IFRS Foundation – ISSB (International Sustainability Standards Board)
- Countries: Global (endorsed by G7, G20, IOSCO, used in 140+ jurisdictions)
- Function: Sets baseline sustainability disclosure standards (IFRS S1 & S2) focused on financial materiality and investor needs
The IFRS Foundation, historically responsible for setting international accounting standards through the International Accounting Standards Board (IASB), expanded its mandate in response to the systemic inadequacy of financial reporting to capture sustainability-related risks and opportunities. In 2021, the Foundation launched the International Sustainability Standards Board (ISSB) to develop a comprehensive, globally consistent framework for sustainability disclosure aligned with financial materiality principles.
The ISSB’s purpose is to establish a unified baseline for sustainability-related financial disclosures, enabling comparability, reliability, and relevance across jurisdictions and industries. It aims to integrate sustainability factors into traditional capital market disclosures to support informed decision-making by investors, creditors, and other providers of capital. Unlike purely voluntary ESG frameworks, ISSB standards are designed to complement mandatory financial reporting under IFRS Accounting Standards and converge with existing regulatory initiatives.
Key innovations of the ISSB include the development of two inaugural standards:
- IFRS S1: General Requirements for Disclosure of Sustainability-Related Financial Information, providing a framework for integrating sustainability factors into general-purpose financial reporting.
- IFRS S2: Climate-Related Disclosures, building directly on the TCFD recommendations, requiring entities to disclose governance, strategy, risk management, and metrics related to climate risks and opportunities.
The ISSB emphasizes financial materiality, focusing disclosures on sustainability factors reasonably expected to influence enterprise value over the short, medium, or long term. (This contrasts with double materiality models like those used in the European Union’s CSRD, although efforts are ongoing to ensure interoperability between systems).
The IFRS Foundation’s governance structure, involving the Monitoring Board, Trustees, and the new Sustainability Consultative Committee, is designed to maintain public accountability and ensure responsiveness to evolving sustainability risks and investor needs.
The ISSB consolidates legacy frameworks, including the Value Reporting Foundation (formerly SASB and IIRC) and aspects of the Climate Disclosure Standards Board (CDSB), creating a more streamlined disclosure landscape.
The ISSB’s standards have been formally endorsed by global regulatory coalitions such as the G7, G20, and IOSCO, and adoption is underway across a wide range of jurisdictions, including major economies in Asia, Europe, and the Americas. This positions the ISSB as the “de facto” global baseline for sustainability-related financial disclosure, upon which national regulators may build with jurisdiction-specific additions such as double materiality or sectoral specificity.
The establishment of the ISSB represents a structural evolution in capital market regulation, redefining the boundaries of fiduciary duty by embedding sustainability into the financial reporting architecture. It is a critical mechanism for enhancing the efficiency, resilience, and accountability of global financial systems during the ongoing transition toward a low-carbon, socially inclusive economy.