ISSB Request for Information

Context and background

The ISSB published an RfI Consultation Agenda Priorities on 4 May 2023 and requested comments by 1 September 2023. The UK does not yet have an endorsement framework in place for the adoption of ISSB Sustainability Disclosure Standards. Until that framework is in place, the UK Government, has asked the UKEB, the Financial Conduct Authority (FCA) and the Financial Reporting Council (FRC) to engage with the International Sustainability Standards Board (ISSB) and to respond to their consultations, according to their respective regulatory objectives and functions. This request was publicly announced in Lord Callanan’s letter to the ISSB regarding their exposure drafts of IFRS S1 and IFRS S2.

The UKEB is carrying out research to consider the overlap or impact of the proposed ISSB IFRS Sustainability Disclosure Standards with IFRS Accounting Standards. This research will inform its response to the RfI, especially as it relates to “connectivity” between the two sets of standards and the information that is produced as a result of their use.

The ISSB is seeking stakeholder views on:

• The strategic direction and balance of the ISSB’s activities
• The suitability of criteria for assessing which matters to prioritise and add to the ISSB’s work plan.
• New research and standard-setting projects that could be added to the ISSB’s work plan

The UKEB response will focus primarily on the first two areas, along with the appropriateness and scope of a possible project on integration in reporting.

Overlap with IASB Climate-related Risks in the Financial Statements project

In March 2023, the IASB activated a narrow-scope maintenance project ‘Climate-related Risks in the Financial Statements’. This project is to ‘explore whether and how financial statements can better communicate information about climate-related risks’. The IASB notes that it will consider the work of the ISSB in the project scope, to the extent that it applies to the financial statements.

As the UKEB remit covers connectivity between the two international Boards it is appropriate that some of the work undertaken as part of this project will also be used by the UKEB to consider its influencing work on the IASB’s Climate-related Risks in the Financial Statements project.

Project outreach completed

In preparation for the ISSB RfI project on integration in reporting the following activities have already been undertaken during 2023:

• Board discussions of preparatory papers on connectivity themes;
• UKEB Advisory and Working Group discussions on preparatory papers;
• Engagement with IFRS Foundation staff on their project direction;
• Engagement with UK Stakeholders on the connectivity themes identified so
• far; and
• Engagement with other National Standard Setters and other international stakeholders.

Final Comment Letter

The UKEB published a final comment letter on 11 August, 2023 – attached below.

The UKEB is very supportive of the ISSB’s objective to develop standards – in the public interest – that will result in a high quality, comprehensive baseline of sustainability disclosures focused on the needs of investors and the financial markets.

While the UKEB supports the ISSB and its objectives it also believes that the next two-year period will be crucial to establishing the credibility and success of the ISSB global baseline.

The UKEB recommends that the ISSB focuses on consolidation. This requires ensuring smooth adoption and implementation of IFRS S1 and S2 and working with the IASB to deliver standards and guidance that produce connected information.

Sustainability and financial reporting must provide investors with high-quality, comparable, and decision-useful information. Without this consolidation investors will not get the clear understanding of the impact of sustainability on the financial statements that they have told us that they are seeking.

NSS Sustainability Forum Joint Letter

The individual members of the National Standard-Setters (NSS) Sustainability Forum, which is chaired by the UKEB, each responded to the ISSB’s Agenda Consultation.

In addition, the Forum’s members sent a joint letter to the ISSB to highlight their common concerns. The letter noted three key areas for the ISSB to consider:

• Connectivity with accounting standards – all considered that close alignment and connectivity between financial and sustainability reporting is paramount to ensure that the information produced for investors is compatible and comparable.
• Strategic roadmap – communicating the ISSB’s long-term objectives and clarifying how these relate to the IASB’s roadmap was a critical next step.
• Implementation priority – the highest priority of the ISSB should be the successful implementation of the inaugural standards.