The ISSB and IFRS Foundation play a crucial role in helping both investors and businesses by improving the quality, transparency, and consistency of sustainability-related financial disclosures.
For investors, the ISSB and IFRS standards provide clarity and consistency in evaluating ESG factors, which are increasingly tied to financial performance. For businesses, adhering to these standards can open new opportunities for investment, improve market credibility, and offer a clearer path to sustainable growth.
What is the ISSB?
The International Sustainability Standards Board is a standard-setting body established in 2021–2022 under the IFRS Foundation, whose mandate is the creation and development of sustainability-related financial reporting standards to meet investors’ needs for sustainability reporting.
What is the IFRS?
The IFRS Foundation is a not-for-profit, public interest organisation established to develop high-quality, understandable, enforceable and globally accepted accounting and sustainability disclosure standards.
Our Standards are developed by our two standard-setting boards, the International Accounting Standards Board (IASB) and International Sustainability Standards Board (ISSB).
What is the IFRS Foundation and how does it serve the public interest?
The IFRS Foundation is a not-for-profit organisation founded in 2001 on the belief that better information supports better economic and investment decisions. As a public interest organisation, the IFRS Foundation works to achieve this vision through the development of high-quality, global standards that result in corporate information that informs investment decisions. This work contributes towards efficient and resilient capital markets, thus fulfilling society’s needs.
In its first two decades, the IFRS Foundation—through the first of its independent standard-setting boards, the International Accounting Standards Board (IASB)—transformed the global landscape of financial information by introducing IFRS Accounting Standards. The Standards have become the de facto global language of financial statements—trusted by investors worldwide and required for use by more than 140 jurisdictions.
Today, economic and investment decisions are increasingly incorporating sustainability information. Responding to the need for such information, in 2021 the IFRS Foundation created the International Sustainability Standards Board (ISSB) as a sister board to the IASB. The ISSB is responsible for developing IFRS Sustainability Disclosure Standards, to provide a truly global baseline of sustainability disclosures to further inform economic and investment decisions.
IFRS Accounting Standards and IFRS Sustainability Disclosure Standards are developed using the same rigorous, inclusive and transparent due process. The two boards ensure connections in their work to enable the Standards to operate effectively together and to support connected reporting, building on the IASB’s Management Commentary and on Integrated Reporting.
The better information we have, the better we can act. Our purpose is to empower people with the right information to support better economic and investment decision-making.
What is the International Sustainability Standards Board and what are its objectives?
The Trustees announced the formation of the ISSB on 3 November 2021 at COP26 in Glasgow.
The ISSB was established as part of the IFRS Foundation because of investor, company and international policy maker (including the G20, G7, IOSCO and the Financial Stability Board) demand for:
- decision-useful, comparable information
- ending the ‘alphabet soup’ of voluntary initiatives
- an efficient reporting landscape
The ISSB has a transparent, rigorous due process to develop market-informed Standards that respond to these needs.
The ISSB develops—in the public interest—standards that will result in a high-quality, comprehensive global baseline of sustainability disclosures focused on the needs of investors and the financial markets.
The ISSB builds on the work of market-led investor-focused reporting initiatives—including the Climate Disclosure Standards Board (CDSB), the Task Force on Climate-related Financial Disclosures (TCFD), the Value Reporting Foundation’s Integrated Reporting Framework and industry-based SASB Standards, as well as the World Economic Forum’s Stakeholder Capitalism Metrics.
Who sits on the ISSB?
Emmanuel Faber is the Chair and Jingdong Hua and Sue Lloyd are Vice-Chairs of the ISSB. The ISSB comprises 14 members from across the world with a mix of professional perspectives, including former investors and preparers.
Where is the ISSB based?
The ISSB collaborates with global and regional partners, and operates a multi-location model to ensure proximity and market relevance across the world. Engagement with developing and emerging economies is an important priority for the ISSB.
The IFRS Foundation has a multi-location footprint with offices in Frankfurt, London, Montreal, Tokyo, Beijing and San Francisco.
How do the IASB and the ISSB work together?
The ISSB works in close cooperation with the IASB, ensuring connections between IFRS Accounting Standards and IFRS Sustainability Disclosure Standards. Each board is independent, and their Standards complement each other to provide investors and other capital market participants with comprehensive information to meet their needs. The staff of the IASB and the ISSB work in coordination at all times to ensure their Standards are compatible.
The IFRS Advisory Council and the Integrated Reporting and Connectivity Council advise the IASB and the ISSB.
The IFRS Advisory Council provides strategic support, and comprises individuals and organisations with an interest in international financial reporting. The Integrated Reporting and Connectivity Council provides advice on how the boards’ required reporting could be integrated, and how they could consider applying concepts and principles from the Integrated Reporting Framework to their projects.
How does the ISSB fit in with other organisations developing sustainability reporting standards?
Many leading investor-focused sustainability and integrated reporting organisations contribute in various ways to the work of the ISSB.
The content, staff, technical expertise and other resources of the Climate Disclosure Standards Board (CDSB) and the Value Reporting Foundation (Integrated Reporting Framework and SASB Standards) were fully consolidated into the IFRS Foundation in 2022. Both the Task Force on Climate-related Financial Disclosures (TCFD) and the World Economic Forum fully supported the creation of the ISSB.
The Financial Stability Board has announced that the work of the TCFD has been completed, with the ISSB Standards marking the ‘culmination of the work of the TCFD‘. Companies applying IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2 Climate-related Disclosures will meet the TCFD recommendations as the recommendations are fully incorporated into the ISSB Standards. Find out more about the ISSB and TCFD.
The ISSB also works closely with Global Reporting Initiative (GRI), the leading provider of sustainability standards aimed at broader stakeholders. This collaboration aims to ensure compatibility and interconnectedness between the ISSB’s investor-focused baseline sustainability information designed to meet the needs of the capital markets, and GRI’s information intended to serve the needs of a broader range of stakeholders. This work will help reduce the reporting burden for companies and further harmonise the sustainability reporting landscape at an international level.
What standard-setting progress has the ISSB made to date?
Following extensive market consultation and having consolidated the resources of other initiatives and aligned international support, the ISSB published its first two Standards in June 2023:
IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Informationprovides 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. It sets out the core content for a complete set of sustainability-related financial disclosures, establishing a comprehensive baseline of sustainability-related financial information to meet the needs of global capital markets.
IFRS S2 Climate-related Disclosuressets out the requirements for a company to disclose information about its climate-related risks and opportunities, while building on the requirements described in IFRS S1. IFRS S2 integrates the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) and requires the disclosure of information about both cross-industry and industry-specific climate-related risks and opportunities.
The ISSB Standards are proportionate and enforceable, designed to elicit assurable, decision-useful information connected to financial statements. The ISSB Standards are suitable for application around the world, creating a truly global baseline.
What are the key elements of IFRS S1?
IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information sets out the core content for a complete set of sustainability-related financial disclosures to meet the needs of global capital markets. IFRS S1:
- asks for disclosure of material information about sustainability-related risks and opportunities with the financial statements, to meet investor information needs;
- applies the TCFD architecture (governance, strategy, risk management and metrics and targets) for disclosure of information about sustainability-related risks and opportunities;
- requires industry-specific disclosures;
- for matters other than climate (IFRS S2), refers to sources to help companies identify sustainability-related risks and opportunities and information; and
- can be used in conjunction with any accounting requirements (GAAP).
Access additional information and materials supporting IFRS S1 application.
What are the key elements of IFRS S2?
IFRS S2 Climate-related Disclosures sets out the requirements for a company to disclose information about its climate-related risks and opportunities. IFRS S2:
- incorporates the TCFD recommendations;
- is used in accordance with IFRS S1;
- requires disclosure of material information about climate-related risks and opportunities, including physical and transition risks; and
- requires industry-specific disclosures, which are supported by accompanying guidance built on the SASB Standards.
Access additional information and materials supporting IFRS S2 application.
Which areas will the ISSB focus on next?
The ISSB’s priority over the next two years will be supporting the implementation of IFRS S1 and IFRS S2. Two new research projects and work to enhance the SASB Standards will be the ISSB’s other key focus areas.
Informed by the ISSB’s recent consultation on future priorities, the ISSB will commence projects to research disclosure about risks and opportunities associated with:
- biodiversity, ecosystems and ecosystem services; and
- human capital.
The research projects will focus on the common information needs of investors in assessing whether and how these risks and opportunities could reasonably be expected to affect a company’s prospects. Through the research projects, the ISSB will assess and define the limitations with current disclosure in these areas, identify possible solutions and decide whether standard setting is required.
The ISSB also has agreed that SASB Standards enhancement will be a priority. Given that companies applying IFRS S1 are required to consider the SASB Standards to identify their sustainability-related risks and opportunities and provide appropriate disclosures for topics beyond climate, enhancing the SASB Standards is a focused and proportionate way to support the implementation of IFRS S1.
Read the Feedback Statement Consultation on Agenda Priorities to learn more about the ISSB’s decisions on its strategic direction and balance of activities for the two-year period of its next work plan.
For notices of upcoming consultation periods, please subscribe to sustainability alerts via the IFRS Foundation’s notifications dashboard.
Will ISSB Standards be mandatory for companies to use? How will the standards work alongside jurisdictional initiatives?
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.
Following a comprehensive review, the International Organization of Securities Commission (IOSCO) announced its endorsement of the ISSB Standards—encouraging their widespread adoption and sending a strong signal to jurisdictions around the world that they can be confident in implementing the ISSB Standards into their regulatory frameworks.
Many jurisdictions around the world are already actively considering their adoption roadmaps and pathways toward mandatory application or other use of ISSB Standards, and we are encouraged by significant developments across all regions. A list is available of ongoing and completed jurisdiction consultations on sustainability-related disclosures.
The ISSB Standards provide a comprehensive global baseline of sustainability disclosure standards that can be mandated and combined with jurisdiction-specific requirements or requirements aimed at meeting the information needs of broader stakeholder groups beyond investors. Consistent with the approach taken for IFRS Accounting Standards issued by the IASB, it is for jurisdictional authorities to decide whether to mandate use of IFRS Sustainability Disclosure Standards issued by the ISSB.
The ISSB collaborates closely with jurisdictions to foster regulatory adoption of its Standards, as well as to facilitate compatibility and interoperability. This work benefits companies by improving reporting efficiency and reducing the risks of confusion for those using the information. In addition to supporting regulatory adoption, the ISSB is supporting voluntary application of its Standards, particularly for preparers in jurisdictions where the IFRS Accounting Standards are not currently mandated but where investors are seeking relevant sustainability disclosures.
The IFRS Foundation has created the Sustainability Standards Advisory Forum as a mechanism for formal engagement on standard-setting between the ISSB and jurisdictional representatives, including those from emerging markets. The Jurisdictional Working Group also continues to provide support to the ISSB.
In May 2024, the IFRS Foundation published the Inaugural Jurisdictional Guide for the adoption or other use of the ISSB Standards (Guide) to help a growing number of jurisdictions as they move ahead with their plans to adopt or otherwise use the ISSB Standards.
By setting the basis for the development of jurisdictional profiles that describe jurisdictional approaches, the Guide aims to provide transparency enabling market participants and regulators’ understanding jurisdictional progress towards delivering globally consistent and comparable sustainability-related information for capital markets.
In September 2024, the IFRS Foundation published Voluntarily applying ISSB Standards—A guide for preparers. Investors globally are calling on companies to voluntarily apply the ISSB Standards in the absence of regulatory requirements to provide decision-useful sustainability-related information. The guide aims to support companies with voluntary application and help them communicate their progress to investors.
How do ISSB Standards approach materiality?
The IFRS Foundation’s focus is on meeting the information needs of investors.
A company is asked to disclose material information about the sustainability-related risks and opportunities that could reasonably be expected to affect its prospects. The definition of material information is aligned with that used in IFRS Accounting Standards—that is, information is material if omitting, obscuring or misstating it could be reasonably expected to influence investor decisions.
Why should companies apply the ISSB Standards?
The ISSB Standards are proportionate standards that enable companies to deliver decision-useful, consistent and comparable information to investors globally in a cost-effective and assurable way.
The ISSB Standards build upon and consolidate the work of pre-existing initiatives such as TCFD, CDSB, SASB and integrated reporting, borrowing well-known concepts from and providing connections to accounting standards.
The ISSB is focused on simplifying the landscape even further through interoperability with additional jurisdictional requirements and the GRI Standards so that companies can avoid duplicative reporting.
Likely benefits for companies applying the ISSB Standards relate to improved data quality, which is expected to have a positive effect on governance, strategy, access to capital, reputation and employee and stakeholder engagement. Applying IFRS S1 and IFRS S2 will help companies streamline their sustainability reporting processes, providing better information to help investors make better investment decisions
What does the publication of IFRS S1 and IFRS S2 mean for companies already using voluntary frameworks and standards?
While the ISSB has achieved consolidation in the sustainability disclosure landscape, a number of the standards and frameworks that companies might already voluntarily use will still be important. This is because, so far, the ISSB has issued standards on general requirements and climate, it has not yet covered other areas in depth.
Therefore, use of the SASB Standards will continue.
Furthermore, the CDSB Framework can still be used to help guide disclosures.
The Integrated Reporting Framework is a useful tool for integrating and presenting reporting that includes disclosures prepared applying ISSB Standards.
Because the ISSB has built on these materials, their continued application is expected to help companies implementing ISSB Standards.
What services does the IFRS Foundation provide that can help?
The IFRS Foundation offers a broad range of products and services to support the widespread adoption and implementation of ISSB Standards and integrated reporting.
For example:
- the IFRS Sustainability Alliance is diverse global network of members who explore and develop best practices related to sustainability standards and integrated reporting;
- the FSA Credential equips professionals with the knowledge and skills to understand the link between sustainability and a company’s ability to drive financial performance; and
- licensing opportunities to help companies secure the rights to incorporate IFRS S1, IFRS S2 and/or SASB Standards into their systems, products or services.
Find further information on IFRS Sustainability products and services.
Will assurance be required for disclosure using the IFRS Sustainability Disclosure Standards?
It is up to jurisdictions to determine whether assurance is required. The IFRS Foundation’s mandate does not include requiring a particular level of assurance by those using its standards. The IFRS Foundation is also not responsible for the development of assurance standards.
The ISSB anticipates that as ISSB Standards are incorporated into national regulatory and legal frameworks jurisdictional regulators around the world will require that this information will be subject to some level of assurance. Both IFRS S1 and IFRS S2 are designed to make the reported information assurable.
Source: IFRS, October 2024
