Jurisdictions Representing Over Half of Global GHG Emissions are Moving Towards Coverage by ISSB Sustainability Reporting Standards: IFRS Report
More than 30 jurisdictions globally are already, or are taking steps towards requiring companies to provide reporting based on the International Sustainability Standards Board’s (ISSB) disclosure standards, according to a new progress report released by the IFRS Foundation.
The announcement marks significant progress towards the expansion of ISSB-based sustainability requirements in only a few months, following a prior report in May 2024 indicating that over 20 jurisdictions were moving towards the standards.
The IFRS Foundation’s International Sustainability Standards Board (ISSB) was launched in November 2021 at the COP26 climate conference, with the goal to develop IFRS Sustainability Disclosure Standards to provide investors with information about companies’ sustainability risks and opportunities. The IFRS released the inaugural general sustainability (IFRS S1) and climate (IFRS S2) reporting standards in June 2023. Following the release of the standards last year, IOSCO, the leading international policy forum and standards setter for securities regulators called on regulators to incorporate the standards into their sustainability reporting regulatory frameworks.
According to the new progress report, 16 jurisdictions have already finalized decisions on the adoption or other use of ISSB Standards, while another 14 are currently making progress to adopt or otherwise use the standards.
In all, the 30 jurisdictions represent 57% of global GDP, more than 40% of global market capitalization, and more than half of global greenhouse gas emissions.
Notably, the report found that 100% of jurisdictions with finalized or proposed requirements on climate-related disclosures (29 jurisdictions in all) have included Scope 3 GHG emissions reporting requirements, although some allow for a brief extension of the ISSB’s proposed transitional reliefs for Scope 3, and 28 jurisdictions included or are considering requiring industry-specific disclosures, with only 2 jurisdictions planning for industry-specific disclosures to be voluntary. Additionally, while 10% of jurisdictions are initially focused only on climate-related disclosures, 90% are considering requirements for reporting covering all sustainability-related risks and opportunities.
The IFRS Foundation also published a progress report to the Financial Stability Board (FSB) detailing corporate reporting based on the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD).
The TCFD was established by the Financial Stability Board in 2015, with the goal of developing consistent disclosure standards for companies, in order to enable investors and other stakeholders to assess the companies’ climate-related financial risk. The recommendations were published in June 2017, and had effectively been serving as the industry standard for climate-related disclosure. The TCFD recommendations were broadly incorporated into the requirements of the ISSB’s climate related disclosure standard, and last year the ISSB announced that it was taking over responsibility for monitoring progress of companies’ climate-related disclosures from the TCFD, at the request of the FSB.
In its progress report, the IFRS Foundation found that 82% of companies in 2023 reported in line with at least one of the TCFD’s 11 recommended disclosures, up from 73% in 2022, while 44% of companies reported in line with at least five of the recommendations, up from 38% in 2022. Overall, the average number of recommended disclosures provided by companies was 5.2, while only 2% – 3% of companies disclosed in line with all 11 recommendations, according to the report.
ISSB Chair Emmanuel Faber said:
“This progress report underscores the significant and encouraging progress in disclosure of climate-related information. But further action is needed to address the fact investors are still not receiving the information they need to assess and price appropriately climate and other sustainability-related risks and opportunities. Through jurisdictional initiatives and the voluntary choices companies are making, often in response to investor demand, we continue to see momentum build.”