ISSB plans practice statement on nature-related disclosures

The International Sustainability Standards Board decided during a meeting on Earth Day that it will propose a set of requirements for nature-related disclosures in the form of an IFRS Practice Statement.

The ISSB, which operates under the oversight of the International Financial Reporting Standards Foundation alongside the International Accounting Standards Board, noted that its existing sustainability and climate disclosure standards already require companies to provide material information about all sustainability-related risks and opportunities, including nature-related risks and opportunities that could reasonably be expected to affect a company's prospects.

The practice statement would complement IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2 Climate-related Disclosures, without changing the requirements in the ISSB standards. When a company needs to provide information about nature-related risks and opportunities in accordance with IFRS S1, the practice statement would explain how it could do this. This form of standard-setting would thus minimize disruption, which the ISSB acknowledged is especially important because companies and jurisdictions are in the process of implementing and adopting the ISSB standards.

The decision on Wednesday follows the ISSB's work to specify aspects about material information on nature-related risks and opportunities for companies to disclose, drawing on the Taskforce on Nature-related Financial Disclosures framework, which the ISSB began taking responsibility for maintaining last fall.

The ISSB intends to publish an exposure draft for public comment in October and give stakeholders the chance to offer feedback on the proposed requirements, including on whether an IFRS Practice Statement is the right form of standard-setting for nature-related disclosures.

"Providing material nature-related disclosures is not optional; IFRS S1 already requires that," said ISSB chair Emmanuel Faber in a statement. "A practice statement will guide companies on how to provide such disclosures."

Applying the practice statement would have the full effect of an ISSB standard for companies applying it, while at the same time, it would provide the ISSB with a pathway to a standard-based outcome in the future. 

In addition to the form of standard-setting, at the Beijing meeting the ISSB discussed aspects of the content of the nature-related disclosures, including how it would draw upon the TNFD framework.

Sustainability reporting has gone on the back burner at many companies in the U.S. after the second Trump administration came to power last year, with the Securities and Exchange Commission shelving the climate-related disclosure reporting rule that former SEC chair Gary Gensler had tried to finalize during the Biden administration despite a wave of industry lawsuits. In the European Union as well, the European Commission scaled back the reach of the European Sustainability Reporting Standards in an "Omnibus" package to apply to far fewer companies, effectively exempting approximately 90% of the companies that were originally within the scope of mandatory reporting under the EU's Corporate Sustainability Reporting Directive. That has led to adjustments by European accounting organizations like Accountancy Europe and the European Financial Reporting Advocacy Group.

"At this moment, the shine is a bit off the topic of sustainability reporting," said Accountancy Europe CEO Eelco van der Enden during an interview in February. "It is very much looking indeed into Omnibus deburdening, deregulation and more adapting to ESRS. People keep an eye on the ISSB and its interaction with EFRAG, with ESRS, and of course, we are involved in many discussions. The more closely they work together in work plans and output, the better. But at this moment in time in the market, I don't see that people see it as a top priority. But that can change very fast, in case the agendas of the decisionmakers are tilting toward more global cooperation in these matters."