Following the issuance of the International Sustainability Standards Board (ISSB)’s inaugural standards on the 26th June this year, the implementation and adoption of the standards may prove challenging, according to an expert.
“I think the lack of expertise is the challenge in implementing the standards … Although there is a lot of good work going on in professions and countries individually to try and build capacity and capability, I think we need to be ambitious globally and take a collaborative approach,” Simon Thompson, CEO of the Chartered Banker Institute, told ISFI.
According to Simon, who also authored ‘Green and Sustainable Finance: Principles & Practice’ in 2021, many of the more ambitious decarbonization commitments financial institutions have set are not credible without an equally ambitious approach to upskilling and reskilling the financial professionals who are hoping to deliver on the commitments.
With the issuance of the new standards, which have been underway since the IFRS Foundation’s establishment of the ISSB in 2021 at the 26th UN Conference of the Parties held in Glasgow, the ISSB will establish a Transition Implementation Group to support companies that apply the standards.
The integration of the sustainability standards with the IFRS accounting standards ensure that companies disclose sustainability-related information in the same reporting package alongside their financial statements.
In addition to capacity-building initiatives, the ISSB will also work with jurisdictions hoping to require incremental disclosures to support effective reporting when the standards are applied in combination with other reporting standards.
According to a report from Deloitte, Southeast Asian organizations will need to change how they measure, model and report climate disclosure to meet the new reporting standards.
“Over time, we anticipate that Southeast Asia will continue to align mandatory climate disclosure requirements with major global markets … and that the ISSB standards will become a regulatory requirement,” the report read.
As the newly issued standards are built on and consolidate existing standards including the Task Force on Financial Disclosure recommendations, the ISSB argues that the new standards will help companies to benefit from their investments they have already made in sustainability disclosures.
The newly launched IFRS S1 and IFRS S2 standards will act as a global baseline for sustainability-related disclosures. Focusing exclusively on capital markets, the standards only require organizations to disclose information that are material, proportionate and decision-useful to investors.
The standards were developed on the concepts underpinning the IFRS accounting standards, which are mandatory in over 140 jurisdictions, many of which have considerable Islamic finance activities.