While the ISSB has no intention of deviating from its investor-focused remit, it is in a good position to fully align with EFRAG's ESRS E1 on climate, as well as progressing in its collaboration with the GRI, according to chair Emmanuel Faber.
Faber updated the ISSB Sustainability Consultative Committee on the board work plan and status, summarising responses received from the public consultation.
"There was a very broad support to the idea that cooperation with EFRAG was essential," he said. "We are having very dense discussions with our European colleagues with a view to come as close as possible to an alignment of our climate standards [...] we are obviously going to stick in the remit of our financial materiality, but the substance is intended to be as close as possible and if possible, even fully aligned."
Faber noted that EFRAG was working on simplifying their suite of disclosure requirements on the back of the feedback they had received from their own consultation and that this would help interoperability between the international and European standards in the future.
On the plus side, Faber said the ISSB received positive feedback for its adoption of the TCFD framework in its standards setting, for the "clarity of [its] materiality [focus] on investors and capital markets", as well as the connectivity between the sustainability standards and the financial accounting standards developed by the IASB.
"There has been a lot of positive comments about our agreement with the GRI and the fact that we are very clear on the fact that financial materiality is where we stay because that's where our primary users are," he said. "And they include not only the private sector, but they can include the public sector, the Financial Stability Board and central banks in their ability to see through corporate disclosure granularity on some of the risks that they have the mandate to fight."
There is this recognition that there is a broader set of secondary users, but also the recognition that there is a broader society, he continued, and the agreement with the GRI is a strategic answer to that need for connectivity.
"We are going to gradually develop a suite of solutions with GRI, where ISSB will be the pillar one of materiality on capital markets and economic decisions and GRI would be pillar two as impact, and the sum of that would be full materiality," he explained. "We will seek to avoid any overlap or any gap between our systems so that any company that needs or wants to report on both can use that as a seamless suite of solutions that are readily available."
Conversations with GRI are progressing and something concrete should be made public by the end of the year, Faber said.
Request for improvements were made on detailed points such as wordings, such as the difference between 'material' and 'significant'.
"Also, the word 'enterprise value' that we've been using all along may not remain because we got feedback that this is a word which has a very specific meaning in the European (context)," Faber said. "Because of that narrow and somewhat different meaning in Europe, we felt we would avoid confusion and we are rewording that."
Feedback from stakeholders also asked for "more support in education around Scope 3 with transition periods, grace periods, the use of estimates, safe harbour, and a number of protections that would give users comfort that they can start using it even though no one is yet professional about Scope 3 at this stage".
Climate scenario was another area highlighted as in need for improvement and the ISSB is working on implementation guidance to help companies with the complexity of it.
Faber noted that the standards didn't ask for companies to disclose the result of the scenario but which scenario they chose and why.
