Staff members at the IFRS Foundation’s International Sustainability Standards Board (ISSB) have recommended that the organization take an approach on setting requirements and guidance for nature-related disclosures that would focus on the development of a non-mandatory “Practice Statement,” rather than the development of a standalone mandatory standard.

In the recommendation, which has raised concerns by environmental groups, the ISSB staff suggest that the proposed approach would minimize disruption to the ongoing implementation of the IFRS’ new sustainability and climate standards, while still signaling “clearly the importance of nature-related financial information.”

The ISSB was launched in November 2021, with the goal 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.

Late last year, the ISSB announced that it will begin work on standard setting for disclosure requirements on nature-related risks and opportunities, with plans to have an initial draft released by late 2026. Shortly after the ISSB announcement, the Taskforce on Nature-related Financial Disclosures (TNFD) announced that it would end its own technical work program, including its work to develop technical guidance for nature-based reporting, in light of the ISSB initiative.

At the time, the ISSB said that it had not yet decided on its approach to nature-related standard-setting, with options available including a new standard, a mix of application guidance or amendments to existing ISSB Standards, industry-based guidance or additional sources of guidance. The new recommendation forms part of a Staff Paper published by the ISSB discussing the potential approaches.

The paper explored four primary approaches, including nature-related reporting materials within IFRS S1, including materials within IFRS S2, developing a new standalone ISSB standard with “specific, incremental requirements for the disclosure of information about nature-related risks and opportunities not already addressed through explicit requirements in IFRS S1 or IFRS S2,” and the fourth approach – ultimately recommended in the paper – of “including materials within a non-mandatory IFRS Practice Statement, which could contain requirements and guidance for the disclosure of information about nature-related risks and opportunities.”

While noting advantages offered by each approach, the paper suggested that adding to IFRS S1 or S2 would disrupt their ongoing implementation and create confusion. For the standalone standard option, while highlighting advantages such as reducing the risk of having nature-related information being interpreted as being less important than climate-related information, the paper suggested that this approach could create a risk of “creating a ‘silo’ of risks and opportunities identified as being nature-related risks and opportunities separate from other sustainability-related risks and opportunities and could potentially lead to siloed disclosures,” in addition to disrupting the adoption of IFRS S1 and S2.

In its discussion of the Practice Statement approach, the paper said that the statement “would be a resource available to entities to enable them to apply IFRS S1 well, considering that IFRS S1 already requires an entity to provide material information about all sustainability-related risks and opportunities,” and that it “would support entities that wish to report on nature-related risks and opportunities to do so in a way that they can be confident will be effective in meeting the needs of users of general purpose financial reports.”

The paper added that “although a Practice Statement is not a Standard, it would become part of the IFRS Sustainability literature that is subject to full IFRS Foundation due process,” and that “containing all materials specific to nature-related disclosures in a single document would clearly identify nature as an important matter in its own right.”

Following the publication of the staff paper, several sustainability-focused groups including WWF International, Conservation International, Finance for Biodiversity Foundation, among several others, published an open letter expressing concern over the recommendation, and urging the ISSB “to align with the latest science, private sector momentum and global policy commitments by choosing to introduce a standard on nature.”

The letter stated:

“Should ISSB decide to follow its staff recommendation for a non-mandatory approach to nature, this would disregard the growing recognition across business and finance of the materiality of nature, scientific recommendations for the integration of climate and nature, and global momentum of private sector concern, action and disclosure on nature. This is in essence a regressive decision that would delay progress – and it is clearly out of sync with today’s science, financial materiality, momentum and needs.”

The ISSB is scheduled to discuss its approach on nature-related disclosures at an upcoming meeting on April 22.