The International Sustainability Standards Board (ISSB) has proposed a new framework for companies to disclose how their dependence on natural resources and their impact on ecosystems could affect their financial prospects.
The proposals stop short, however, of introducing a new sustainability disclosure standard.
ISSB chair Emmanuel Faber said the disclosures would help investors assess the financial risks arising from companies’ dependence on natural resources, including water, waterways and pollinators.
“When a company’s access to these environmental resources is threatened, the company can face risks and opportunities that affect its prospects,” he said.
Published on 22 October, the exposure draft would establish IFRS Sustainability Disclosure Practice Statement 1, Nature-related Disclosures, as a supplement to IFRS S1 and IFRS S2.
The consultation, which closes 19 February 2027, also asks for views on whether the board should instead issue the requirements as a standard.
Supplementing existing requirements
The proposed practice statement would not be compulsory for companies reporting under the ISSB’s existing standards, although individual jurisdictions could mandate its use.
Companies adopting it would have to meet its requirements and those of IFRS S1 and S2 to claim compliance with the practice statement.
ISSB vice chair Sue Lloyd added that the board wants to “balance the need to give markets time to implement the ISSB Standards well, with the demand from investors for information on nature”.
Proposals in detail
Under the proposals, companies would explain how their reliance on natural resources, including water, soil and biodiversity, affects their cash flows, access to finance and cost of capital. They must also consider how their operations and value chains affect nature and give rise to physical or transition risks.
The proposals are based on IFRS S1’s four reporting areas of governance, strategy, risk management, and metrics and targets.
They also place greater emphasis on geographical location, requiring companies to consider how risks vary according to where their assets and operations are situated, including areas affected by water shortages or biodiversity loss.
Finally, companies must consider how their engagement with Indigenous Peoples, local communities and other affected stakeholders influences nature-related risks and opportunities.
Scenario analysis, metrics
The board also wants companies to use nature-related scenario analysis to assess and report on the resilience of their strategies and business models.
Two proposed cross-industry metrics would show the amount and proportion of assets or activities vulnerable to nature-related risks and those aligned with nature-related opportunities.
Companies could draw on additional metrics developed by the Taskforce on Nature-related Financial Disclosures (TNFD), while use of the organisation’s LEAP approach to assessing nature-related issues remains optional.
The ISSB also suggests companies explain the connections between climate and nature, including where efforts to address one risk create problems or benefits in the other.
The board has also sought to make the proposals easier to apply alongside the Global Reporting Initiative (GRI) and European Sustainability Reporting Standards (ESRS).
If finalised as proposed, the practice statement could be applied from its issuance date, with no requirement to restate earlier periods.
