets. This framework is supported by public and private organisations around the world, including Global Reporting Initiative (GRI), the big four, Carbon Disclosure Project (CDP), Principles for Responsible Investment (PRI), United Nations Environment Programme Finance Initiative (UNEP FI) and International Corporate Governance Network (ICGN).
  • Adoption and alignment with the ISSB standards is being anticipated across some economies:
    • The Financial Reporting Council of Nigeria confirmed that it will adopt the ISSB’s IFRS Sustainability Disclosure Standards in Nigeria when they are issued.
    • In a recent report on ESG Disclosures, the Hong Kong Exchanges and Clearing has ‘strongly encouraged’ issuers to get familiar with the ISSB standards, consistent with suggestions that it will adopt the ISSB requirements once finalised.
    • New Zealand’s External Reporting Board has adopted climate standards to support their mandatory climate disclosure obligations. In light of the forthcoming ISSB standards, the final versions of its standards align more closely to the ISSB framework than the TCFD framework.
    • Australia’s Treasury is consulting on requiring large businesses to make climate related financial disclosures. The consultation includes seeking feedback on the alignment with the ISSB standards in the Australian framework.
    • The EU has agreed its Corporate Sustainability Reporting Directive (CSRD), which will require sustainability reporting. The ISSB has announced that it is working with the European Commission and the European Financial Reporting Advisory Group toward agreeing a framework for maximising interoperability of the standards and aligning on key climate disclosures, while allowing the necessary adaptations for the EU.


regulatory, climate change, financial institutions, global