SASB Standards: Introduction of IFRS S1 and IFRS S2 Disclosures

Financial world shifts with ISSB IFRS S1 and IFRS S2 Sustainability Disclosure Standards. Harmonizing global approaches, they offer guidance on risks, opportunities, and climate disclosures. Preparation is key for convergence towards high-quality sustainability disclosures.

SASB Standards: Introduction of IFRS S1 and IFRS S2 Disclosures
EU The evolution and consolidation of sustainability reporting standards

The Evolution of SASB Standards and the Introduction of IFRS S1 and IFRS S2 Disclosures

Source: SASB Standards Keywords SASB Standards IFRS S2

The international landscape for investor-focused sustainability disclosures has been significantly evolving, with the Sustainability Accounting Standards Board (SASB) Standards serving as a key element in this shift. Recently, the International Sustainability Standards Board (ISSB) issued its first-ever global IFRS Sustainability Disclosure Standards, known as IFRS S1 and IFRS S2 in June 2023, which are built upon existing SASB Standards, Integrated Reporting Framework, and CDSB Framework. The IFRS S1 sets disclosure requirements that help companies communicate about their sustainability-related risks and opportunities, while IFRS S2 focuses on specific climate-related disclosures. Both of these standards embody the recommendations of the Task Force on Climaterelated Financial Disclosures (TCFD). The continued use of SASB Standards is seen as integral to the implementation of these new ISSB Standards. Companies can voluntarily apply IFRS S1 and IFRS S2 for reporting periods from 2024 onwards, giving them a chance to grow into their capability to fully meet the requirements.




SASB Sustainability Disclosures: IFRS S1 and IFRS S2 Standards


The financial world has witnessed a major shift in the landscape for investor-focused sustainability disclosures, ushered in by the recent introduction of the International Sustainability Standards Board (ISSB) IFRS Sustainability Disclosure Standards - IFRS S1 and IFRS S2. This groundbreaking development, predicated on the Sustainability Accounting Standards Board (SASB) Standards, stands to revolutionize how financial institutions globally communicate about sustainability-related risks and opportunities.

The IFRS S1 and IFRS S2 standards harmonize the diverse approaches to sustainability disclosures under a globally recognized framework. This transformation applies to all financial institution types operating within jurisdictions that use or recognize International Financial Reporting Standards (IFRS) - a tally surpassing 140 countries, including powerhouses like the European Union, Australia, and Canada, in addition to numerous Asian and African nations.

The IFRS S1 offers guidance for communicating sustainability-related risks and opportunities, while IFRS S2 zeroes in on climate-related disclosures. Both standards embody the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), marking an era of increased transparency and comparability across international borders, with an additional benefit of reduced reporting burdens for multinational companies.

The move towards these new sustainability standards indicates a more holistic perspective, integrating both industry-specific and entity-specific issues. This broader approach promises investors a more comprehensive and actionable insight into companies' sustainability performance.

However, this transformation isn't without challenges. Companies may encounter increased compliance costs due to the demands of collecting and verifying new data types. The heightened focus on climate risks might prompt a redirection of capital towards sustainable initiatives. Plus, as sustainability practices come under the microscope, reputation risks could surface for companies falling short of these standards. Those reluctant to adopt might also face hurdles attracting Environment, Social, and Governance (ESG)-focused investments.

Although the IFRS S1 and IFRS S2 implementation is voluntary and might initially result in variability in the level of disclosure among companies, the expectation is that familiarity with the ISSB standards will eventually lead to a convergence towards high-quality, consistent sustainability disclosures.

Preparation is key for institutions to navigate this new landscape. Integration of SASB standards into current reporting systems, improved data management capabilities, establishment of cross-functional teams to address diverse disclosure requirements, and active communication with stakeholders about sustainability strategies are all pivotal for smooth sailing. Institutions can voluntarily apply the IFRS S1 and IFRS S2 from reporting periods in 2024 onwards.

In this evolving scenario, the ongoing refinement of the SASB Standards, especially in enhancing their international applicability, remains crucial. It forms the bedrock for the successful implementation of the IFRS S1 and IFRS S2, shaping the future of sustainability disclosures and paving the way for a more transparent, sustainable financial sector.




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