February was an important month because it is the month in which the ISSB Board is wrapping up their deliberations on the first two standards, IFRS S1 General Sustainability-related Disclosures (IFRS S1) and IFRS S2 Climate-related Disclosures (IFRS S2) Exposure Drafts, as well as setting the effective date for these standards.

In this summary, we take you through what they decided, why it matters and what the next steps are.   

Key focus 1: Setting the effective date

With respect to the effective date, the ISSB Board decided that IFRS S1 and IFRS S2 should be effective as of 1 January 2024, where both standards should be applied together. The effective date on 1 January 2024 aligns with the effective date for the first adopters of the European Sustainability Reporting Standards. It is undoubtedly an ambitious timeline, indicating the need for better information on climate and other sustainability topics. Also, it helps with interoperability for those companies that will apply the European Sustainability Reporting Standards.

Another point to note is that international standards will need to be adopted by local jurisdictions and made mandatory through the interaction of regulators or governments. Therefore, the effective date may differ for jurisdictions, depending on the local decisions. 

The ISSB Board also understands that it could be challenging for companies to apply the standards for the first time. Hence, the ISSB Board is giving some relief in the first year of application by, for example, not requiring comparatives.

Key focus 2: Making the requirements proportionate

The key theme throughout the work of the ISSB Board has been around proportionality to ensure that all types of companies can apply the standards regardless of where they are on their reporting journey.

While there are companies that are already quite mature, there are also many companies that are still at the beginning of their journey. The ISSB Board acknowledges the need for the standards to be applicable for all of those companies, and hence, in the February Board meeting, the ISSB Board summarised all measures that have already been discussed in order to make it easier for companies to apply the standards, including the following – 

Wei Lin
Partner, Head of Environmental, Social and Governance
KPMG China

Erik Bleekrode
Head of Insurance, Asia Pacific / Co-Head of Insurance, China
KPMG China

Patrick Chu
Partner, Head of ESG Reporting and Assurance
KPMG China

Pat Woo
Partner, Head of Environmental, Social and Governance, Hong Kong SAR
KPMG China

Irene Chu
Partner, ESG Advisory
KPMG China

Derek Yuen
Partner, ESG Reporting and Assurance
KPMG China

Eddie Ng
Partner, ESG Advisory
KPMG China

Angus Choi
Partner, ESG Advisory
KPMG China

Rani Kamaruddin
Partner, ESG Advisory
KPMG China

Jonathon Ko
Partner, ESG Advisory
KPMG China

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Key focus 3: Clarifying the role of other guidance in applying the standards

The ISSB Board also discussed sources of guidance for companies’ consideration when disclosing material information across all sustainability-related topics. The ISSB Board decided to give explicit permission to companies to refer to GRI (Global Reporting Initiative) metrics or to the European Sustainability Reporting Standards in deciding what information to give on sustainability topics that are not yet covered by international standards.

Next step

The ISSB Board have made all final decisions and will begin finalising the text, aiming to release the standards in June 2023. Upon the release of the finalised standards, it will be up to local jurisdictions to decide how to adopt these standards and when to make them effective, or adopt the effective date of 1 January 2024. 

Hong Kong Stock Exchange already expressed its intention to enhance climate-related disclosures in line with the new ISSB standards. Companies listed in Hong Kong should start preparing for the impending expansion of required climate disclosures.  

Actions for management

  • Familiarise yourself with the requirements. See Climate Change Reporting: Imminent, Challenging & Mandatory – The Opening Moves, the Sustainability Reporting: New on the Horizon and ISSB resource centre
  • Understand the information required to support these disclosures, including what is reasonably available to you.
  • Make sure that financial and sustainability reporting specialists work together so that sustainability-related financial information is prepared based on the same set of facts and circumstances as the financial statements.
  • Assess whether any existing systems, processes and controls are sufficient to support these disclosures.
  • Develop a roadmap to improve information for disclosures and enhance existing infrastructures and systems over time.

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