Australia reverses decision to extend ISSB-inspired standards beyond climate

The Australian Accounting Standards Board (AASB) will return to the global benchmark of the International Sustainability Standards Board (ISSB) and align “as closely as possible” with the standards body’s two disclosure standards, the regulator has confirmed. President Keith Kendall to Responsible investor.

The decision was made at a board meeting this week, where the main agenda item was climate-related financial disclosures and the feedback the CNAC had received on its three standards.

The AASB first published the draft standards in October, following two consultations by the US Treasury on mandatory climate-related financial disclosures. The draft standards built on the ISSB’s two disclosure standards on general sustainability (IFRS S1) and climate (IFRS S2).

The original draft framework for the standards (ASRS 1, 2 and 101) proposed to limit the scope of ASRS 1 disclosure to climate-related financial information only, replacing all references to sustainability in IFRS S1 with “ climate “.

Over the past two months, the Board has discussed the possibility of introducing a non-mandatory standard consistent with the ISSB General Sustainability Reporting Standard, instead of limiting ASRS 1 to climate-related risks as a mandatory standard, as previously proposed.

The Australian ASRS 2 climate standard will therefore operate as a standalone standard.

Kendall said RI that the next board meeting has been scheduled for mid-July, with the goal of finalizing the standards by the end of August.

An IFRS Foundation spokesperson said: “We are delighted to hear that the AASB is seeking to align as closely as possible with IFRS S1 and IFRS S2, in line with the strong signal they have received many respondents to their proposals regarding the importance of providing information consistent with the ISSB global benchmark. »

Disclosures should start from January 2025, with mandatory reasonable assurance on all climate-related information, including Scope 3, which should start from the fourth year of reporting.

The AASB concluded a consultation on assurance requirements for the standards in early May and intends to publish draft local amendments this summer, with final decisions expected by December.

The move follows months of criticism from Australia’s financial industry and global investors for failing to fully adopt the ISSB’s two standards.

The government’s initial draft standards were met with strong opposition from investors, sustainable finance bodies and not-for-profit organisations, who called for full alignment with the ISSB framework.

The investment industry has raised specific concerns about the decision to omit “sustainability” from Australian ASRS 1, in response to the AASB consultation.

Australian investors Hesta and IFM Investors have also pushed for full alignment with the ISSB and the introduction of other sustainability measures.

Separately, Nordic asset-owning giant Norges Bank Investment Bank, which has publicly supported the global ISSB benchmark, has warned Australia against introducing key changes to ISSB standards, saying that this could “compromise” the objective of global comparability.

The trillion-dollar fund has also criticised other markets, such as Malaysia, for deviating from the ISSB framework and introducing unique reporting exemptions in the local market.