The ISSB (International Sustainability Standards Board) was established by the IFRS Foundation at COP26 in 2021. In June 2023, the ISSB issued IFRS S1 (general requirements for disclosure of sustainability-related financial information) and IFRS S2 (climate-related disclosures), effective for reporting periods beginning on or after 1 January 2024 in jurisdictions that adopt them.
Key takeaways
- The ISSB serves investors: it focuses on sustainability-related risks and opportunities that affect a company's financial prospects.
- IFRS S2 builds on the four TCFD pillars: governance, strategy, risk management, and metrics and targets.
- GRI (outward impacts) and the ISSB (financial effects) complement rather than replace each other.
What do IFRS S1 and IFRS S2 require?
IFRS S1 — General requirements
Companies disclose material information about all sustainability-related risks and opportunities that could reasonably be expected to affect their cash flows, access to finance or cost of capital over the short, medium and long term. The information is presented alongside the financial statements.
IFRS S2 — Climate
It requires disclosure of physical and transition risks, scenario analysis, greenhouse gas emissions across Scopes 1, 2 and 3, climate targets and transition plans. The standard includes certain transitional reliefs for the first year of application.
How does the ISSB differ from GRI?
| ISSB (IFRS S1, S2) | GRI | |
|---|---|---|
| Primary users | Investors, lenders | All stakeholders |
| Materiality perspective | Financial materiality | Impact materiality |
| Where disclosed | Alongside the financial statements | Sustainability report or integrated report |
Combining the two perspectives is what is known as double materiality.
The Vietnamese context
Circular 96/2020/TT-BTC guiding information disclosure on the securities market already requires public companies to disclose environmental and social information in their annual reports. Foreign investors and international banks increasingly refer to the ISSB, so early preparation puts listed companies on the front foot.
A five-step preparation roadmap
- Carry out a gap assessment against IFRS S1 and S2.
- Establish governance: the role of the Board and the Executive Board in overseeing climate risk (see the role of the Board).
- Identify risks and opportunities and conduct scenario analysis (see climate risk management).
- Build the data: a greenhouse gas inventory, connected to the financial systems.
- Independent assurance: prepare for limited assurance and work towards reasonable assurance; the IAASB has issued the ISSA 5000 assurance standard.
Frequently asked questions
Are Vietnamese businesses required to apply the ISSB standards?
Mandatory application depends on decisions by each country's regulators; businesses should follow guidance from the Ministry of Finance and the State Securities Commission.
If we already report under GRI, do we still need the ISSB?
You may, as the two sets of standards serve different audiences; GRI and the IFRS Foundation have published interoperability guidance to reduce duplication.
Is TCFD still used?
The TCFD content has been integrated into IFRS S2; companies already reporting under TCFD have a good foundation for moving to the ISSB.
VietESG — Independent ESG rating organisation. Ratings based on disclosed data, supporting evidence and a public methodology aligned with GRI and the SDGs.
