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ESG Newsletter published on January 2, 2024

International Sustainability Standards Board Issues First Two Reporting Standards


  • The International Sustainability Standards Board (ISSB) issued new standards for securities issuers reporting on sustainability and climate risks as they relate to their businesses.
  • The standards are part of ongoing efforts to bring greater consistency to corporate reporting related to sustainability broadly and climate risk specifically.
  • Consistent global reporting standards are intended to bring better information to investors as they assess the progress of companies seeking to achieve more sustainable business operations.

Breckinridge’s Longstanding Support for SASB/ISSB

We last wrote about the International Sustainability Standards Board (ISSB) in an ESG Newsletter article in January 2022. We thought the timing was right to provide an update to our readers as the organization has made significant strides since then.

We have long valued and supported the work of the Sustainability Accounting Standards Board (SASB) to bring ESG reporting standards to the marketplace. For example, Breckinridge joined the SASB Investor Advisory Group as a founding member in 2016. More recently, Breckinridge signed the COP 28 Declaration of Support to publicly state our commitment to “advancing the adoption or use of the ISSB’s Climate Standard [IFRS S2] as the climate global standard.”

Recent Developments: Launch of IFRS S1 and IFRS S2

On June 26, 2023, the ISSB issued its first two sustainability standards: International Financial Reporting Standards (IFRS) S1 and IFRS S2.1 The standards incorporate recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) to address disclosure requirements related to a company’s governance, strategy, risk management, and sustainability-related metrics and targets.

IFRS S1, IFRS S2, and SASB identify sustainability issues most likely to affect financial performance and enterprise value for 77 industries. The standards are intended to establish a global baseline for disclosures: IFRS S1 on sustainability-related risks and opportunities, IFRS S2 on climate-related disclosures. The standards are designed to work alongside financial statements to help investors assess companies’ environmental, social and governance (ESG) credentials, as well as standardize and potentially reduce corporate reporting burdens.

IFRS Foundation trustees created the ISSB in 2021 at COP 26. IFRS S1 and IFRS S2 are first steps in the ISSB’s goal to standardize ESG reporting with the goal of increasing the consistency of reporting requirements of security issuers and enhance the information they offered to other market participants (See Updated Global ESG Reporting Standards Move Toward More Consistency).

The International Organization of Securities Commissions endorsed the ISSB’s corporate reporting standards for sustainability and climate risk. IFRS measures for financial accounting are used in 168 jurisdictions outside of the U.S., as of December 18, 2023.

The U.S. relies on the Generally Accepted Accounting Principles (GAAP), as adopted by the Securities and Exchange Commission (SEC). The SEC is expected to release its own reporting requirements related to climate risk for securities issuers (See SEC Proposes Climate-Related Reporting Requirements). In a comment letter, Breckinridge Capital Advisors encouraged the SEC to consider alignment of its proposed climate rule with ISSB’s draft climate disclosure standard to reduce disclosure complexity and confusion while helping to clarify corporate climate preparedness across countries and regions.

Briefly, the ISSB-promulgated standards address the following:2

  • IFRS S1 (General Requirements for Disclosure of Sustainability-related Financial Information) requires company disclosures about all sustainability-related risks and opportunities that could reasonably be expected to affect the company’s cash flows and access to finance or cost of capital over the short, medium, or long term. In addition, it offers requirements for the content and presentation of required disclosures so that the information disclosed is useful to primary users in making decisions relating to providing resources to the company.
  • IFRS S2 (Climate-related Disclosures) requires company disclosures about climate-related risks and opportunities that could reasonably be expected to affect the company’s cash flows, and its access to finance or cost of capital over the short, medium, or long term.

Now that IFRS S1 and IFRS S2 are issued, the ISSB will work with jurisdictions and companies to support adoption. The first steps will be creating a Transition Implementation Group to support companies that apply the standards and launching capacity-building initiatives to support effective implementation.

The ISSB will also continue to work with jurisdictions wishing to require incremental disclosures beyond the global baseline and with the Global Reporting Initiative (GRI) to support efficient and effective reporting when the ISSB Standards are applied in combination with other reporting standards. The ISSB’s work continues as it addresses proposals for additional standards related to corporate reporting on such issues as biodiversity, ecosystems and ecosystem services, human capital, and human rights.

[1] Breckinridge created its internal sustainability rating gradient ranging known as “S1-S4” in 2011; IFRS developed the S1 and S2 nomenclature independently.
[2] New ISSB Sustainability Standards: A Long-awaited Milestone for Harmonising ESG-Related Disclosure, Jack Kelly, Benjamin Morgan, Ariel White-Tsimikalis, Goodwin Law, September 7, 2023.

BCAI-12202023-e0dkrgp0 (12/22/23)


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