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ISSB releases jurisdictional guide to sustainability standards

May 29, 2024

The International Sustainability Standards Board and its parent, the International Financial Reporting Standards Foundation, published an inaugural jurisdictional guide to adopting or using their standards in countries around the world.

The guide, released Tuesday, aims to help various jurisdictions adopt the ISSB sustainability reporting and climate-related disclosure standards, S1 and S2. The IFRS Foundation and the ISSB said over 20 jurisdictions have indicated plans to incorporate the standards into their legal or regulatory frameworks. The jurisdictions collectively represent nearly 55% of global GDP and more than 30% of global market capitalization.

"From major economies to emerging markets, jurisdictions around the world such as Brazil, Costa Rica, Japan, Nigeria and the U.K. are recognizing the value of the ISSB standards," ISSB chair Emmanuel Faber said in a statement. "Supporting completion of their regulatory processes, as well as the engagement with other jurisdictions around the world, is our priority in the near future in creating the global baseline of proportionate, high-quality sustainability-related financial disclosures."

At an annual meeting in Nairobi, Kenya, the African Development Bank signed an agreement with the IFRS Foundation to collaborate to advance sustainability-related disclosure practices in Africa through the provision of capacity building and technical assistance.

"We are committed to supporting markets across Africa to advance sustainability disclosure practices," African Development Bank president Akinwumi Adesina said in a statement. "Through our partnership with the IFRS Foundation we will deliver capacity building and assistance that will lead to enhanced transparency, accountability and efficiency, with a goal of mobilizing capital flows across Africa."

The International Federation of Accountants has been collaborating with the IFRS Foundation on its Regulatory Implementation Program, a component of the jurisdictional guide that includes the development of tools, educational materials and other initiatives to advance capacity building in support of ISSB standards.

"IFAC was an early advocate for a harmonized, global system for the disclosure of sustainability-related information, and we continue to actively support and contribute to coordinated efforts to develop and deliver such a system," said IFAC CEO Lee White at the 49th IOSCO Annual Meeting in Athens. "Today's announcement by the IFRS Foundation confirms strong global momentum for the ISSB standards and is particularly powerful given it comes less than a year after IOSCO's endorsement of ISSB standards IFRS S1 and IFRS S2. I wish to recognize the leadership of the IFRS Foundation and ISSB on the milestone they've achieved."

Last June, the International Organization of Securities Commissions, an association of organizations that regulate the world's securities and futures markets whose members include the Securities and Exchange Commission, officially approved the ISSB sustainability and climate disclosure standards.

"Today marks an important milestone in IOSCO's objective to establish a global framework for comparable reliable sustainability disclosures for the capital markets," said IOSCO chair Jean-Paul Servais in a statement. "I am encouraged by the fact that not even a year after our endorsement and call to action, so many jurisdictions are seeking to adopt or be informed by the ISSB Standards. The ISSB's Inaugural Jurisdictional Guide released today will be very useful to further support jurisdictional journeys towards adoption or use of the standards and to bring much needed transparency to market participants on global progress."

The standards are also gaining ground in China, where the Ministry of Finance issued an exposure draft of Chinese Sustainability Disclosure Standards for Business Enterprises – Basic Standard and Explanation of the Drafting. It formulates the unified China Sustainability Disclosure Standards based on ISSB standards, while aligning with China's context and showcasing Chinese characteristics.

"Regulators and standard-setters have complementary roles in supporting capital markets' efficiency," said IFRS Foundation trustees chair Erkki Liikanen in a statement. "We look forward to building on our close working relationship with IOSCO to support regulators on their journey to adopt or otherwise use ISSB Standards. The introduction of the standards into regulatory frameworks will — for the first time — enable capital markets to assess and price climate and other sustainability-related risks and opportunities appropriately. Furthermore, we welcome the recent announcement from the Chinese Ministry of Finance regarding their strategy for unified China Sustainability Disclosure Standards System based on ISSB standards."

Leaders of the International Auditing and Assurance Standards Board and the International Ethics Standards Board for Accountants also expressed their support for the jurisdictional guide. "On behalf of our boards, we congratulate the ISSB on the release of its new adoption guide, which will help jurisdictions navigate the adoption journey and promote necessary consistency and quality for sustainability disclosure," said IAASB chair Tom Seidenstein and IESBA chair Gabriela Figueiredo Dias in a joint statement. "As the IAASB and IESBA continue to progress our proposed standards on sustainability assurance and an ethics framework for sustainability reporting and assurance, we welcome all initiatives aiming at building the necessary capacity and understanding to achieve a consistent application of sustainability related standards, including assurance and ethics standards. Our collective goal is to strengthen stakeholders' trust and confidence in disclosures."

GRI collaboration

The Global Reporting Initiative, whose standards are widely used in Europe, also tightened its relationship with the ISSB after the two groups signed a memorandum of understanding in 2022 to coordinate their work.

"GRI is fully committed to working with key partners to increase transparency by organizations around the world for their impacts, which cannot be achieved without consistent and clear sustainability reporting," said GRI CEO Eelco van der Enden in a statement. "From the outset, our collaboration with the IFRS Foundation has been built on a desire to ensure that GRI and ISSB standards can be used seamlessly together so that sustainability reporting is streamlined and robust. The announcement today marks an important step towards making that a reality."

The increased collaboration will optimize how GRI and ISSB standards can be used together to facilitate reporting on an organization's impacts, risks and opportunities, including risks that arise from the organization's impacts.

The ISSB and GRI's Global Sustainability Standards Board committed to jointly identify and align common disclosures that address information needs under the distinct scopes and purposes of their respective standards, for both thematic and sector-based standard setting. An initial outcome of the collaboration will involve a methodology pilot building on the recently published GRI 101 Biodiversity Standard and the ISSB's upcoming project on Biodiversity, Ecosystems and Ecosystem Services.

However, the ISSB and the GSSB plan to continue to make decisions separately in accordance with their established standard-setting due processes, including public consultation on any proposed amendments to their standards regarding the alignment of common disclosures.

"The joint-working between the GSSB and ISSB seeks to foster closer integration on standard setting while reinforcing our distinct yet complementary positions within the global corporate reporting landscape," said GSSB chair Carol Adams in a statement. "This new agreement recognises our commitment to enhancing disclosures on an organization's most significant impacts, as well as their sustainability-related risks and opportunities. The next stage, starting with biodiversity, builds momentum toward a fully aligned global standards system. We believe reporters and stakeholders, including investors, will welcome this step."

[Accounting Today]

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