Standardized sustainability reporting takes center stage in 2025

The global landscape of sustainability-related disclosures is undergoing a transformative shift, particularly impacting the banking sector. With the introduction of IFRS S1 and IFRS S2 by the International Sustainability Standards Board (ISSB) in June 2023, banks are poised to benefit from more consistent and comparable sustainability data. These standards, transitioning from voluntary guidelines to mandatory requirements, are set to be enforced in countries like Australia, Singapore, and Hong Kong by 2025. The UK, Canada, and South Africa are also nearing the final stages of the process of adopting and integrating these standards into their regulatory frameworks.

At a global level, the International Organization of Securities Commissions (IOSCO) has been at the forefront of promoting the adoption of ISSB standards to the financial sector. It recently launched a dedicated network to support the 32 members of its Growth and Emerging Markets Committee (GEMC) toward the adoption of ISSB standards in their local jurisdictions. Since IOSCO’s endorsement, nearly 56 jurisdictions, both from developed and emerging markets, have already taken action to adopt or otherwise use ISSB standards.

For banks, in particular, the adoption of IFRS S1 and S2 is significant. These standards will provide consistent and comparable data, enhancing banks' ability to assess climate-related risks and finance sustainable projects. This not only improves transparency but also helps banks meet regulatory requirements and investor expectations. The magnitude of the impact of the effort to standardize the sustainability disclosures can be understood by looking at how various countries are adopting these standards:

• Australia. The Australian Accounting Standards Board (AASB) has published the Australian Sustainability Reporting Standards, AASB S1 and AASB S2, which are fully aligned with ISSB standards and will be effective from annual reporting periods beginning January 01, 2025.

• United Kingdom. The UK Sustainability Disclosure Technical Advisory Committee (TAC) has recommended endorsing IFRS S1 and S2, with minor amendments to align with the UK's existing legal framework, including extending the “climate first” reporting relief from one to two years. The UK government plans to consult on exposure drafts for the UK Sustainability Reporting Standards in the first quarter of 2025.

• Canada. The Canadian Sustainability Standards Board (CSSB) has released the Canadian Sustainability Disclosure Standards (CSDS), which align with IFRS S1 and S2 and will be effective for annual reporting periods beginning on or after January 01, 2025.

• Singapore. The Singapore Exchange Regulation (SGX RegCo) has also integrated the ISSB standards into its sustainability reporting regime. Beginning with the financial year 2025, SGX requires all issuers to start reporting Scope 1 and Scope 2 greenhouse gas (GHG) emissions, including climate-related disclosures based on the ISSB standards.

• Hong Kong. The Hong Kong Institute of Certified Public Accountants (HKICPA) has published the Hong Kong Sustainability Disclosure Standards, HKFRS S1 and S2, which are fully aligned with ISSB Standards and will take effect from August 01, 2025.

• South Africa. The Johannesburg Stock Exchange (JSE) has revised its Sustainability Disclosure Guidance to align with the IFRS S1 and IFRS S2 standards. These updates include exemptions for Scope 3 emissions in the first year of adoption and efforts to consolidate various sustainability frameworks to ease reporting burdens.

As these standards become embedded in regulatory frameworks worldwide, banks will gain access to reliable data for risk management and investment decisions. This shift toward standardized sustainability disclosures is expected to be significant, with banks playing a crucial role in this transformation. By adopting these standards, banks can better manage risks, meet regulatory requirements, and fulfill investor expectations, ultimately contributing to a more resilient and sustainable global economy.