The ISSB and IFRS S1: General Requirements for Sustainability-related Disclosures

Before 2021 a company that wanted to report on its climate risk could choose among dozens of frameworks, each with its own definitions. An investor comparing two companies had to translate between them. Investors, regulators and companies asked for one global baseline.

The answer was the International Sustainability Standards Board (ISSB), set up under the International Financial Reporting Standards (IFRS) Foundation, alongside the International Accounting Standards Board, to write sustainability disclosure standards on the same footing as the accounting standards. Its first two standards, IFRS S1 and IFRS S2, were issued in June 2023.

This topic covers why and how the ISSB was created, why it matters, and the general requirements of IFRS S1: its objective and scope, the concepts of value, materiality, fair presentation, reasonable and supportable information, the reporting entity and connected information, the four content areas (governance, strategy, risk management, and metrics and targets) and the transition reliefs. The next topic covers how Nigeria is adopting the standards.

Both parts are examined. In November Diet, 2025, Question 6(c) (4 marks) asked for the importance of the ISSB to global sustainability reporting. In May Diet, 2026, Question 6 (15 marks) asked candidates to discuss any five of six concepts within IFRS S1 and S2:

• value created, eroded or preserved for others
• reasonable and supportable information
• connected information
• fair presentation
• the reporting entity
• risk management (3 marks each)

Read the main sustainability reporting frameworks and the Nigerian Exchange guidelines first.

The ISSB and why it matters

The sustainability reporting landscape was fragmented: the Global Reporting Initiative (GRI), SASB Standards, the Task Force on Climate-related Financial Disclosures (TCFD), the Carbon Disclosure Project (CDP) and others produced inconsistent disclosures. The IFRS Foundation launched the ISSB at the United Nations climate conference (COP26) in Glasgow in November 2021, with the support of the International Organization of Securities Commissions, standard setters and financial institutions.

The ISSB consolidated the Climate Disclosure Standards Board and the Value Reporting Foundation. It operates under the IFRS Foundation with a multi-stakeholder board (accounting, sustainability, finance and policy expertise), and its standards are designed to be used alongside the accounting standards. Its importance to global sustainability reporting is that it:

• provides a single, authoritative global baseline for the sustainability-related information that investors and lenders need;
• promotes comparability and consistency across countries and industries, reducing the cost of reporting in many frameworks;
• builds on and consolidates existing frameworks (TCFD, SASB Standards, the Integrated Reporting Framework) so that preparers do not start again;
• gives connectivity between sustainability disclosures and the financial statements;
• is endorsed by securities regulators and being adopted or used as a base in many jurisdictions, including Nigeria, the United Kingdom, Canada, Australia, Singapore and Japan, and is designed to work with other regimes such as European standards; and
• helps capital flow to sustainable activities by giving decision-useful, reliable and forward-looking information.

IFRS S1: objective and scope

The objective of IFRS S1 is to require an entity to disclose information about its sustainability-related risks and opportunities that is useful to the primary users of general purpose financial reports (investors, lenders and other creditors) in making decisions about providing resources to the entity.

An entity’s ability to generate cash flows over the short, medium and long term is linked to its interactions with stakeholders, society, the economy and the natural environment throughout its value chain: the full range of interactions, resources and relationships related to its business model and the environment in which it operates.

The entity depends on, and has impacts on, those resources and relationships, and they give rise to sustainability-related risks and opportunities.

IFRS S1 applies to all sustainability-related risks and opportunities that could reasonably be expected to affect the entity’s cash flows, access to finance or cost of capital over the short, medium or long term. An entity can apply the ISSB standards whether its financial statements follow IFRS Accounting Standards or other generally accepted accounting principles. IFRS S2 covers the climate-related risks and opportunities in detail.

The key concepts

Value created, preserved or eroded for others

The entity’s ability to create, preserve or erode value for itself is inextricably linked to the value it creates, preserves or erodes for others, such as its stakeholders, society and the environment. For example, the pesticide used to protect an entity’s crops may damage the surrounding bee populations on which its own pollination depends.

Impacts on others matter to investors to the extent that they could reasonably be expected to affect the entity’s cash flows, access to finance or cost of capital.

Reasonable and supportable information

In identifying risks and opportunities, and in preparing some disclosures, the entity uses all reasonable and supportable information that is available at the reporting date without undue cost or effort, including information on past events, current conditions and forecasts of future conditions. An approach is also required to be commensurate with the skills, capabilities and resources available.

Exhaustive effort is not required, but the entity cannot argue that no effort is needed. In some cases quantitative information on financial effects need not be given if the effects are not separately identifiable, if the measurement uncertainty is too high, or if the entity lacks the skills or resources, in which case it gives qualitative information and explains why.

Materiality

Information is material if omitting, misstating or obscuring it could reasonably be expected to influence the decisions that the primary users of general purpose financial reports make on the basis of those reports. The entity considers all the facts, decides how to aggregate and disaggregate information, and must not obscure material information with immaterial information.

Fair presentation

A complete set of disclosures presents fairly all the sustainability-related risks and opportunities that could reasonably be expected to affect the entity’s prospects, with faithful representation: a complete, neutral and accurate depiction. The information should be comparable, verifiable, timely and understandable, and additional information is given if the specific requirements are not enough to understand the effects.

Applying the standards, with additional information where needed, is presumed to achieve fair presentation, and the entity states compliance explicitly.

The reporting entity

The sustainability-related financial disclosures are for the same reporting entity as the related financial statements, which means the same group and boundary, and the entity identifies the financial statements to which they relate. Information about risks and opportunities in the value chain is included to the extent that it affects the reporting entity’s prospects.

Connected information

The entity provides information so that users can understand the connections between the items that the information relates to (for example between risks and opportunities), between the disclosures in the sustainability report (governance, strategy, risk management, metrics) and between the sustainability disclosures and the financial statements. Data and assumptions are consistent with those in the financial statements, and the currency is the presentation currency of the financial statements.

Risk management

This is one of the four areas of core content: the processes the entity uses to identify, assess, prioritise and monitor sustainability-related risks and opportunities, whether and how those processes are integrated into the overall risk management process, and how the entity uses them in its decisions.

Applying the standards for the first time

IFRS S1 and IFRS S2 are effective for annual reporting periods beginning on or after 1 January 2024, with application depending on the jurisdiction’s decision to adopt them. Reliefs eased the first year, including permission to report sustainability-related financial information after the financial statements are published, and a transition for the scope of the first report, with comparatives not required.

Each jurisdiction (in Nigeria, the Financial Reporting Council) decides the dates for its entities (see the next topic).

The quantification of the effect of a risk uses the information described above. For example, a carbon price of ₦5,000 a tonne applied to emissions of 20,000 tonnes costs ₦100 million, which is 4% of profit of ₦2,500 million, an effect that is likely to be material to an investor. A flood that has a 10% probability and would cause a loss of ₦300 million has an expected loss of ₦30 million. Both would be disclosed with their assumptions.

The ideas in more depth

Why the investor focus

IFRS S1 is built for the primary users of financial reports, who cannot demand information directly from the entity. It is narrower than a report to all stakeholders, but it is meant to be a baseline: other frameworks can add information on wider impacts for other users.

Why connectivity matters

A climate risk may cause an impairment, a new provision or a change in an estimate in the financial statements. If the sustainability report and the financial statements use different assumptions, readers cannot rely on either.

Sources and references

• International Financial Reporting Standard (IFRS) S1 General Requirements for Disclosure of Sustainability-related Financial Information, and IFRS S2 Climate-related Disclosures (June 2023), including Appendix B on value and the proportionality requirements; IFRS Foundation and ISSB announcements.

These points are stated as at 5 November 2026.

Worked examples

1. Cost.
   20,000 × ₦5,000 = ₦100m.
2. Size.
   ₦100m ÷ ₦2,500m = 4% of profit.

1. Expected loss.
   10% × ₦300m = ₦30m.

1. Boundary. The disclosures cover the same group as the consolidated financial statements, including the subsidiary.

How to answer in the exam

• For each concept, define it, state the requirement and give a short example.
• For the ISSB, state its creation and four or five reasons why it is important.
• Name the four content areas in the order governance, strategy, risk management, metrics and targets.
• Link the disclosures to the financial statements.

Common mistakes in the exam

• Saying the ISSB replaced the accounting standards.
• Confusing IFRS S1 (general) with IFRS S2 (climate).
• Describing materiality as the effect on society.
• Forgetting that the reporting entity is the same as for the financial statements.
• Naming the content areas incorrectly.
• Giving definitions without examples.

Quick revision

• ISSB: launched November 2021 at COP26; absorbed Climate Disclosure Standards Board (CDSB) and the Value Reporting Foundation; S1 and S2 issued June 2023.
• Content: governance, strategy, risk management, metrics and targets.
• Concepts: fair presentation, materiality, reporting entity, connected information, reasonable and supportable information, value for others.

Practice questions

These are original questions written in the style of the Institute’s exams. Try each one before you open the answer. Section A is a recall check, because the paper itself is written.

Recall check: multiple choice

Section B style: written questions

A further written question

Model answers

Spotted a mistake? Tell us and we will check it.