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In a major step towards consistent, comparable, and reliable sustainability information, the International Organization of Securities Commissions - IOSCO announces on July 25, 2023, that it has decided to endorse the sustainability-related financial disclosures standards, recently issued by the International Sustainability Standards Board (ISSB), IFRS S1 and IFRS S2. IOSCO now calls on its 130 member jurisdictions, regulating more than 95% of the world's financial markets, to consider ways in which they might adopt, apply, or otherwise be informed by the ISSB Standards within the context of their jurisdictional arrangements, in a way that promotes consistent and comparable climate-related and other sustainability-related disclosures for investors. Link
Hong Kong: The Stock Exchange of Hong Kong Limited (HKEX), has proposed to mandate all issuers to make climate-related disclosures in their ESG reports, and introduce new climate-related disclosures aligned with the International Sustainability Standards Board (ISSB) Climate Standard. The proposals mark a significant milestone in achieving the commitment to mandate TCFD-aligned disclosures by 2025 as announced by the Hong Kong Green and Sustainable Finance Cross-Agency Steering Group. Acknowledging the readiness of the issuers and their concerns, the Exchange proposes interim provisions for certain disclosures for the first two reporting years following the effective date of 1 January 2024. (Read more here)
Canada: The Canadian Securities Administrators (CSA) welcomes the publication of the International Sustainability Standards Board (ISSB)’s first two sustainability disclosure standards. Link
CSA members are responsible for developing climate-related disclosure requirements for reporting issuers in Canada. CSA expressed its intention to conduct further consultations to adopt disclosure standards based on ISSB Standards, with modifications considered necessary and appropriate in the Canadian context. A further market update from the CSA will follow in the coming months.
UK: The Financial Reporting Council (FRC), has issued a call for evidence to inform the proposed endorsement of the IFRS Sustainability Disclosure Standards in the UK. Link
This call for evidence seeks views on whether the application of these standards in a UK context will result in disclosures that are understandable, relevant, reliable, and comparable for investors. It also considers technical feasibility, timeliness alongside financial reporting, and the proportionality of costs to benefits.
The UK’s Financial Conduct Authority (FCA) has also issued a timeline for UK’s International Sustainability Standards Board - ISSB-based Sustainability Disclosure. And expect to consult in the first half of 2024 on proposals to implement disclosure rules referencing UK-endorsed IFRS S1 and IFRS S2 for listed companies.
Singapore: The Accounting and Corporate Regulatory Authority (ACRA) and Singapore Exchange Regulation (SGX RegCo) have launched a public consultation on the recommendations of the Sustainability Reporting Advisory Committee (SRAC) to advance climate reporting in Singapore. The recommendations require Listed Issuers to lead the way and report International Sustainability Standards Board (ISSB)-aligned climate-related disclosures (CRDs) starting from the financial year 2025 (FY2025). Large Non-Listed Companies with annual revenue of at least $1 billion will follow suit in FY2027. The public consultation will run from 6 July 2023 to 30 September 2023. Link
Currently, only Listed Issuers in five prioritized industries are required to provide full Task Force on Climate-related Financial Disclosures (TCFD)-aligned CRD progressively from FY2023. All other Listed Issuers are required to apply TCFD on a ‘comply-or-explain’ basis.
GC Insights: As more nations and regions seek the adaptation of the newly released ISSB standards, technical advisors are coordinating the fit-for-use in their specific country context, in particular, the views on whether the disclosures required by the IFRS Sustainability Disclosure Standards, in the context of the specific country:
will result in disclosures that are understandable, relevant, reliable, and comparable for investors;
are technically feasible to prepare;
can be prepared on a timely basis and at the same time as general-purpose financial reports;
are expected to generate benefits that are proportionate to the costs that are likely to be incurred; and
can boost sustainability-related competitive edge in the global contests, and present comparable insights for international investors as well.
To prepare for the upcoming scrutiny of sustainability reporting against the IFRS Sustainability Disclosure Standards, GC Insights has incorporated the latest finalized ISSB framework onto ESG Connector - GC Insights proprietary ESG reporting SaaS platform is available for demo here.
IFRS: Transfer of TCFD Monitoring Responsibilities to ISSB from 2024
Following the publication of the inaugural International Sustainability Standards Board (ISSB) Standards—IFRS S1 and IFRS S2—the Financial Stability Board (FSB) has asked the IFRS Foundation to take over the monitoring of the progress on companies’ climate-related disclosures from the Task Force on Climate-related Financial Disclosures (TCFD).
IFRS S1 and IFRS S2 fully incorporate the recommendations of the TCFD. As such, from 2024—as the ISSB Standards start being applied around the world—the IFRS Foundation will take over these responsibilities from the TCFD, which has been monitoring progress towards climate-related disclosures against the recommendations since they were published. Link
GC Insights: To achieve alignment with a global baseline of sustainability-related disclosures worldwide, the ISSB will likely gradually reshape the existing sustainability reporting standards landscape:
More about the recently finalized ISSB Standards—IFRS S1 and IFRS S2 can be found here.
According to IFRS and the FSB, There are still some differences between the core content requirements in IFRS S2, including associated application guidance, and the TCFD’s core recommendations, recommended disclosures, and guidance. These differences are mainly:
The IFRS S2 uses different wording to capture the same information as the TCFD recommendations. In other words, in these cases, the requirements in IFRS S2 are described as being broadly consistent with the TCFD recommendations;
The IFRS S2 requires more detailed information that is in line with the TCFD recommendations;
The IFRS S2 differs from the TCFD guidance—but not from the TCFD overall recommendations—mainly by providing some additional requirements and guidance.