As a Director of an Investor Relations and ESG advisory firm, I’m constantly seeking ways to help our clients communicate effectively with their investors. Integrated Annual Reports, amongst others, are a key channel for lucid investor communication. One of the most significant developments in recent years has been the emergence of the International Sustainability Standards Board 1 (ISSB) and its standards for sustainability-related financial disclosures. A recently published document by the ISSB to aid stakeholders in understanding IFRS Sustainability Disclosure Standards, prompted me to write this insight – simplifying and streamlining our understanding of what’s being said.

The International Sustainability Standards Board (ISSB) develops global standards for sustainability-related financial disclosures, providing a consistent framework to address sustainability risks and opportunities. It focuses on materiality, aligning sustainability reporting with financial statements to support investor decision-making. Established by the IFRS Foundation, ISSB aims to enhance comparability and reliability in sustainability disclosures worldwide.

A cornerstone of these standards is the concept of materiality, which dictates what information companies consider ‘relevant’ – and so must disclose about their sustainability-related risks and opportunities. This post explores how ISSB materiality standards are reshaping the landscape of sustainability disclosures and what this means for companies and investors.

Additionally, global investible funds are increasingly borderless, with capital flowing seamlessly across markets in search of opportunities that align with investors’ financial and sustainability goals. As global standards like those of the ISSB gain traction, harmonising local reporting practices with these frameworks becomes essential. Alignment ensures transparency, comparability, and consistency, making it easier for global investors to evaluate and trust disclosures. By adopting these standards, companies can position themselves as credible and investmentready, attracting the growing pool of capital and prioritising sustainability and long-term value creation.

ISSB Standards in the UK: Adoption Status

The UK’s approach to implementing ISSB standards reflects a clear trajectory toward mandatory adoption. While not yet required, the government has outlined a framework to endorse these standards by early 2025. Once endorsed, the Financial Conduct Authority (FCA) plans to integrate ISSB-based UK Sustainability Reporting Standards into regulatory requirements for listed companies, with broader decisions pending for other entities.

The UK already enforces climate-related disclosure rules aligned with TCFD recommendations, creating a strong foundation for transitioning to ISSB standards. These standards promise enhanced clarity, better alignment between sustainability and financial reporting, and higher-quality disclosures through mandatory compliance. This proactive shift positions the UK to lead in consistent and integrated sustainability reporting.

ISSB Standards in India: Adoption Status

While the ISSB standards are not yet mandatory in India, the global trends and investor expectations they represent are highly relevant for Indian listed companies. Indian companies would benefit from proactively assessing their current reporting practices and taking steps to align with ISSB standards. This would not only prepare them for potential regulatory changes but also enhance their attractiveness to investors and demonstrate their commitment to sustainable business practices.

It’s important to note that the specific regulatory landscape for sustainability reporting in India is evolving. SEBI and other relevant authorities may introduce new requirements in the future. Indianlisted companies should stay informed about these developments and seek professional guidance to ensure compliance.

ISSB Standards in the UAE: Adoption Status

The United Arab Emirates (UAE) has demonstrated a strong commitment to sustainability through initiatives like the Net Zero by 2050 strategic plan and the Abu Dhabi Sustainable Finance Declaration. As global investors increasingly prioritise standardised sustainability reporting, aligning with the International Sustainability Standards Board (ISSB) standards can enhance UAE companies’ appeal to ESG-focused investors. Given Dubai and Abu Dhabi’s roles as major financial hubs, adopting these standards can improve risk management and provide a competitive edge in global markets. While not yet mandatory in the UAE, proactive alignment with ISSB standards positions companies favourably in the evolving global financial landscape.

What Makes Information “Material”?

The ISSB standards adopt a user-centric approach to materiality. Information is deemed material if omitting, misstating, or obscuring it could reasonably be expected to influence the decisions of primary users – existing and potential investors, lenders, and other creditors. In other words, companies must disclose information that helps investors understand how sustainability-related issues could impact their investment decisions.

This definition of materiality is a significant departure from previous sustainability reporting frameworks, which often focused on a broader range of stakeholders. By prioritising the information needs of investors, the ISSB standards aim to ensure that sustainability disclosures are financially relevant and decision-useful.

Connecting the Dots: Financial Statements and Sustainability Disclosures

Another critical aspect of the ISSB standards is the emphasis on connectivity. Sustainability disclosures should not be viewed as a standalone exercise but rather as an integral part of a company’s overall financial reporting.

To achieve this connectivity, the ISSB standards require:

• Alignment with financial reporting: The definition of material information used in the ISSB standards is aligned with that used in the IFRS Accounting Standards. This ensures consistency in how materiality is applied across different reporting domains.
• Simultaneous publication: Sustainability-related financial disclosures and financial statements should be published at the same time. This reinforces the idea that sustainability information is an essential component of a company’s financial picture.
• Inclusion in general-purpose financial reports: This further underscores the importance of integrating sustainability information into the main body of financial reporting.

A Four-Step Process for Identifying Material Information

The sources provide a practical framework for companies to identify and disclose material information about their sustainability-related risks and opportunities. This four-step process can be summarised as follows:

Embracing the Transition: From TCFD to ISSB

For companies already reporting under the TCFD recommendations, the transition to the ISSB standards presents both challenges and opportunities. The good news is that the ISSB standards build upon the TCFD framework, providing a familiar
foundation.

However, the ISSB standards go further in several key areas, requiring companies to:

• Provide more granular information, particularly around metrics and targets. For example, while the TCFD recommends disclosing Scope 1 and Scope 2 GHG emissions, the ISSB standards require disclosure only if the information is material.
• Strengthen the linkage between sustainability information and financial statements.This includes using consistent data and assumptions across different reports and providing more detailed explanations of how sustainability-related issues are reflected in financial performance.
• Adopt a more formalised and standardised reporting approach.TThis is expected to improve the comparability and reliability of sustainability disclosures, making it easier for investors to assess performance across different companies.

The Digital Frontier: Taxonomy and Data Accessibility

Recognising the importance of data accessibility and comparability, the ISSB has also developed a digital taxonomy for sustainability-related financial information. This taxonomy enables companies to tag their disclosures with standardised labels, making it easier for investors and other stakeholders to extract and analyse data using digital tools.

The move towards digital reporting is a gamechanger for sustainability disclosures. It has the potential to significantly reduce the time and effort required to gather and compare information across companies, enabling more informed
investment decisions.

In Closing

As the landscape of corporate reporting evolves, the ISSB standards represent a turning point in how companies communicate their sustainability commitments and financial resilience. By aligning sustainability disclosures with investor priorities and embedding them into financial reporting, these standards offer a compelling framework for transparency and comparability. For companies, this is not merely a compliance exercise but an opportunity to articulate their role in a rapidly transforming global economy. Those that proactively adopt these practices will find themselves well-positioned—not just to meet regulatory expectations, but to stand out as leaders in sustainable value creation, appealing to an increasingly discerning investor base.

Authored by:

Kinneri Saha
Director, Dickenson World

Visit www.dickensonworld.com to learn more about our services and how we can help streamline your corporate reporting process.