Financial Reporting Council call for evidence regarding UK’s endorsement of the recently issued Sustainability Standards

Background

On 26 June 2023, the ISSB issued the initial two IFRS Sustainability Disclosure Standards. IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information establishes the general framework and foundation for sustainability-related disclosures and IFRS S2 Climate-related Disclosures establishes specific disclosures required in relation to climate-related risks and opportunities (together, the Standards). See our recent article on the publication of Standards here.

The Standards will be effective for annual reporting periods beginning on or after 1 January 2024. However, they are not yet mandatory, and it is up to individual jurisdictions to decide the extent to which they will be adopted and which entities, if any, may be required to comply with them. 

The Call for Evidence

As part of its 2023 Green Finance Strategy, the UK government stated that it will consult on a framework to adopt and endorse the Standards for the UK. The FRC is now responsible for analysing the technical aspects of the Standards and considering whether amendments are necessary to enable their effective application in a UK context.

The Call for Evidence is therefore designed to gather views on whether the disclosures required by the Standards, in a UK context, will result in disclosures that are: 

1. understandable, relevant, reliable, and comparable for investors; 
2. technically feasible and timely to prepare; and 
3. expected to generate benefits that are proportionate to the costs that are likely to be incurred in complying with the Standards.

Respondents (such as those preparing corporate disclosures, investors, and other stakeholders with an interest in sustainability reporting) have been asked to provide opinions and evidence relating to specific topics within the Standards. The UK Sustainability Disclosure Technical Advisory Committee (TAC) has specifically requested insight into any perceived challenges and benefits that might arise when preparing and disclosing information required under the Standards. This also includes the scale of the challenge and any proposed solutions. Responses are to be provided by 11 October 2023 to the TAC.

The responses to the Call for Evidence will inform the TAC’s recommendations to the UK government on the suitability of the Standards to inform its decision on endorsement. However, it is important to note that any decision on the scope of mandatory reporting will only be made after further consultations following the Call for Evidence. 

If you would like any further information about the Standards, please contact the Environment, Safety & Planning team at Norton Rose Fulbright.