Financial Disclosures Through the ISSB 

Financial Disclosures Through the ISSB 

– By Shea Karssing

January 9, 2024

Climate-Related Reporting and the International Sustainability Standards Board  

The International Sustainability Standards Board (ISSB) is an organisation that carries the mantle when it comes to sustainability-related reporting. Companies around the world continue to work out the impact of climate change on business and economies.  

To build resilience and flexibility around climate change considerations, the ISSB is tasked with standardising and consolidating sustainability disclosure standards and encouraging their uptake in jurisdictions around the world. In doing so, it is guided by market considerations – intent on providing cost-effective guidance for reporting on meaningful metrics for decision-making. 

In this blog, we examine the ISSB and climate-related financial disclosures – and see how smart technologies like those from Smarter Technologies Group are simplifying the process. 

A summary of why sustainability disclosure standards and reporting are important 

Beyond environmental considerations, climate change raises myriad economic concerns. Companies face unparalleled pressures from government regulation, investors, and consumers to proactively respond to climate change. This means the risks and opportunities posed by climate change have become woven into the fabric of corporate risk management, strategic decision-making, and long-term resilience.   

As such, sustainability factors have become a salient consideration in investment decision-making. The patchwork application of voluntary climate-related disclosures makes for complicated reporting and burgeoning risk for investors. 

What is the ISSB? 

The ISSB was established by the International Financial Reporting Standards (IFRS) Foundation at COP26 in 2021. It was established in direct response to a demand for global sustainability standards. It works alongside other global initiatives. In 2024, it will take over the responsibilities of the Task Force on Financial Related Disclosures (TCFD). The ISSB standards incorporate the widely-recognised TCFD recommendations, which will be applied and evolved by the ISSB into the future. 

What is the role of the International Sustainability Standards Board? 

The work done by the ISSB and related bodies seeks to guide the provision of high-quality, standardised climate-related information for investors. The ISSB aims for uniformity of information for interoperability across jurisdictions for sustainability-related information for global capital markets. It also empowers businesses themselves to monitor risks and opportunities and respond in meaningful ways.  

What are the ISSB reporting standards? 

The ISSB reporting standards allow for a uniform system of reporting around climate-related risks and opportunities for informed investment decisions – aptly dubbed ‘a common language’ on sustainability-related reporting. In June 2023, it issued IFRS S1 and S2. These standards incorporate the TCFD recommendations and empower companies on how to communicate and report on climate-related risks and opportunities, as well as climate-related financial disclosures. Specific disclosures are covered in the second set of standards. 

IFRS S1 and S2 require an entity to make disclosures around: 

  • Governance related to monitor and manage sustainability risks and opportunities.  
  • Strategy for sustainability management. 
  • The processes used to identify, assess, prioritise, and monitor sustainability-related risks and opportunities. 
  • Targets and performance. 

The standards also focus on climate-related physical and transition risks and opportunities. They also apply to climate-related impact in the short, medium, and long term. 

Risks are divided into transitional risks and physical risks. Transition risks are the anticipated risks of moving over to low-carbon economies. This includes climate-related compliance requirements and penalties, the shift to new technologies, public and market pressures, and reputational damage from inaction or greenwashing. Physical risks include the threat and damage caused by climate-related events like rising sea levels, floods, hurricanes, etc. 

Climate-related opportunities include optimising resource efficiency, making the move to renewable and low-emission energy sources, green products, green markets, and building resilience in response to climate-related risks. 

Which countries are adopting the ISSB standards? 

The UK, Australia, Japan, Singapore, Hong Kong, Canada, New Zealand, Nigeria, and Malaysia are some of the nations that have expressed interest in adopting the ISSB standards. With multiple voluntary and mandatory reporting standards around the world today, the ISSB standards have the potential to standardise and simplify reporting – with benefits for investors and businesses. 

How does smart technology simplify climate-related financial disclosures? 

Simpler processes around ESG and sustainability-related financial disclosures are more likely to foster adoption. Technology will undoubtedly play a central role in simplifying, streamlining, and standardising monitoring and reporting around climate-related risks and opportunities. Additionally, there are benefits to big data that correlate directly to the risks and opportunities outlined above. 

Real-time data monitoring and long-term analytics 

IoT smart technologies improve the efficiency and accuracy around ESG and climate-related data. Reliably collecting meaningful real-time data provides intelligent insights into every element of a building or business’s operations. This data is analysed to identify climate-related risks and opportunities and report on these in a standardised way over time.  

Smart utilities and building monitoring technologies are a cost-effective way to collect data, analyse, and report on data. There is also capacity for automated reporting and real-time alerts that empower action.  

Benchmarking and performance 

The insights from a building’s real-time data are powerful resources for adaptation planning and physical risk assessments. The data collected using smart technologies can be used to identify risks and opportunities and to develop a roadmap for responsiveness. Additionally, they can be used as a standardised data pool to guide implementation, measure progress around strategies, and ensure precision reporting.  

This roadmap can include changes that need to be made around low-carbon technological infrastructure. There is also scope to get granular around resource utilisation and plot the course for efficiencies – turning risks into opportunities.  

In making the move to alternative energy sources, the data collected around operations is useful in guiding the process for gradual but effective change. This reduces the chance of business disruptions and ensures sustainability of solutions going forward. 

Big data endows business leaders with a true understanding of their operations. This data also gives flexibility for enhanced resilience in navigating climate realities and regulations into the future. 

Smart compliance 

The data around compliance metrics provide the basis for accurate, detailed, consistent monitoring around compliance metrics and reporting. These data insights can be adapted to benchmark and meet the needs of changing regulations and compliance reporting over time for true flexibility.  

In many respects, there is potential for reduced manual processes (and time and administrative costs) and high-level accuracy. This, in turn, mitigates risks around policy changes and legal and reputational consequences of non-compliance.  

Additionally, policy changes often reflect public sentiment. There is a real likelihood that meeting statutory requirements will allay market and public pressures around climate considerations. 

IoT as evidence of good governance and transparency 

The adoption of digital technologies are powerful tools for change. The data collected by these solutions aid transparency and accountability around climate-related issues. This data can be used as evidence of demonstrable changes to support operational decisions, reporting over time, and to avoid greenwashing claims through real evidence. 

Use smart solutions for climate-related insights and reporting 

Contact Smarter Technologies Group today to discuss our secure, smart technology solutions. Simplify monitoring and reporting to meet ISSB standards and other climate-related disclosures.

Contact us today to see how Orion™ The Real-Time Data Network can benefit your business.

Our experts are on-hand to advise you on the most efficient and cost-effective smart technology solutions for your business’ needs.

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