The International Sustainability Standards Board (ISSB)

What is the ISSB?

The International Sustainability Standards Board (ISSB) was formed in 2021, at COP26 in Glasgow, to formulate a comprehensive sustainability standard that draws on decades of expertise across the several organisations working on the subject. It is housed within the International Financial Reporting Standards (IFRS) Foundation, which is widely known for its general accounting standards, formulated by the International Accounting Standards Board (IASB). The IFRS Foundation now houses both the IASB and the ISSB, with the former focused on financial reporting and the latter on non-financial (sustainability) reporting related to climate, environmental, social, governance, and risk-management disclosures.

The ISSB’s work on developing sustainability disclosure standards is supported by the G7, G20, International Organization of Securities Commissions (IOSCO), Financial Stability Board, and finance ministers and central bank governors from more than 40 jurisdictions.¹ The board’s objectives include the development of a global baseline for sustainability disclosures, aligned with requirements of investors and global capital markets, and facilitating interoperability with jurisdiction-specific disclosures.²

The ISSB standards are the result of growing market demand for a disclosure framework that can facilitate decision-making for capital allocation. The standards focus on material sustainability information that affects enterprise value, keeping in mind the needs of investors and financial markets. The ISSB incorporates two main standards that have been published to date:

• IFRS S1: General Requirements for Disclosure of Sustainability-related Financial Information
• IFRS S2: Climate-related Disclosures

Evolution of sustainability disclosures

Sustainability factors are becoming a core concern for decision-making globally, especially investors. Thus, it is crucial for corporations to ensure high-quality, regularly updated, standardised, and comparable disclosures on sustainability-related parameters. Sustainability-related disclosure frameworks are not new. Initiatives such as the Global Reporting Initiative (GRI) and Carbon Disclosure Project (CDP) were founded in the late 1990s by a diverse range of stakeholders, encompassing governments, non-governmental organisations (NGOs), and businesses, who acknowledged the significance of non-financial reporting. While GRI covered broader environmental, social, and governance (ESG) impacts, the CDP framework focused on environmental data collection and standardisation, such as greenhouse gas (GHG) emissions, climate risks, water security, and deforestation. 

Thereafter, several global standards have emerged to support companies and regulators develop disclosure frameworks for domestic implementation. Over the years, this has resulted in a fragmented landscape of sustainability standards with Each focussing on different aspects, creating selective disclosure, additional costs, complexities and information asymmetry for both companies and investors.³

In this context, the ISSB built on the work of previous reporting initiatives, including the Climate Disclosure Standards Board (CDSB); the Task Force on Climate-related Financial Disclosures (TCFD); The Value Reporting Foundation’s (VRF) Integrated Reporting Framework and industry-based Sustainability Accounting Standards Board (SASB); and the World Economic Forum’s (WEF) Stakeholder Capitalism Metrics.⁴ It harnessed the expertise of these initiatives through their participation in the Technical Readiness Working Group (TRWG), set up to undertake preparatory work for the ISSB. Further, the CDSB and VRF were subsumed under the ISSB, to consolidate expertise from both initiatives within the board.

Figure 1: Evolution of sustainability-related initiatives into the ISSB

Source: CEEW-CEF analysis based on IFRS Foundation’s description of ISSB’s formation

How is the ISSB framework different from its predecessors?

The ISSB standards draw heavily on previous standards across ESG and climate-specific formats. The IFRS S1 and IFRS S2 standards differ in their scope: S1 covers general sustainability-related metrics, and S2 covers only climate-specific metrics. A comparison of the ISSB standards with previous prominent formats for both general (GRI) and climate-specific (TCFD) disclosures is provided in Table 1.

Table 1: Comparison of key aspects of GRI, TCFD, and ISSB standards

Source: CEEW-CEF analysis based on GRI, TCFD, and ISSB disclosures

*The GRI is still voluntarily adopted by companies. The TCFD was disbanded in 2023.

Who should care?

• Private-sector enterprises
• Public-sector enterprises
• Statutory regulators
• Financial institutions
• Asset managers
• ESG fund managers