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Key takeaways from newly released ISSB disclosure standards

June 26, 2023

Today the International Sustainability Standards Board (ISSB) released its highly-anticipated disclosure standards which will help shape the future of sustainable finance globally.

“This is a really important initiative to get everyone agreeing on how firms should disclose their emissions and climate plans,” said ISF Research Director Ryan Riordan. “ISF research shows that in Canada, progress is being made, at least among large public firms. But there is still a lot of variety in what’s being reported, the quality of data, and the credibility of net-zero planning. Consistency is coming, but we need to keep pushing ahead on widely accepted standards and mandatory disclosure regulations.”
Next, the Canadian Sustainability Standards Board (CSSB) will review and adapt the standards for the Canadian context and for future adoption by regulators.
ISF has drawn some key takeaways for the S2 Climate-related Disclosures:

  • This is a major step towards the standardization of climate reporting which will help firms meet expectations from shareholders, investors, lenders and regulators for credible emissions reporting and net zero planning. Data comparability and verifiability are emphasized.
  • ISSB is very clear that the Standard applies to both physical and transition climate risks. 
  • S2 states the entity shall disclose absolute gross GHG emissions for Scopes 1, 2, and 3 in accordance with the Greenhouse Gas Protocol standard, unless required otherwise by a jurisdiction or stock exchange where the entity is listed. (To learn more about Scope 1, 2 and 3 reporting see ISF’s primer article by ISF Director of Research, Ryan Riordan and Senior Research Associate, Simon Martin.
  • Regarding Scope 2 (emissions from purchased electricity, steam, heating or cooling): “For the avoidance of doubt, an entity is required to disclose its Scope 2 greenhouse gas emissions using a location-based approach and is required to provide information about contractual instruments only if such instruments exist and information about them informs users’ understanding of an entity’s Scope 2 greenhouse gas emissions.” Previously some firms chose to only report Scope 2 using a market-based approach.
  • For Scope 3, there is a requirement for “… additional information about the entity’s Category 15 greenhouse gas emissions or those associated with its investments (financed emissions), if the entity’s activities include asset management, commercial banking or insurance.”
  • Firms are expected to report on whether and how climate-related considerations are factored into executive remuneration.
  • Regarding target setting: “If an entity has a net greenhouse gas emissions target it is required to also disclose a gross greenhouse gas emissions target,” and there are requirements for reporting metrics and providing explanations for revisions to targets.
  • The Standard asks companies to disclose whether and how they use scenario analysis to inform their identification of climate-related risks and opportunities. (For more on scenario analysis see ISF's primer by Simon Martin.)
  • The Standard says entities shall disclose the extent carbon credits are used to achieve net emissions targets, the type of credits, and whether it is achieved through carbon reduction or removal.