Sustainability Disclosure Standards
The UK plans to establish Sustainability Disclosure Standards (SDS) by July 2024 based on the IFRS S1 and IFRS S2 guidelines issued by the ISSB.
The new SDS will regulate companies’ disclosure of sustainability-related risks and opportunities and constitute a regulatory policy. The SDS will also prioritize climate change in IFRS S2. The SDS will serve as a tool for the government and the Financial Conduct Authority (FCA). Based on IFRS S1, the new standards will make sustainability information disclosure globally comparable and help investors compare companies’ sustainability status in order to make efficient investment decisions.
ISSB Two Sustainability Guidelines
The International Sustainability Standards Board (ISSB) released IFRS S1 (General Requirements for Disclosure of Sustainability-related Financial Information) and IFRS S2 (Climate-related Disclosures) in June this year. The ISSB plans to provide regulators worldwide with a common sustainability information framework.
IFRS S1 requires companies to provide sustainability-related financial information disclosure from the four perspectives of governance, strategy, risk management, and metrics. It is applicable to profit-oriented entities, and the required disclosures are material information. IFRS S2 makes climate change a priority, designing a disclosure framework. The ISSB will also continue to issue sustainable disclosure frameworks in areas such as supply chain, biodiversity, and labor.
UK’s Futures Actions for ISSB Guidelines
In the Green Finance Strategy, UK plans to conduct an assessment of IFRS S1 and IFRS S2 in order to draw conclusions on whether the two standards are applicable. To help with the assessment, the UK established the Sustainability Technology Advisory Committee and the Sustainability Disclosure Policy and Implementation Committee.
The Sustainability Disclosure Technical Advisory Committee (TAC) will assess the IFRS standards from a technical perspective. Sustainability Disclosure Policy and Implementation Committee (PIC) will formulate and implement SDS according to the opinions of TAC.