Jurisdictions representing over half the global economy by gross domestic product (GDP) are taking significant steps to adopt the International Sustainability Standards Board’s (ISSB) Standards. This move aims to align its sustainability disclosure standards with the global baseline established by the ISSB.
Global Momentum Towards ISSB Sustainability Reporting Standards
Over 20 jurisdictions have committed to implementing ISSB Sustainability Reporting Standards in their legal frameworks. Together, these regions represent nearly 55% of global GDP, over 40% of global market capitalization, and more than half of global greenhouse gas emissions. This widespread adoption signals a growing commitment to standardized sustainability disclosures.
Key Developments
European Union's Leading Role:
China has introduced an Exposure Draft for its unified Sustainability Disclosure Standards for Business Enterprises. This draft, issued by the Ministry of Finance, formulates standards based on ISSB guidelines, drawing from global best practices while addressing local needs. This initiative highlights China's efforts to harmonize its reporting standards with international norms, showcasing Chinese characteristics and adapting to the local context.
China's Recent Adoption:
China has introduced an Exposure Draft for its unified Sustainability Disclosure Standards for Business Enterprises. This draft, issued by the Ministry of Finance, formulates standards based on ISSB guidelines, drawing from global best practices while addressing local needs. This initiative highlights China's efforts to harmonize its reporting standards with international norms, showcasing Chinese characteristics and adapting to the local context.
Broad Adoption Across Jurisdictions:
The jurisdictions adopting or aligning with ISSB Sustainability Reporting Standards represent around 75% of global market capitalization, excluding the United States. The US Securities and Exchange Commission (SEC) has acknowledged the similarities between its climate disclosure rules and the ISSB Standards. However, the SEC has not yet integrated these standards into its regulations, indicating ongoing deliberations within the US regulatory framework.
Support for Jurisdictions
The IFRS Foundation released the Inaugural Jurisdictional Guide to facilitate this transition at the IOSCO Annual Meeting in Athens. This guide assists jurisdictions in planning and implementing ISSB Sustainability Reporting Standards. It outlines various approaches such as full adoption, partial adoption, and permission to use the standards, providing flexibility for different legal frameworks.
The guide aims to show market participants how jurisdictions are progressing toward delivering globally consistent and comparable sustainability-related information. It acknowledges the various ways jurisdictions may use the ISSB Standards, as set out in the IOSCO endorsement decision. The IFRS Foundation also describes various jurisdictional approaches to the adoption or other use of ISSB Standards, including full adoption, partial adoption, and permission to use.
Additionally, the IFRS Foundation introduced the Regulatory Implementation Programme. This program includes tools, educational resources, and capacity-building initiatives to support jurisdictions in their policy decisions and roadmap executions for adopting ISSB Sustainability Reporting Standards. The program emphasizes collaboration with international organizations, development banks, and private sector partners to enhance capacity-building efforts.
Capacity Building in Africa
A significant development in capacity building was marked by the African Development Bank (AfDB) signing an agreement with the IFRS Foundation at its Annual Meeting in Nairobi, Kenya.
This partnership aims to advance sustainability-related disclosure practices across Africa through technical assistance and capacity-building support. The agreement reflects the IFRS Foundation’s priority focus on supporting the implementation of ISSB Sustainability Reporting Standards.
Statements from Key Leaders
Jean-Paul Servais, IOSCO Chair:
"Today marks an important milestone in IOSCO’s objective to establish a global framework for comparable reliable sustainability disclosures for capital markets. The ISSB’s Inaugural Jurisdictional Guide will support jurisdictional journeys towards adoption or use of the Standards."
Mohamed Farid Saleh, IOSCO Growth and Emerging Markets Committee Chair:
"I am delighted to see a number of emerging markets taking clear steps towards adoption or other use of the ISSB Standards. I urge them to complete the efforts to avail the standards in different languages for speed of adoption."
Erkki Liikanen, IFRS Foundation Trustees Chair:
"We look forward to building on our close working relationship with IOSCO to support regulators on their journey to adopt or otherwise use ISSB Standards."
Emmanuel Faber, ISSB Chair:
"Jurisdictions around the world are recognizing the value of the ISSB Standards. Supporting completion of their regulatory processes and engaging with other jurisdictions is our priority in creating the global baseline of high-quality sustainability-related financial disclosures."
The Global Shift Towards ISSB Sustainability Reporting Standards
The adoption of ISSB Sustainability Reporting Standards represents a pivotal change in global sustainability reporting. By aligning with these standards, jurisdictions worldwide are enhancing the consistency and comparability of climate-related and sustainability-related disclosures.
This initiative promotes greater transparency for investors and stakeholders and represents a significant stride towards a unified global approach to sustainability disclosures. The collective effort underscores the importance of addressing climate risks and opportunities within the capital markets.
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