The inaugural International Sustainability Standards Board (“ISSB“) sustainability disclosure standards, namely IFRS S1 (General requirements for disclosure of sustainability-related financial information) and IFRS S2 (climate-related disclosures) (the “ISSB standards“), have received positive feedback from stakeholders around the world since its release on June 26, 2023 (which we reported here). This includes approval by the International organization of securities commissions (IOSCO) on July 25, 2023.
The long-awaited ISSB standards are intended to provide a global basis for transparent, reliable and comparable corporate disclosure of climate and sustainability-related information, and will help inform investment decisions. In this blog post we summarize the positive responses from various Asian regulators to the ISSB standards.
On June 27, 2023, the Cross-Agency Green and Sustainable Finance Steering Committee (“Steering committee“) published one press release welcoming the publication of the ISSB standards. The steering committee is co-chaired by the Hong Kong Monetary Authority and the Securities and Futures Commission. More recently, on August 7, 2023, the Steering Committee announced it is developing a ‘comprehensive roadmap for Hong Kong’ to adopt the ISSB standards, taking into account local expectations and regulatory circumstances. A working group will be established with the participation of relevant authorities and stakeholders, which will make recommendations to the Steering Committee on the elements to be addressed in the roadmap.
In particular, Hong Kong regulators have been working to align local disclosure standards with the ISSB standards, in parallel with the finalization of the ISSB standards. In April 2023, the Stock Exchange of Hong Kong Limited (“SEHK“) published one consultation paper seeking market feedback on proposals to improve climate-related reporting requirements for listed companies in Hong Kong. The consultation is based on the ISSB’s draft standards for climate-related disclosure issued in March 2022. The SEHK is expected to take the ISSB standards into account when updating the existing ESG reporting requirements, with the changes taking effect from January 1, 2024. The results and conclusions of the SEHK’s consultation, which closed on July 14, 2023 are pending .
On June 27, 2023, the Financial Services Agency in Japan (“FSA“) published a press release (in Japanese) issued by the IFRS Foundation Monitoring Board, welcoming the finalization of the ISSB standards. However, the FSA and other Japanese government agencies have not yet made any formal announcements on the applicability of the ISSB standards to companies operating in Japan. According to a report (in Japanese) published in April 2023 by the Sustainability Standards Board of Japan (“SSBJ“), a group within the Financial Accounting Standards Foundation of Japan, the SSBJ is preparing a local version equivalent to the ISSB standards. Japan’s draft standards are expected to be released by the end of FY 2023 (March 31, 2024), while the final standards are expected to be released by the end of FY 2024 (March 31, 2025). The effective date of the Japanese standards has not been determined. SSBJ’s report states that it will monitor the applicability of the ISSB standards in other countries and developments from relevant international bodies when making its decision on the timing.
People’s Republic of China (“PRC”)
The People’s Republic of China has a track record of supporting the work of the ISSB. During the consultation of the draft ISSB standards, both the Ministry of Finance and the China Securities Regulatory Commission actively provided feedback on the content of the draft, focusing on the adaptability of the ISSB standards to small and medium-sized enterprises, emerging markets and developing countries. to land. In addition, the Ministry of Finance has had regular contact with the ISSB via the Legal Working Group and is represented on the Sustainability Standards Advisory Foruma body that advises the ISSB.
PRC market participants have noted that the ISSB standards are likely to serve as a benchmark for the PRC’s ESG information standards in the future. On July 5, 2023 China Securities Journal (in Chinese) reported that the Shanghai and Shenzhen stock exchanges are currently studying and formulating guidelines on sustainable development disclosure for listed companies, taking into account local conditions and the development stage of the People’s Republic of China. In this context, we previously reported here on the PRC’s first ESG guidelines with Chinese characteristics.
Finally, it is worth noting that the IFRS Foundation opened the ISSB office in Beijing on June 19, 2023. The Beijing office will serve as a hub for stakeholder engagement and capacity building in Asia, with a focus on emerging economies, developing countries and small and medium-sized enterprises. This is ISSB’s second office in Asia, with the first office in Tokyo.
On July 6, 2023, the Accounting and Corporate Regulatory Authority of Singapore and the Singapore Exchange Regulation issued a consultation paper on the recommendations of the Sustainability Reporting Advisory Committee to promote climate reporting in Singapore (the “Consultation document”). The consultation paper proposes to (i) reflect ISSB standards in local mandatory climate-related disclosures (to the extent practicable), (ii) require listed issuers in Singapore to report ISSB-aligned climate-related disclosures from FY 2025 onwards and (iii) ) extend the climate reporting requirement to large unlisted companies in Singapore. The public consultation will run from July 6, 2023 to September 30, 2023. The Law Society of Singapore’s Corporate Practice Committee is expected to submit its assessment of the consultation document to the advisory committee before the consultation deadline.
Furthermore, on July 27, 2023, the Monetary Authority of Singapore and the HM Treasury of the United Kingdom published joint statement on the Financial Dialogue between Great Britain and Singapore, which, among other things, reaffirmed both countries’ continued support for the ISSB Standards and welcomed IOSCO’s adoption of the ISSB Standards. Both countries agreed to implement the ISSB standards and support global interoperability of disclosure standards.
Given the positive feedback from the aforementioned regulators, it is expected that the voluntary ISSB standards will be integrated into local requirements for sustainability or climate-related disclosures in several jurisdictions in Asia, with Hong Kong and Singapore emerging as the likely first to adopt them to apply. At the same time, Asian regulators are aware of the need for disclosure standards that suit local conditions. As Asian regulators accelerate their work to ensure interoperability between the ISSB Standards and local standards, companies should use this interim period to familiarize themselves with the requirements of the ISSB Standards and prepare for the increasing mandatory disclosure regimes in the region in the future.