2023 is going to be really an important year because we will see a number of the sustainability reporting standards being finalised, including the IFRS S1 General Sustainability-related Disclosures (IFRS S1) and the IFRS S2 Climate-related Disclosures (IFRS S2) Exposure Drafts. So this is really the year for companies to get ready and start actually with relevant projects.

In the meeting of the ISSB Board in January 2023, the ISSB Board was really looking at how can we make these standards as operational as possible. In order to do so, they also looked at what concepts do we already have in the IFRS Accounting Standards that we may actually lift and bring into the sustainability reporting standards as well. Another key area to highlight is what they decided on scenario analysis and how to determine the financial effects of sustainability risks and opportunities.

Key area 1: Leveraging accounting concepts

To make the sustainability reporting standards as practical as possible, the ISSB Board highlighted three concepts in the meeting that are lifting from the accounting standards: 

  1. Forward-looking information: Such information needs a lot of estimation. So how far do companies need to go in their search for getting the information ready? The ISSB Board says it will be limited by a concept that they call ‘reasonable and supportable information that you can get without undue cost or effort’. That is a concept already tried and tested because it is also included in International Financial Reporting Standards (IFRS) 9 on financial instruments and in IFRS 17 on insurance contracts.

  2. Sensitivity: The ISSB Board suggested to reference the concepts in International Accounting Standard (IAS) 37 on provisions. There is already an exemption saying that if a company has a court case and disclosing the court case would actually seriously prejudice the outcome of it, the company would not have to disclose it. The ISSB Board is going to do something similar for sustainability reporting by saying that if a company has certain opportunities and disclosing this commercial opportunity would be commercially sensitive and therefore impact on the opportunity itself, then the company would not be required to disclose the opportunity. A clear statement of using an exemption would be required. The exemption does not apply to sustainability risks that you have identified, so only to opportunities.

  3. Significant judgements: The third concept that the ISSB Board is lifting from the accounting standards is what we have in IAS 1  on the requirement to disclose the significant judgements that the company has made in determining what significant estimates they had to make. That is very important because it will actually help investors to judge for themselves whether they think what the company has done is reasonable in terms of their significant judgements.

Key area 2: Introducing scalability in scenario analysis

The ISSB Board has decided at its November meeting to that scenario analysis should be part of the IFRS S2. While scenario analysis is going to be a requirement, the ISSB Board also acknowledges that scenario analysis can be difficult and can be complex. Therefore, they also want to make that scalable. 

The amount of information that a company would need to give under scenario analysis would therefore depend on, for example, the exposure that the company has to climate risks, but also the resources and the skills that the company has available. And again, the information that the company provides would be subject to the concept of reasonable and supportable information. And it can range for more simple situations to just a narrative disclosure all the way up to a full quantitative analysis in various scenarios.

Key area 3: Disclosing financial effects of sustainability risks and opportunities

The final area is around financial effects of sustainability risks and opportunities. The ISSB Board discussed how far do companies need to go in terms of giving the financial effects and gathering that information. And again, this will be subject to the concept of reasonable and supportable information. If companies cannot provide the required level of detail, they would explain why not and provide additional qualitative information and quantitative information that is as granular as possible. Companies will also need to explain connections between their sustainability-related financial information and financial statements. 

Next step

The ISSB will finish its discussion on IFRS S1 and IFRS S2 in February 2023, and the final standards are expected to be released in June.

Actions for management

  • Familiarise yourself with the requirements. See our detailed guide, Climate Change Reporting: kpmg.com/cn Imminent, Challenging & Mandatory – The Opening Moves 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 over time.


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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