Jurisdictional Rationale Guide for ISSB Standards Adoption
The International Sustainability Standards Board (ISSB) releases jurisdictional rationale guide for ISSB standards adoption, aimed at introducing the benefits of applying ISSB standards to jurisdictions.
In 2023, the ISSSB released IFRS S1 and IFRS S2, aimed at establishing global standards for sustainable information disclosure for businesses, ensuring that the benefits of implementing ISSB standards outweigh the costs.
Related Post: Deep Dive on IFRS General Requirements for Disclosure of Sustainability-related Financial Information
Introduction to Jurisdictional Rationale Guide for ISSB Standards Adoption
The ISSB believes that when a jurisdiction considers whether to adopt ISSB standards, it typically involves the following stages:
- Familiar with ISSB standards.
- Assess the necessity and market readiness of adopting ISSB standards.
- Develop a roadmap for the application of ISSB standards.
- Develop sustainable development disclosure requirements in stages to implement the roadmap.
The ISSB believes in Inaugural Jurisdictional Guide for the Adoption of ISSB Standards that the application of ISSB standards depends on the impact of economic, financial, geographical, and institutional factors, and regulatory agencies need to consider the opinions of stakeholders from multiple sectors. The Guide introduces the three most common benefits:
Provide information for investors’ fund allocation
The International Organization of Securities Commissions (IOSCO) believes that global sustainability disclosure standards can promote effective pricing of sustainable risks and opportunities in the market and make more accurate capital allocation decisions. The Financial Stability Board (FSB) believes that high-quality information disclosure can have an impact on pricing and fund allocation. Introducing international standards for sustainable disclosure can improve the reliability and consistency of information, help users of general financial reports assess the sustainable impact on businesses. The application of ISSB standards in jurisdictions can improve market efficiency, reduce funding costs, and enhance participants’ confidence. The application of sustainable disclosure in emerging market economies can also attract more foreign investors.
Improve the cost-effectiveness and efficiency of enterprises
The existing sustainable disclosure policies often use different terminology and have different methods for substantive judgment, which leads to increased disclosure costs for companies and difficulties for investors to use sustainable information. The ISSB standard can simplify regulatory agencies’ formulation and continuous disclosure policies, reducing the compliance burden on enterprises. When consistent reporting mechanisms are adopted across jurisdictions, multinational corporations can establish more efficient and sustainable disclosure processes. The ISSB is providing more educational materials and resources to help businesses improve data collection and information disclosure efficiency.
Assist jurisdictions in obtaining benefits beyond sustainable financial disclosure
The ISSB standards can not only help businesses and users of general financial reports but also improve the sustainable financial architecture of jurisdictions. Jurisdictions can use ISSB standards as a basis to meet information disclosure requirements through appropriate supplements. Jurisdictions can also be used as data collection and analysis tool for climate action and economic transition, improving transparency between businesses and stakeholders, society, economy, and natural environment, and promoting overall sustainable development.
Reference:
Jurisdictional Rationale Guide for the Adoption or Other Use of ISSB Standards
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