The IFRS Foundation’s International Sustainability Standards Board (ISSB) has proposed allowing companies to use Taskforce on Nature-related Financial Disclosures (TNFD) disclosure metrics to help meet nature-related disclosure requirements, and confirmed that it will draw on the TNFD framework in developing its upcoming draft Practice Statement for nature-related disclosures.
The update comes as the ISSB is in the process of developing a new IFRS Practice Statement to enable companies on providing standardized disclosures on nature-related risks and opportunities, with plans to publish the initial exposure draft later this year.
The ISSB announced last year that it will begin work on standard setting for disclosure requirements on nature-related risks and opportunities, following its release in 2023 of its inaugural general sustainability (IFRS S1) and climate (IFRS S2) reporting standards.
Rather than developing a mandatory standalone standard, however, the ISSB announced in April that had decided to proceed with the development of proposed nature-related reporting requirements in the form of an IFRS Practice Statement. While non-mandatory by design, IFRS Practice Statements are a form of standard setting, sharing similarities including being subject to full due process, including public consultation.
At the time, the ISSB explained that it had elected to use the Practice Statement format in order to minimize disruption for companies currently implementing its existing standards. The ISSB also pointed out that the standards in the Practice Statement can become mandatory by jurisdictions that choose to apply it.
In its new update, the ISSB outlined a series of proposals agreed to by the board in its June meeting, including, allowing companies to use TNFD disclosure metrics to help meet nature-related disclosure requirements, provided they support the objective of IFRS S1 and don’t conflict with ISSB Standards or the Practice Statement.
The ISSB also said that it has proposed a requirement for companies that wish to assert compliance with the Practice Statement to comply with all of the statement’s requirements, in order to reduce diversity and fragmentation of reporting. In addition, companies applying the Practice Statement would also need to apply IFRS S1 and IFRS S2.
ISSB Vice-Chair Sue Lloyd said:
“The ISSB sees a real opportunity to address fragmentation in the disclosure landscape through the proposed Practice Statement by drawing on the TNFD framework and building on IFRS S1 and IFRS S2.
“Proposing a Practice Statement enables us to do this without disrupting implementation and adoption of ISSB Standards around the world. However, by developing these proposals in the form of a Practice Statement, we are leaving the door open for a Standard in the future.”
