As noted above, on 26 June 2023, the ISSB issued its inaugural standards (IFRS S1 and IFRS S2), clearly marking a new era of sustainability disclosures in global capital markets. Shortly after the release of the inaugural standards, the ISSB also issued a podcast, ‘Ten things to know about the first ISSB Standards’, and recorded two webinars providing a detailed overview of IFRS S1 and IFRS S2. For more detail regarding these standards and PwC’s observations regarding some of these requirements, read our In depth here. For an overview of IFRS S1 and IFRS S2, read PwC’s In brief here.

IOSCO publicly endorsed the inaugural standards issued by the ISSB, where Erkki Liikanen, the chair of Trustees of the IFRS Foundation®, commented, “IOSCO's endorsement is a resounding validation of the ISSB's work to develop robust, proportionate sustainability disclosure standards fit for capital market use at global level”.

IOSCO called on its 130 member jurisdictions (which together regulate more than 95% of the global financial markets) to consider ways in which they might adopt, apply or otherwise be informed by the ISSB™ standards to promote consistent and comparable disclosures for their investors. Consequently, local jurisdictions will need to consider whether to adopt IFRS S1 and IFRS S2 as reporting requirements for local entities. Read more about this announcement here.

The Board ratified amendments to the climate-related SASB standards to align to IFRS S2, specifically in relation to the application guidance in IFRS S2 on financed emissions and the industry-based guidance included in IFRS S2. As a result, these amendments will add to the international application of the climate-related SASB standards.

A full update of the meeting is here; alternatively, listen to the May 2023 ISSB podcast here.

The Board met virtually in July 2023 to discuss an item included in its agenda consultation in relation to researching targeted enhancements to the ISSB standards. As a result of this meeting, the Board instructed the staff to develop educational material focused on how an entity might disclose nature- and social-related aspects of climate-related risks and opportunities by applying the requirements in IFRS S2.

Since the educational material is only guidance and cannot add or change the requirements in the current standards, it will not be released for public comments before being issued. The Board is aiming to issue this educational material before the effective date of IFRS S1 and IFRS S2, that is 1 January 2024.

A full update of the meeting is here; alternatively, listen to the July 2023 ISSB podcast here.

The IFRS Foundation has announced that it will take over the monitoring of climate-related disclosures from the Task Force on Climate-related Financial Disclosures (TCFD) as of 2024. This is as a result of IFRS S1 and IFRS S2 being considered to be 'the culmination of the work of the TCFD', according to the Financial Stability Board’s announcement. Read more about these announcements here.

Many preparers have previously reported their climate-related risks and opportunities in accordance with the TCFD recommendations. To further facilitate the transition to a comprehensive global baseline of sustainability disclosures, the IFRS Foundation has also published a comparison of the requirements in IFRS S2 and the TCFD recommendations, to assist these preparers. The Financial Stability Board has also concluded that, as a result of the TCFD recommendations being fully incorporated into the IFRS Sustainability Disclosure Standards, an entity applying IFRS S1 and IFRS S2 will meet the TCFD recommendations.

To facilitate the structured digital reporting of sustainability-related financial information prepared by applying the IFRS Sustainability Disclosure Standards, a common digital taxonomy is necessary. As a result, to further enhance global accessibility and comparability of sustainability information for investors, the Board published its ‘Proposed IFRS Sustainability Disclosure Taxonomy’ for public comment on 27 July 2023.

In this webcast, Linda Mezon-Hutter, Vice-Chair of the International Accounting Standards Board (IASB), and Sue Lloyd, Vice-Chair of the ISSB, discuss the connections between financial and sustainability disclosures. Considering the interconnectedness of financial and sustainability disclosures, they also share how the work of the two Boards complement each other.

At the Brussels BdB Courtyard Reception, Sue Lloyd provided a high-level overview of IFRS S1 and IFRS S2, and how the market received these standards since the Board issued them in June 2023. She also explained how these standards relate to ESRS and summarised what questions the Board asked in its agenda consultation. Read her full speech here.

As noted above, the EC adopted the final Delegated Act which includes the ESRS. The Delegated Act includes the 12 finalised ESRS, made up of two cross-cutting standards, which apply to all sustainability matters, and ten topical standards covering a wide range of environmental, social and governance matters.

The final ESRS reflect updates to the 12 previous draft ESRS that were issued by the EC for public comment on 9 June 2023. The EC received over 600 comment letters, including feedback from PwC, before the deadline of 7 July 2023. Some of the changes to the final ESRS include further alignment regarding financial materiality to that used in the IFRS Sustainability Disclosure Standards, and a requirement to include a detailed explanation when an entity concludes that climate change is not a material topic.

For more information regarding the final ESRS, read PwC’s In brief here.

The EC, EFRAG and the ISSB have worked together to improve the interoperability of their respective climate-related disclosure requirements. This collaboration has led to an increased alignment, reduced complexity and duplication for entities that wish to (or are required to) apply both IFRS S2 and ESRS E1, ‘Climate change’.

In addition, these parties have committed to develop interoperability guidance that could assist entities to better understand where there are incremental disclosures required by only one set of standards. Read the full announcement here.

On 13 June 2023, the EC published the final Environmental Delegated Act, which defines the technical screening criteria of four other environmental objectives of the Taxonomy Regulation. These include: sustainable use and protection of water and marine resources; transition to a circular economy; pollution prevention and control; and protection and restoration of biodiversity and ecosystems. For more information, read PwC’s In brief here.

While the SEC is focused on the current application of existing securities laws with regard to climate-related disclosures, the exact date of the SEC’s final rule on climate-related disclosure is still unknown. The SEC also intends to issue a proposal on human capital management disclosures, which is expected in the second half of 2023.