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Sustainability Disclosures: A Digital Taxonomy Published by ISSB

The IFRS Sustainability Disclosure Taxonomy (ISSB Taxonomy), a new digital tool designed to help investors analyze sustainability-related financial disclosures based on the ISSB’s recently released sustainability and climate-related reporting standards, was released by the IFRS Foundation’s International Sustainability Standards Board (ISSB).

The new Taxonomy “will enable investors to search, extract, and compare sustainability-related financial disclosures as ISSB establishes its global baseline of Standards,” according to an IFRS statement introducing the new tool.

In response to demand from investors, businesses, governments, and regulators for a global baseline of disclosure requirements that enable a consistent understanding of the impact of sustainability risks and opportunities on companies’ prospects, the ISSB was established at the COP26 climate conference in November 2021 with the goal of developing IFRS Sustainability Disclosure Standards. In June 2023, the board released its first reporting guidelines for general sustainability (IFRS 1) and climate change (IFRS 2). These new guidelines are anticipated to influence the development of disclosure required systems from several agencies throughout the world.

In order to improve accessibility and comparability of the reported information for investors, the ISSB published a proposed digital taxonomy reflecting the disclosure requirements in the first two standards. This was done with the intention of facilitating structured digital reporting of sustainability-related financial information prepared using the standards.

The taxonomy is a classification system that is similar to the IFRS Accounting Taxonomy used for financial reporting. It is made up of a collection of XBRL files and is intended to identify and organize information to make it easily accessible and to improve communication between those who prepare disclosures and those who use them. Information may be labelled and shared in an organized fashion using taxonomies, making it easier to access and analyze data quickly.

According to the IFRS, the new taxonomy is made to be compatible with its IFRS Accounting Taxonomy, allowing businesses to provide investors a comprehensive reporting package and facilitating integration with other online taxonomies.

The Taxonomy takes into account the Climate-related Disclosures under IFRS S2, the General Requirements for Disclosure of Sustainability-related Financial Information under IFRS S1, and the advice that goes along with it. The Taxonomy was created to facilitate communication between businesses and investors; it has no effect on a company’s adherence to the Standards or the introduction of new regulations. The Taxonomy helps businesses to consistently categorize data created using ISSB Standards since it is based on feedback from the market.