Impending Sustainability Disclosures: Impact on Financial Statements

Impending Sustainability Disclosures: Impact on Financial Statements

 

In 2021 the ‘International Sustainability Standards Board (ISSB) (1) was developed to help ensure that requisite information is available within financial statements to inform investors on their decision-making. 

The new standards for disclosure proposed at the International Financial Reporting Standards (IFRS) Sustainability Symposium (2) represent the latest step in the continual progression of Environmental, Social and Governance (ESG) requirements.

These disclosure standards will take effect in January 2024.

 

What do these new requirements mean for me?

 

It has been clear for some time that companies are under increasing pressure to report on an ever-growing list of ESG related topics, and new standards are being created every year. The most recent requirements which have been proposed relate to the following matters:

  • Further details will be required on measures to reduce energy consumption and methods by which greenhouse gas emissions will be reduced.
  • Companies will report on actions used to promote social wellbeing.
  • Disclosure of material information on sustainability-related risks and opportunities.

    These disclosures will help to increase transparency into the benefits and drawbacks associated with investment in a company, hold the company accountable to their ESG commitments, and ultimately aid in the cost-benefit analyses and valuations given by investors. Studies conducted by Evora Global in 2021 (3) show that only 14 percent of institutional investors believe that companies provide investment-grade ESG data, despite 92 percent believing that ESG data is a material consideration. The above regulations will help to increase visibility into this data.

     

    How can I prepare for the upcoming regulations?

    ‘You can’t effectively manage what you don’t already measure’. In relation to the ISSB disclosure standards, this has never been more true.

    As companies are required to report on their ESG commitments, gathering data around ESG related topics will become more and more imperative.

     

    Whether this is

    Whether this is in relation to Social aspects such as charitable donations, or for Environmental considerations such as energy consumption or greenhouse gas emissions. The only way to provide costed, actionable steps to improve ESG performance is to collect data.

    At IBG, we are here to help you on this journey. We collect investment grade Environmental data and provide the backbone on which further sustainability decisions can be made. Get in touch today to discuss how IBG can help support your business and help you prepare for the upcoming regulation changes.

     
    References:

     

    1. ISSB – (https://www.ifrs.org/groups/international-sustainability-standards-board/)
    2. IFRS Symposium – (https://www.ifrs.org/news-and-events/events/2023/february/ifrs-sustainabilitysymposium)
    3. Evora Global Survey – (https://evoraglobal.com/wp-content/uploads/2021/12/ESG-Data-ChallengeInvestor-Survey-Part-2.pdf)
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