ISSB S1 and S2: Global Sustainability Disclosure Standards
What Are the ISSB Standards and Why Do They Matter?
The International Sustainability Standards Board (ISSB), established by the IFRS Foundation in 2021, has issued two sustainability disclosure standards — IFRS S1 (General Requirements) and IFRS S2 (Climate-Related Disclosures) — that represent the first globally comprehensive baseline for investor-focused sustainability reporting. Building directly on the TCFD framework and consolidating the CDSB, SASB, and VRF frameworks that preceded it, the ISSB's standards are designed to provide the global equivalent of what IFRS does for financial accounting: a common language enabling cross-market comparison of corporate sustainability performance. Multiple jurisdictions — including Australia, Canada, the UK, Japan, Singapore, Brazil, and others — are adopting ISSB-aligned requirements, creating genuine momentum toward a global sustainability disclosure baseline for the first time.
ISSB S1 and S2 are global sustainability disclosure standards developed by the IFRS Foundation's International Sustainability Standards Board, requiring companies to disclose material sustainability-related risks and opportunities (S1) and climate-related information (S2) — providing a globally comparable, investor-focused disclosure baseline being adopted by regulators across multiple jurisdictions.
Key Takeaways
- ISSB uses single materiality — only information material to investors (affecting enterprise value) is required — distinguishing it from CSRD's double materiality (financial + impact reporting).
- ISSB S2 requires Scope 1, 2, and 3 GHG emissions disclosure (Scope 3 where material), climate scenario analysis using quantitative scenarios, and a transition plan.
- ISSB standards are built on the TCFD framework's four pillars (governance, strategy, risk management, metrics and targets) — making TCFD-prepared companies well-positioned for ISSB compliance.
- Jurisdictions adopting ISSB include Australia (AASB ASRS 1/2), Canada (CSSB), UK (SUSR), Japan (SSBJ), Singapore (ASC), Brazil (CVM), South Africa — creating a growing global adoption coalition.
- The ISSB and CSRD issued interoperability guidance (2023) enabling companies reporting under both frameworks to avoid unnecessary duplication — but differences in materiality scope remain.
ISSB Foundation and Context
Formation: The ISSB was announced at COP26 in Glasgow (November 2021) by the IFRS Foundation — the organization that oversees IFRS financial accounting standards. The ISSB consolidated three prior sustainability reporting bodies: the Climate Disclosure Standards Board (CDSB), the Sustainability Accounting Standards Board (SASB), and the Value Reporting Foundation (VRF).
Mandate: Develop a global baseline of sustainability disclosure standards focused on the needs of investors — providing information about sustainability-related risks and opportunities that affect enterprise value.
Independence from IASB: The ISSB operates independently from the International Accounting Standards Board (IASB) that develops IFRS financial accounting standards — though the ISSB benefits from IFRS Foundation's existing institutional infrastructure and jurisdiction relationships.
IFRS S1: General Requirements
Purpose: Provides the overarching framework for sustainability-related financial information — applicable to all sustainability topics, not just climate.
Core requirement: Companies must disclose material information about sustainability-related risks and opportunities that could reasonably be expected to affect the entity's cash flows, access to finance, or cost of capital in the short, medium, or long term.
Four-pillar structure (from TCFD):
- Governance: How the board and management oversee sustainability risks and opportunities
- Strategy: How sustainability risks and opportunities affect the company's strategy, business model, and financial planning
- Risk Management: Processes for identifying, assessing, and managing sustainability risks
- Metrics and Targets: Quantitative metrics and targets for material sustainability topics
Connected reporting: S1 requires companies to connect sustainability disclosures to financial statements — explaining how sustainability risks affect specific financial statement line items.
Industry-based requirements: S1 incorporates SASB industry standards as guidance for identifying industry-specific material sustainability topics. This provides the first global integration of SASB's sector-specific materiality guidance into a regulatory framework.
IFRS S2: Climate-Related Disclosures
Scope: Climate-specific standard applying the S1 four-pillar framework to climate change — covering both climate risks (physical and transition) and climate opportunities.
Governance disclosures: Board oversight of climate-related risks and opportunities; management processes for identifying and managing climate-related matters.
Strategy disclosures: Climate-related risks and opportunities and their impact on business model and strategy in short, medium, and long term; assessment of climate resilience.
Scenario analysis requirement: Companies must use climate scenario analysis to assess climate resilience — including at least one scenario consistent with the Paris Agreement 1.5°C goal. Quantitative scenarios are preferred; qualitative-only is permitted in early years for some companies.
Risk management: Integration of climate risk into overall enterprise risk management framework.
Metrics and targets:
- GHG emissions: Scope 1, 2, and 3 (where material) in CO2e
- Industry-based climate metrics (from SASB)
- Climate-related transition risk metrics
- Climate-related physical risk metrics
- Capital deployment aligned to climate opportunities
Scope 3 requirements: S2 requires Scope 3 emissions disclosure where material — with explicit carve-outs for early adopters in the first years. All Scope 3 categories must eventually be disclosed where material, using GHG Protocol Corporate Value Chain (Scope 3) Standard.
ISSB vs. CSRD: Key Comparison
| Dimension | ISSB S1/S2 | CSRD/ESRS |
|---|---|---|
| Materiality | Single (investor-focused) | Double (financial + impact) |
| Governance | Voluntary adoption by regulators | Mandatory for EU companies |
| Non-climate topics | All material sustainability | Full ESG range (E, S, G standards) |
| Scope 3 | Where material, all categories | Required in ESRS E1 |
| Biodiversity | Not yet a standalone standard | ESRS E4 (biodiversity) |
| Assurance | No mandatory assurance requirement | Mandatory limited→reasonable assurance |
| SMEs | No separate SME standard yet | Simplified ESRS for listed SMEs |
Interoperability: The ISSB and EFRAG (CSRD standards setter) published interoperability guidance (June 2023) allowing companies to report against both frameworks with minimal duplication for overlapping requirements. Companies must still meet the additional CSRD requirements (impact materiality, additional topics) beyond what ISSB requires.
Jurisdiction Adoption
Australia: AASB (Australian Accounting Standards Board) issued ASRS 1 and ASRS 2, mandatory for large listed companies from FY2025 (phased).
Canada: CSSB (Canadian Sustainability Standards Board) issued CSDS 1 and CSDS 2 aligned with ISSB; adoption by Canadian Securities Administrators expected.
United Kingdom: SUSR (Sustainability Reporting Standard for UK) aligns with ISSB. FCA implementation for UK listed companies under development.
Japan: SSBJ (Sustainability Standards Board of Japan) issued JSDS 1 and JSDS 2 aligned with ISSB; phased mandatory adoption for prime-listed companies from FY2027.
Singapore: ASC (Accounting Standards Council) issued Singapore FRS S1 and S2; mandatory for prime SGX-listed companies from FY2025.
Brazil: CVM (Brazilian Securities Commission) adopted ISSB standards; mandatory for listed companies.
South Africa: JSE and IRBA implementing ISSB-aligned requirements.
India: SEBI issued Business Responsibility and Sustainability Reporting (BRSR) which is India's own standard; ISSB interoperability being assessed.
What ISSB Means for Investors
Improved data comparability: As ISSB adoption grows, investors will be able to compare climate and sustainability disclosures across Australian, Japanese, UK, Canadian, and other companies using a common framework — the most significant improvement in cross-market sustainability data comparability since TCFD recommendations (2017).
Scope 3 disclosure expansion: ISSB S2's Scope 3 requirement — being adopted by regulators across ISSB-aligned jurisdictions — will substantially expand available Scope 3 data for investment analysis, engagement, and portfolio carbon footprinting.
Transition plan expectations: S2's transition plan requirement provides an investor engagement anchor — companies without credible Paris-aligned transition plans are not meeting ISSB disclosure expectations in jurisdictions where S2 is mandatory.
TCFD consolidation: For companies that have prepared TCFD disclosures, ISSB S2 is a natural evolution requiring incremental additions (quantitative scenarios, Scope 3, enhanced transition plan). The TCFD framework is officially consolidated into ISSB.
Common Mistakes
Treating ISSB adoption as global universal standard. ISSB adoption varies significantly by jurisdiction — US has not adopted ISSB; EU uses CSRD/ESRS not ISSB as the primary framework. "Global baseline" means growing multi-jurisdiction adoption, not universal requirement.
Assuming ISSB compliance satisfies CSRD requirements. ISSB S1/S2 are a subset of CSRD/ESRS requirements. ISSB covers investor-material sustainability and climate; CSRD covers these plus impact materiality, biodiversity, pollution, workforce, communities, and governance topics. ISSB-compliant companies must add significant additional disclosure for CSRD compliance.
Conflating TCFD with ISSB. TCFD issued recommendations (voluntary); ISSB issued standards (regulatory baseline). ISSB S2 builds on TCFD but adds mandatory quantitative scenario requirements, Scope 3 emissions, and transition plan disclosure that go beyond TCFD recommendations.
Related Concepts
Summary
ISSB S1 (General Requirements) and S2 (Climate) provide the first globally comparable, investor-focused sustainability disclosure baseline — building on TCFD's four-pillar framework and consolidating prior voluntary standards (CDSB, SASB, VRF). ISSB uses single materiality (investor-relevant information only), distinguishing it from CSRD's double materiality. S2 requires Scope 1, 2, and material Scope 3 GHG emissions, quantitative climate scenario analysis, and transition plan disclosure. Adoption is growing — Australia (FY2025), Japan (FY2027), Singapore (FY2025), UK, Canada, Brazil, and others — with EU using CSRD/ESRS as its primary framework but with ISSB-CSRD interoperability guidance reducing duplication. For investors, ISSB adoption will substantially improve cross-market sustainability data comparability and Scope 3 data availability — the most significant improvement in investor ESG data since the proliferation of ESG ratings providers.