The ISSB standard transforms "scattered" data into "systematic and comparable" information.

Many people interested in sustainability may have encountered problems when reading reports from different companies. Even when disclosing the same information, they use different approaches, making it difficult to compare the data comprehensively. Different disclosure formats result in varying levels of completeness. For example, the sustainability disclosure under Form 56-1 One Report, as per the SEC's criteria, is an "apply or explain" approach.

Furthermore, companies may choose to use standards based on the data user group, such as GRI (Global Reporting Initiative), which is often used to communicate with a wide range of stakeholders and disclose social and environmental impacts, and TCFD (Task Force on Climate-related Financial Disclosures), which aims to disclose risks and opportunities that have a financial impact on the business from the investor's perspective, etc.

While many may still be unfamiliar with the ISSB standard or view it as something distant, seemingly related to large companies or a global sustainability issue unrelated to them, the truth is that the ISSB standard is playing a crucial role in transforming scattered disclosures into valuable and comparable data.

This article will help you understand what ISSB standards are and what role they play in today's investment and business world.

ISSB & ISSB Standards

The ISSB (International Sustainability Standards Board) is an organization established under the supervision of the International Financial Reporting Standards (IFRS) Foundation, the same organization that oversees the widely used international financial reporting standards. The ISSB aims to create a systematic link between sustainability data and financial data, with a key objective of addressing past challenges where companies used differing principles and practices to measure and disclose sustainability information.

This results in inconsistent disclosed information that fails to clearly reflect the impact of "sustainability opportunities and risks" on the company's financial position, making it impossible to compare or link the data for effective decision-making.

The ISSB standard, which aims to establish a globally acceptable baseline for sustainability reporting, will be a key tool in reducing the burden and confusion for businesses dealing with diverse sustainability reporting needs. This will lead to more systematic, comparable, reliable, and, importantly, accessible disclosure of information to users across all sectors.

IFRS S1 & IFRS S2

In 2023, ISSB issued two sustainability disclosure standards for companies: IFRS S1 and IFRS S2, which differ in the following ways:

• IFRS S1 This establishes general guidelines for companies to disclose sustainability information, covering both opportunities and risks arising from environmental, social, and governance (ESG) factors that may affect a company's financial position.
• IFRS S2 This establishes guidelines for companies to disclose information regarding opportunities and risks from climate change, including industry-based metrics that companies use in their assessments, so that report users can compare data from different companies appropriately.

A key principle under IFRS S1 and IFRS S2 is the disclosure of opportunities and risks associated with sustainability and climate change that may have a significant impact (Material) on a company's financial information, ability to access funding, and cost of capital in the short, medium, and long term. This helps data users clearly see the connection between "sustainability-related information" and "the company's financial status."

This reflects the company's capacity to comprehensively address opportunities and risks arising from sustainability factors that may impact its profitability, competitiveness, and survival, beyond the current reporting format.

standard ISSB and data users.

The ISSB standard is an important tool for various groups of data users, including those involved in investment and risk management in businesses, such as:

1. Investors: The data can be used to assess the risks and opportunities of a company, both from an ESG and climate change perspective. This enables investors to make informed investment decisions, makes it easier to compare companies in the same industry, both domestically and internationally, and provides a long-term overview of the business.
2. Investment analyst: This information will help in evaluating and preparing comprehensive, high-quality, and useful securities analyses for investors to make better investment decisions.
3. Fund managers and portfolio managers: This information can be used to effectively manage portfolio risk, assess the impact of sustainability risk on returns, and develop long-term investment strategies aligned with return and sustainability goals.
4. Registered companies: It helps companies improve their corporate strategy, enhance credibility with investors and stakeholders, and allows for clear comparison of performance with other companies, thus supporting better business planning.

In Thailand, the SEC (Securities and Exchange Commission of Thailand) is in the process of upgrading the sustainability disclosure requirements under Form 56-1 One Report to ensure that Thai listed companies disclose sustainability information in accordance with the ISSB standard. The effective date is as follows:

• The regulation will be implemented in 2570, initially targeting large listed companies within the SET 50 index due to their greater potential and readiness.
• The regulation will come into effect in 2571 and apply to companies listed in the SET 100.
• From 2572, this will apply to all listed companies on the SET, including IPOs.
• From 2573 onwards, this will apply to all listed companies on the mai market, Real Estate Investment Trusts (REITs), Infrastructure Funds (IFFs), Infrastructure Investment Trusts (IFTs), and Private Funds (PFs), including IPOs.

Based on the aforementioned timeline, the SEC believes that sustainability disclosure will be more comprehensive and move towards international standards, with in-depth content covering four main topics according to the ISSB standard: governance, strategy, risk management, and goals and indicators. This will benefit both companies and information users amidst the diverse needs and complexity of the current investment world.