The ISSB’s IFRS standards for climate-related disclosures continue to grow in popularity as more jurisdictions transpose them into law. At the same time, divergent schemes in the US and EU are faltering. Both the US and the EU created bespoke legislation rather than adopt ISSB Standards. In the US, there were the SEC’s Climate-related Disclosure Rules. In the EU, we saw the creation of the Corporate Sustainability Reporting Directive (CSRD). The SEC’s rules are in legal limbo with a near certainty of defeat or retraction, and the EU rules are being actively reworked through the omnibus negotiations. In light of this, the ISSB’s framework offers stability. S&P Global recently published an ISSB adoption update:
“Since the ISSB issued its first two global sustainability standards in June 2023, jurisdictions around the world have stated their intention to adopt the standards or align reporting frameworks with them. Adoption of the standards is gaining traction: As of Dec. 31, 2024, 13 jurisdictions have adopted the standards on a voluntary or mandatory basis with reporting starting as of Jan. 1, 2024, or Jan. 1, 2025, and 22 other jurisdictions are planning to adopt them in the future.”
The US and EU may ultimately align with ISSB standards. While US federal rulemaking on climate-related disclosures isn’t likely, California has adopted several climate disclosure laws (here, here and here). This includes a law that requires the disclosure of Scope 1, 2, and 3 emissions. The California Air Resources Board (CARB) is currently working on disclosure standards for this law, and they may come out looking very similar to IFRS S2. In the EU, reports are surfacing that double materiality may be on the chopping block. If the CSRD ditches double materiality and shifts to a financial materiality lens, then that will bring the EU’s reporting requirements much closer to ISSB standards as well. The main upside to the ISSB consolidating its position as the global climate disclosure standard is that it reduces effort required to comply with a patchwork of different regulations and standards. At the same time, ISSB dominance could make it more difficult for countries looking to push more aggressive reporting requirements.
Our members can learn more about climate disclosure standards here.
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