The IFRS Foundation’s International Sustainability Standards Board (ISSB) announced the release of the initial exposure draft of its proposed nature-related disclosure requirements, designed to help companies provide material information to investors about nature-related risks and opportunities in a consistent and comparable manner.

As previously communicated by the ISSB, the new reporting requirements were released in the form of a non-mandatory “Practice Statement,” although the ISSB said that in addition to seeking feedback on the content of the draft, its consultation will also ask for feedback on whether to issue nature-related content in another form, such as a standalone mandatory standard.

The ISSB was launched in November 2021 to develop IFRS Sustainability Disclosure Standards to provide investors with information about companies’ sustainability risks and opportunities. The IFRS released the inaugural general sustainability (IFRS S1) and climate (IFRS S2) reporting standards in June 2023.

Rather than developing a mandatory standalone standard, however, the ISSB announced in April that had decided to proceed with the development of proposed nature-related reporting requirements in the form of an IFRS Practice Statement. While non-mandatory by design, IFRS Practice Statements are a form of standard setting, sharing similarities including being subject to full due process, including public consultation. As a non-mandatory instrument, companies would not be required to comply with the Practice Statement in order to state compliance with the ISSB standards.

The ISSB explained that it had elected to use the Practice Statement format in order to minimize disruption for companies currently implementing its existing standards. The ISSB also pointed out that the standards in the Practice Statement can become mandatory by jurisdictions that choose to apply it.

ISSB Vice-Chair Sue Lloyd said:

“We recognise that companies are deeply engaged with applying IFRS S1 and IFRS S2 for the first time. What we’re proposing is to balance the need to give markets time to implement the ISSB Standards well, with the demand from investors for information on nature.”

According to the ISSB, while the IFRS S1 standard already requires companies to disclose material information about all sustainability-related risks and opportunities, including those related to nature, that could reasonably be expected to affect their prospects, the current standards do not provide requirements specific to nature-related disclosures. The new proposals are designed to complement IFRS S1 and S2, specifying for companies how to provide high-quality, comparable and decision-useful disclosures about nature to investors, according to the ISSB.

The Exposure Draft proposes requirements that would help companies understand what nature-related risks and opportunities are, how they can affect a company’s prospects, and what information about these risks and opportunities is useful to investors.

Specific disclosures in the new proposal include requirements for a company to report information about how it has responded to, and plans to respond to, nature-related risks and opportunities in its strategy and decision-making, the resilience of its strategy and business model to uncertainties arising from nature-related risks, and information about the amount and percentage of assets or business activities vulnerable to nature-related risks and those aligned with nature-related opportunities. Companies would also be required to provide information about nature-related targets that they have set, including what the target relates to, location-specific aspects of the target and its objectives, and whether and how the target has been informed by law or regulation.

ISSB Chair Emmanuel Faber said:

“Whether it is access to water for production, to rivers for transportation or to bees for pollination, companies around the world depend on nature. When a company’s access to these environmental resources is threatened, the company can face risks and opportunities that affect its prospects. We believe companies that comply with an IFRS Sustainability Practice Statement on nature-related disclosures will be best placed to provide high-quality reporting to their investors.”

The ISSB said that it drew extensively from the work of the Taskforce on Nature-related Financial Disclosures (TNFD) in the development of its proposals, and noted that companies that companies that have used the TNFD framework will be well positioned to apply the Practice Statement. Following the ISSB’s announcement last year of plans to develop nature-related reporting requirements, the TNFD announced that it would end its own technical work program.

TNFD Co-Chair David Craig said:

“I welcome the publication of the ISSB’s Exposure Draft on nature-related disclosures, which draws extensively on the TNFD’s framework. This milestone builds on the momentum achieved over the past five years by TNFD in driving better nature-related reporting and is a testament to both the progress made and the significant demand for high-quality nature-related information.”

The ISSB also said that it has worked to ensure that companies that apply the Global Reporting Initiative (GRI) Standards or European Sustainability Reporting Standards (ESRS) alongside the Practice Statement can do so efficiently.

The ISSB consultation on the new exposure draft will run through February 19, 2027. Click here to access the exposure draft and consultation.