Investors globally have called on companies to voluntarily implement ISSB Standards in order to give them access to useful insights and globally comparable information even in the absence of regulatory requirements to apply ISSB standards. To address this demand by investors, the International Financial Reporting Standards (IFRS) has published a new guide that aims to help companies and investors voluntarily apply ISSB Standards. 

Private equity and credit firms, asset managers, and impact investors may consider using this guide to help streamline the adoption of ISSB standards for their portfolio companies. With more companies implementing ISSB standards, investors will benefit from more transparency and accountability when making investment decisions. 

Let’s explore the key aspects of the new guide released by IFRS in detail.

About IFRS guide to ISSB standards

The guide released by IFRS on September 25, 2024, is named “Voluntarily applying ISSB Standards—A guide for preparers”. It provides a tool for companies, particularly in jurisdictions without regulatory requirements to apply for the ISSB Standards so they can meet investor demand for sustainability reporting aligned with the latest standards. The guide aims to support companies as they begin to apply for IFRS S1 and IFRS S2 voluntarily and also helps to communicate their progress. 

The ISSB Chair Emmanuel Faber said, “Companies around the world already provide investors with sustainability-related information in response to investor demand. However, they use a patchwork of frameworks and standards to do so, leaving investors unable to compare the performance and prospects of companies. With many frameworks and standards now consolidated into the ISSB, the voluntary application guide helps companies navigate from their current reporting practices to applying ISSB Standards, providing a cost-effective route for companies to provide decision-useful, assurable financial information to investors.” 

Key aspects of the new IFRS guide 

• The IFRS guide addresses the critical need for a global baseline of disclosures that concerns climate and other sustainability-related issues and opportunities. 

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  The guide promotes the importance of clear communication regarding the ISSB Standards. Companies that are not able to fully comply should take this as a learning opportunity and report their progress by identifying which requirements they meet and which do not. 

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  The IFRS guide includes references to several industry-specific disclosures that can enhance decision-making for investors to ensure relevance and utility in reporting practices. 
  
  

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  The guide also highlights two key elements of the standards to support implementation for companies: transition reliefs and proportionality mechanisms. The transition reliefs allow a phased approach to requirements that include “climate-first” reporting, the timing of reporting, comparative disclosures, and greenhouse gas emissions disclosure reliefs. The latter ensures that ISSB Standards accommodate the varying capabilities and circumstances of companies. 

• Many big investing corporations, including BlackRock, Capital Group, Vanguard, and Neuberger Berman, are encouraging the application of ISSB Standards through voting guidelines, which is why IFRS released the guide to help companies comply with the Standards.

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  The voluntary application guide is the latest in a series of publications that are designed to support the implementation of IFRS S1 and IFRS S2. 

Next steps

The full range of educational materials is available under the application support of IFRS. In addition, the IFRS Foundation is working with organizations such as CDP to rationalize the disclosure landscape. 

While you’re here…

Private equity and private credit firms should carefully consider the new guidance released by IFRS in their investment strategies and risk assessments to capitalize on opportunities and mitigate potential risks.

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