ISSB to collaborate with other reporting frameworks to align global sustainability standards

Looking to work more closely with the GRI, CDP, TPT and TNFD

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Michael Nelson

The IFRS Foundation has announced that the International Sustainability Standards Board (ISSB) will be working more closely with established and emerging sustainability reporting frameworks to work on what is regarded as an “alphabet soup” of disclosure requirements.

Reflecting on the journey so far at its conference, which coincided with London Climate Action Week, the IFRS Foundation stated more than 20 jurisdictions have already decided to use, or are taking steps to introduce ISSB Standards in their legal or regulatory frameworks. Together, these jurisdictions account for nearly 55% of global GDP and more than 40% of global market capitalisation.

However, looking to the future, it cited the Global Reporting Initiative (GRI) and CDP, as well as the Transition Plan Taskforce (TPT) and the Taskforce for Nature-related Financial Disclosures (TNFD) as organisations to work closely with to create greater harmony among global sustainability reporting mechanisms.

Firstly, to support the application of transition plan disclosure requirements – a key part of the IFRS S2 standard – and to reduce fragmentation in information provided in the market, the ISSB plans to support work to streamline and consolidate frameworks and standards for disclosures about transition plans.

To achieve this, the IFRS Foundation will assume responsibility for the disclosure-specific materials developed by the Transition Plan Taskforce. In the near term, it expects to use these materials to develop educational materials, ensuring that they do not change the requirements in IFRS S2, by tailoring them to ensure global applicability and to deliver full compatibility with the global baseline.

Over time, the ISSB will consider the need to enhance the application guidance within IFRS S2. In so doing, the ISSB will utilise these materials, as relevant, to support the provision of high-quality disclosures to meet investors’ information needs

Secondly, to ensure ongoing compatibility between the work of the GHG Protocol and the ISSB, and to ensure that the information provided meets the needs of capital markets, the IFRS Foundation and GHG Protocol have signed a Memorandum of Understanding to put in place governance arrangements so that the ISSB is actively engaged in updates and decisions made in relation to the GHG Protocol standards and guidance. This includes the appointment of a representative of the ISSB as an observer on the GHG Protocol Independent Standards Board.

Finally, as set out in the ISSB’s Feedback Statement, the ISSB will look at how it might build from relevant initiatives to meet the information needs of investors as it embarks on its research project on biodiversity, ecosystems and ecosystem services. It has agreed that in undertaking this research, it will consider how to build upon the recommendations of the Taskforce on Nature-related Financial Disclosures (TNFD) published in September 2023.

Lindsey Stewart, director of stewardship research and policy at Morningstar Sustainalytics, said the news would be welcomed by investors who support global harmonisation of disclosures, but also warned the risks of fragmentation “remain high”.

“Regulators in several jurisdictions are already indicating intentions to delay or cherry-pick implementation of ISSB standards. Investors and reporters can only hope that improving collaboration between the various bodies often described as the ‘alphabet soup’ will help drive better alignment of international sustainability reporting requirements in the second half of the 2020s, compared with what we’ve seen in the first half.”