ISSB to Add Biodiversity, Just Transition Disclosures to Climate Reporting Standard

The International Sustainability Standards Board (ISSB) is meeting in Montreal to advance the IFRS Sustainability Disclosure Standards ahead of their publication in 2023 and made progress on several topics relevant for the work of COP15 on Biodiversity, simultaneously taking place in Montreal, Canada.

From ESG to sustainability

The ISSB determined during its October 2022 meeting that it would be advantageous to ground its standard-setting work by explicitly articulating the connection between sustainability issues and the creation of financial value in order to progress from the current fragmented ESG disclosure landscape, which lacks connectivity and has conflicting concepts, to a truly global common language of sustainability-related financial disclosures.

The ISSB agreed on a definition of sustainability during its meeting on December 13, 2022, and made it clear that a company's capacity to generate value for its investors is inextricably linked to the stakeholders it engages with and serves, the society in which it operates, and the natural resources it uses.

The choice is based on ideas from the Integrated Reporting Framework, which aids businesses in explaining how they use and impact connections and resources for generating, protecting, and depleting value through time.

The ability of a company to sustainably maintain resources and relationships with and manage its dependencies and impacts within its entire business ecosystem over the short, medium, and long terms will be described as sustainability in the ISSB's General Sustainability-related Disclosures Standard (S1). Sustainability is a requirement for a business to access over time the relationships and resources (such as financial, human, and natural) required, assuring their proper preservation, development, and regeneration, in order to realise its objectives.

A company will be in a better position to explain to its investors how it is working sustainably within its business ecosystem—addressing the impacts, risks, and opportunities that can affect its performance and prospects—to ultimately deliver financial value for investors if it makes use of this articulation of the value creation process.

Addressing natural ecosystems as it relates to climate

The ISSB will investigate incremental improvements that complement the Climate-related Disclosures Standard (S2), including those relating to natural ecosystems and the human capital aspects of the climate resilience transition, after receiving significant feedback on the relationship between climate and nature, including cultivated and natural biodiversity, deforestation, and water—and having subsequently decided during its October meeting (just transition).

In order to do this, the ISSB will take into account the work of the Taskforce for Nature-related Financial Disclosure (TNFD) and other existing nature-related standards and disclosures where they relate to the information needs of investors. This is in line with the ISSB's approach of building upon the work of market-led initiatives grounded in current-best practise and thinking. In doing so, the ISSB's research on extending its climate-related disclosures to address disclosures pertaining to natural ecosystems will take into account the TNFD's recent work on the intersection of climate and biodiversity disclosures.

(Source : ESG News)