Sue Lloyd, the vice chair of the International Sustainability Standards Board (ISSB), has emphasised the critical role of informal guidance from the board’s Transition Implementation Group (TIG) in applying the sustainability standards, IFRS S-1 and IFRS S-2.

“Regulators assure us and others in the ecosystem who are on it are going to know what was in these minutes, and so they’re there to help.”

She added: “But what I say to people is sort of ignore them at your peril, because they’re there to really shed light on how you should be reading these words.”

Her comments came as businesses and investors prepare for their first full year of sustainability reporting under the ISSB’s standards.

New rules, new challenges

IFRS S-1 focuses on general sustainability-related disclosures, while IFRS S-2 considers climate-related disclosures. It requires detailed reporting on how climate change could affect a company’s financial position and performance.  

Companies in jurisdictions that have adopted the standards are now working toward their first full year of sustainability reporting, leading to a flurry of questions about how the standards work in practice.

The first issue under scrutiny involves the interpretation of ‘business activities’ and ‘vulnerable’ in Paragraph 29(b)–(c) of IFRS S-2.

This clarification is relevant for companies reporting the extent of their assets or operations at risk from climate-related transitions and physical impacts. 

The TIG emphasised that such disclosures should provide meaningful information capable of influencing investment decisions without being a checklist.

The second issue relates to the requirement in IFRS S-1, Paragraph B50, concerning the revision of previously reported estimates when new information reveals that conditions in the past period were different than reported.

TIG podcast update

Speaking during the TIG podcast, Lloyd said that revisions to estimated amounts are only necessary when the information is material and changing it is feasible.  

She also underscored the importance of using judgement to decide if something falls under the definition of a metric and needs revision.

Importantly, she added, any revisions should ensure the overall information remains coherent and understandable to users.

It also emerged from the TIG’s discussions that relevant information included in other reports, such as financial statements or sustainability reports, should be considered for climate-related disclosures, underscoring the interconnectedness of all corporate reporting.

Fragmented guidance

Some parties have found it challenging to apply the new standards, as they lack experience of applying the International Accounting Standards Board’s financial reporting standards and thinking about how they work in practice.

As an additional challenge, the guidance issued by the TIG is spread across the TIG’s meeting pages, the ISSB’s meeting pages, and the TIG podcast.

The TIG has also released a list of issues received from constituents during the ISSB’s outreach work that it decided not to consider.

Meanwhile, Lloyd also stressed the TIG’s pronouncements are non-mandatory.

She said: “It’s not the case that an auditor or regulator can say you have to apply what’s on these minutes to be able to comply with ISSB standards. They don’t have that level of authority analysis of formal literature.”

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