ISSB takes the lead in promoting the disclosure of nature.ISSB is promoting the disclosure of nature.

The International Sustainability Standards Board (ISSB) has suggested that companies use the metrics from the Taskforce on Nature-related Financial Disclosures (TNFD) to help them comply with upcoming requirements on nature-related disclosure. The transition is a component of the board's work on nature-related financial disclosures, the TNFD framework, IFRS sustainability standards, corporate ESG reporting and nature-related risks and opportunities within global sustainability reporting practices.

The IFRS Foundation's ISSB will take the TNFD framework as a reference for the work on its next IFRS Practice Statement on disclosures related to nature. The proposed guidance would enable companies to give more consistent information about the risk of natural issues to their financial position, performance and future prospects.

Development of a Practice Statement (PS) continues.Practice Statement development is ongoing.

Having previously decided that it will not establish a separate mandatory disclosure standard for nature-related disclosures, the ISSB is now working on a new IFRS Practice Statement. The draft guidance is likely to be issued as an exposure draft this year for stakeholders and companies to comment in advance of finalisation.

The board has been working on nature-related reporting requirements since 2023 when it adopted its first sustainability and climate reporting standards, IFRS S1 and S2. IFRS S1 deals with general sustainability disclosures in financial information and IFRS S2 with climate-related disclosures in financial information.

The framework, which is called the TNFD, has been created to assist with reporting alignment.

The ISSB commented that companies could use metrics from the TNFD as one way of meeting elements of the future Practice Statement, provided that they align with the objectives of IFRS S1 and are not inconsistent with the ISSB Standards or the proposed guidance.

This decision is based on the ISSB's efforts to minimize the disparities between different reporting frameworks, which is done by leveraging existing global sustainability reporting frameworks. The aim of TNFD is to support companies and financial institutions to report dependencies, impacts, risks and opportunities on nature.

The guidance needs to be understood by any company that adopts it.Companies that follow the guidance must understand the requirements.

The ISSB also suggested that if companies reported to abide by the Practice Statement, they should also adhere to all of the requirements outlined in the guidance. The board explained that it's designed to help minimize inconsistencies in reporting and variations in the use of the framework.

The companies applying the Practice Statement would also have to apply IFRS S1 and IFRS S2. This would further help to ensure that the disclosures related to nature are included within the context of broader sustainability and climate-related financial information, the ISSB said.

ISSB points to potential future standard-setting opportunities

The proposed approach has the potential to foster a more holistic and comprehensive approach to sustainability disclosures, while also drawing on existing ISSB standards and aligning with the principles of the TNFD framework, which could help mitigate fragmentation in sustainability reporting, ISSB Vice-Chair Sue Lloyd said.

The ISSB believes that it has the potential to help overcome fragmentation in the disclosure landscape by building on the TNFD framework and following on the heels of the IFRS S1 and IFRS S2 proposed Practice Statement, Lloyd said.

The guidance would be available as a Practice Statement, which would allow companies and jurisdictions to roll out the ISSB Standards without significant disruption and maintain the potential for a formal standard to be developed in the future, she added.

A worldwide overview of the sustainability reporting landscape.Global overview of the sustainability reporting landscape.

As businesses, investors and regulators increasingly look to nature-related risks alongside climate-related reporting, the ISSB is moving into this space.Issued alongside climate-related reporting, the ISSB is moving into this space as more and more companies, investors and regulators turn to nature-related risks. The loss of biodiversity, ecosystem changes and resource dependency are increasingly being discussed as potential factors affecting financial decision making.

The proposed Practice Statement will not exist as a ‘mandatory global Practice Statement’ at this stage but jurisdictions that implement regulatory requirements for reporting in accordance with the ISSB may do so using the ISSB guidance.

The ISSB indicated that it would keep working on the final version of the Practice Statement, which will undergo due process, including public consultation. The development will help pave the way for the developing global trend in incorporating nature-related information in corporate sustainability reporting.