New IFRS S1 & S2 standards out and available
On 26 June, the International Sustainability Standards Board (ISSB) issued the IFRS S1 on general requirements for disclosure of sustainability-related financial information and IFRS S2 on climate-related disclosures.
The International Sustainability Standards Board (ISSB)
Today, sustainability considerations have become a mainstream part of investment decision-making. In parallel with this development, there is an increasing demand for companies to provide high-quality, globally comparable information on sustainability-related risks and opportunities. In order to support them in providing such information different disclosure standards are developed, such as the IFRS S1 & S2 by the ISSB.
The ISSB operates within the context of the IFRS (International Financial reporting Standards) Foundation and is the entity which is responsible for developing IFRS disclosure standards on sustainability specifically. Its primary objective is to provide high quality, understandable and globally applicable sustainability disclosures to inform investors and the financial markets.
IFRS S1 & S2
Both standards provide alignment on a standard baseline of disclosure requirements across jurisdictions and focus on providing material sustainability information for investors to support better decision-making.
These standards build on well-known TCFD recommendations, SASB Standards, CDSB Framework, Integrated Reporting Framework and World Economic Forum metrics to streamline sustainability disclosures and also link to the European Sustainability Reporting Standards (ESRS) and GRI (Global Reporting Initiative). They also build connectivity with financial statements.
IFRS S1 and S2 are effective for annual reporting periods beginning on or after 1 January 2024 with earlier application permitted as long as both are applied.
IFRS S1 requires an entity to disclose information about all sustainability-related risks and opportunities that could reasonably be expected to affect the entity’s cash flows, its access to finance or cost of capital over the short, medium or long term. It sets out the requirements for disclosing information about an entity’s sustainability-related risks and opportunities. In particular, an entity is required to provide disclosures about:
- Risk management
- Metrics and targets.
IFRS S2 requires an entity to disclose information about climate-related risks and opportunities that could reasonably be expected to affect the entity’s cash flows, its access to finance or cost of capital over the short, medium or long term. It applies to:
- climate-related risks to which the entity is exposed, which are climate-related physical risks and climate-related transition risks,
- climate-related opportunities available to the entity.
Metrics to use in accordance with IFRS S2 are defined by industry in the standard’s appendix.
It is to be noted that even if the focus is first placed on climate, it is expected that further IFRS-S standards will be published in the future.
Start preparing today !
If you are preparing consolidated IFRS financial statements, your consolidation process will need to include the IFRS-S disclosure requirements for your report on 2024. The preparation process to check relevant data metrics and assess the information not yet collected today is thus key
If you would like to discuss how to best to prepare to comply with these two new IFRS standards if you would like to know more about this topic and how it may impact you, then do not hesitate to get in touch with us.