Dive Brief:
- The International Sustainability Standards Board released a proposal for corporate nature-related disclosures last week and is seeking feedback on the nonmandatory standard under which companies can disclose how their operations affect biodiversity, among other related risks.
- ISSB, which operates under the International Financial Reporting Standards Foundation, proposed a “practice statement” for companies to issue nature-related disclosures. ISSB said it created the nonmandatory proposal to support standard development but not slow down companies or jurisdictions implementing ISSB standards.
- ISSB announced last year that it would take up the work of the Taskforce on Nature-related Financial Disclosures and issue its own nature-related disclosure proposal, a move TNFD welcomed.
Dive Insight:
ISSB said in a Thursday press release that it drew “extensively” on the work of the TNFD to develop the nature-related disclosure proposal, including in its emphasis on location, engagement with Indigenous peoples, local communities and affected stakeholders. Given its choice to develop a practice statement rather than a full standard, companies or jurisdictions will be able to claim full compliance with the ISSB’s standards with or without complying with the practice statement.
The proposal is designed to capture the metrics and information for companies to share “nature-related risks and opportunities that could reasonably be expected to affect an entity’s cash flows, its access to finance or cost of capital over the short, medium or long term,” according to the exposure draft.
“Whether it is access to water for production, to rivers for transportation or to bees for pollination, companies around the world depend on nature,” ISSB Chair Emmanuel Faber said in the Oct. 22 release. “When a company’s access to these environmental resources is threatened, the company can face risks and opportunities that affect its prospects.”
The proposal walks organizations through the identification of nature-related risks and opportunities, as well as how to disclose their governance, strategies and decision-making, risk management resilience and metrics for handling biodiversity and other related risks.
Among the disclosures are how an organization is responding to nature-related risks and disclosures, including how it plans to meet any related targets it has set or is required to set by law. That includes any current or anticipated changes to the entity’s business model or current and anticipated efforts to mitigate and adapt to a changing availability or affordability of environmental resources, according to the draft.
The decision to go with a nonmandatory standard has already drawn some pushback. On Sunday, a group of 15 financial institutions, organized by the Finance for Biodiversity Foundation, released a statement calling for ISSB to issue a dedicated nature-related disclosure standard, rather than a practice statement.
The initial signatories include Achmea Investment Management, Domini Impact Investments and Tribe Impact Capital. The financial institutions said they “welcome the ISSB’s work but believe a dedicated Nature Standard should remain the ultimate outcome.” The group is seeking additional signatories to its letter until Jan. 15, 2027.
“Without a clear pathway towards a global standard, there is a risk of fragmented disclosure requirements across jurisdictions,” the institutions said in their Oct. 25 statement.
ISSB Vice Chair Sue Lloyd said in the Oct. 22 release that the board chose a nonmandatory route “to balance the need to give markets time to implement the ISSB Standards well, with the demand from investors for information on nature.” Over 36 global jurisdictions have implemented or are implementing climate-related disclosures aligned with or based on ISSB’s IFRS S1 and S2 climate-risk disclosure standards, according to IFRS.
ISSB is seeking feedback on the draft practice statement’s disclosure framework until Feb. 19, 2027.
