ISSB publishes first nature-related disclosure draft as non-mandatory practice statement

The International Sustainability Standards Board published the first exposure draft of its proposed nature-related disclosure requirements on October 22, using the non-mandatory IFRS Practice Statement format it settled on in April.

The ISSB said its consultation will ask for feedback on the draft's content and also on whether nature-related content should be issued in another form, including a standalone mandatory standard. Companies would not have to comply with the Practice Statement to state that they comply with the ISSB's standards. The ISSB said it chose the format to limit disruption for companies applying IFRS S1 and IFRS S2 for the first time.

The ISSB said in the announcement: "What we're proposing is to balance the need to give markets time to implement the ISSB Standards well, with the demand from investors for information on nature."

Practice Statements are not standards, but they go through the same due process, including public consultation, the ISSB said. The ISSB also noted that jurisdictions can make the Practice Statement's content mandatory if they choose to apply it.

IFRS S1, released in June 2023 alongside the climate standard IFRS S2, already requires companies to disclose material sustainability-related risks and opportunities, including those related to nature, that could reasonably be expected to affect their prospects. It does not contain requirements specific to nature. The proposals are designed to complement S1 and S2 by specifying how companies provide comparable, decision-useful nature disclosures to investors, according to the ISSB.

The Taskforce on Nature-related Financial Disclosures said in October that it had counted 836 adopters of its nature reporting recommendations. Committed financial institutions among them represent more than $26 trillion in assets under management, as this publication reported.

The UK's Financial Conduct Authority has extended comply-or-explain to ISSB-aligned standards for accounting periods starting January 1, 2027, with initial reports due in 2028. The ISSB cites this implementation cycle in explaining why it did not draft a mandatory nature standard now.