International Sustainability Standards Board (ISSB)

Exposure Draft Summary

ISSB Introduction
ISSB and Exposure Draft Introduction
The ISSB aims to deliver a comprehensive global baseline of sustainability-related disclosure standards that provide investors and other capital market
participants with information about companies’ sustainability-related risks and opportunities to help them make informed decisions.

Nov 2021 Jan 2022 Mar 2022 Jul 2022

IFRS Foundation Trustees
announced the creation of a
new standard-setting board—
the International Sustainability
Standards Board (ISSB)
IFRS Foundation completes
consolidation of Climate
Disclosure Standards Board (CDSB)
from CDP to provide staff and
resources to support the ISSB.
ISSB launched a consultation on The end of consultation. The
its first two proposed standards, ISSB will review feedbacks on
IFRS S1 and S2. the proposals and aims to issue
the new Standards by Dec 2022.

The proposals―exposure dra s—build upon the recommendations of the Task Force on
Climate-Related Financial Disclosures (TCFD) and incorporate industry-based disclosure
requirements derived from SASB Standards.

• [Draft] IFRS S1 General Requirements for Disclosure of Sustainability-related Financial

Information sets out the overall requirements for disclosing sustainability-related financial
information about all its significant sustainability-related risks and opportunities, to
provide the market with a complete set of sustainability-related financial disclosures.

• [Draft] IFRS S2 Climate-related Disclosures sets out the specific requirements for the
identification, measurement and disclosure of climate-related financial information.

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ISSB Exposure Draft
IFRS S1 ED
In the IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information
Exposure Draft (IFRS S1 ED), it points out that:
Disclosure
• It provides guidance on the disclosure of material information about sustainability-related risks and
opportunities, and their related metrics and targets.
• It also requires a company to disclose:
• Information of itself;
• Information across its value chain, including supply and distribution channels.

Structure
• Its structure is based on the four pillars used in the recommendations by the Task Force for Climate-related
Financial Disclosures (TCFD): Governance, Strategy, Risk Management, and Metrics and Targets.

Framework Equivalence
• IFRS S1 ED is designed to be the equivalent of the IFRS Conceptual Framework, IAS 1 Presentation of
Financial Statements and IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors.
• IFRS S1 ED sets out requirements on fair presentation, comparative information, use of financial data and
assumptions, source of estimation and outcome uncertainty, as well as a statement of compliance.

Financial Reporting
• IFRS S1 ED proposes a company’s sustainability disclosures would form part of a company’s general
purpose financial reporting, and thus would need to be published at the same time as its financial
statements.
• In addition, how a company’s sustainability-related financial information is related to information in its
financial statements should also be disclosed.

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ISSB Exposure Draft
IFRS S2 ED
In the IFRS S2 Climate-related Disclosures Exposure Draft (IFRS S2 ED), it points out that:
Disclosure
Key Challenges:
• Disclosure of Scope 1, 2 and 3 absolute emissions and intensity will pose significant challenge, especially Significant effort would need to be made
for Scope 3; for companies to disclose the absolute
• The ED proposes to compute emissions using the GHG Protocol (or alike). This computation method is emissions and intensity of Scope 3
different from that currently used in China issued by the National Development and Reform Commission
(NDRC) emission for their value chain

Scenario Analysis Key Challenges:

• Scenario analysis is required, and should be aligned to Paris Agreement-like protocol Such alignment would require building
models and use of data, and data sourcing
and integrity could be challenging
Reporting
• Use of IFRS Sustainability Disclosure Standards (ISDS) to prepare sustainability report.
• Joint ventures, associates, unconsolidated entities, and affiliates report GHG emissions separately.
Key Challenges:
If ISDS is used to prepare sustainability
report, then the must be issued at the
Key Challenges: same time with their corresponding
1. Difference in approach – differences between the reporting entity and its joint venture / associates could pose financial statements. This could be a
implementation challenges significant challenge for those companies
2. Difference in GHG emissions computation method – investees may not be using a GHG Protocol-alike method having to issue interim and quarterly
3. Difference in policy choice for each investee – some investees could be using the financial control model while others reports, where systems, process and
may be using the operational control model control may require significant upgrading.
4. Non-co-terminus period ends – investees may have different period ends

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ISSB Exposure Draft
Suggestions by receivers on the Exposure Draft

IFRS S1 General ISSB should further consider the following for ISSB should further consider the following for
Requirements for IFRS S1: IFRS S2: IFRS S2 Climate-
Disclosure of • Achieving a global baseline for related
Sustainability- sustainability disclosures • Clarifying the scope and key definitions Disclosures
related Financial • The application of proportionality and • Avoiding unnecessary duplication
Information transitional measures to encourage • Due process
adoption • The potential effective date
• The importance of business model- • Cost vs. benefits
focused disclosures • Achieving a global climate baseline
• Clarity on scope and key definitions
• The use of third-party documents
• Reliability and levels of certainty of
disclosures
• The use of illustrative examples and non-
mandatory educational guidance
• Field testing
• Leveraging IASB experience regarding due
process
• Alignment with IFRS Accounting
Standards

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ISSB Exposure Draft
Next Steps: What should companies do?

Sustainability-
Holistic Climate risk
focused Climate-related
sustainability management
Governance disclosure
strategy framework
Structure
Establish and define a Set up strategic Analyze the alignment of Identify and select the
sustainability governance development priorities, climate risk management climate targets and metrics
structure, as well as the strategic objectives, with existing business to keep track on climate
roles and responsibilities including integrated operations and integrate information based on your
of each committees and management climate risk considerations sectors, priorities, and
departments. recommendation on risk, into existing operating favours (from investors and
disclosure, and process, covering front, key stakeholders).
The Board should sustainability middle and back office.
engagement and form management system. Plan and implement
cross-functional or Build resources and respective measures and
designated working Respond to multi- capabilities on talents, disclose the achievement in
groups to coordinate the stakeholders needs, data, and technology in climate risk management
planning and incorporate sustainability risk management. on a regular basis.
implementation of ISSB considerations into long-
disclosure requirement. term business strategy. Enterprises should adopt
appropriate systems,
procedures, and internal
control schemes to ensure
the rigor of relevant
information disclosure.

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