US companies expected to use ISSB standards as disclosure ‘passport’, says Faber

The ISSB chair discusses the SEC’s climate rule, connectivity between standards and the importance of disclosure from smaller capital markets.

The International Sustainability Standards Board (ISSB) expects US companies to use its standards as a “passport” in other jurisdictions, and to add to the disclosures required by the new Securities and Exchange Commission (SEC) climate rule, Emmanuel Faber has told Responsible Investor.

“We have a lot of conversations with US corporates, who are also looking at California’s climate bill, which refers directly to Taskforce for Climate-related Financial Disclosures (TCFD) and ISSB work,” the ISSB chair says. “It’s a lively dialogue in the US.”

The standard setter launched its initial disclosure standards on sustainability (IFRS S1) and climate (IFRS S2) last June.

Emmanuel Faber, ISSB chair

Faber says the ISSB is making further assessments on interoperability with the US rule – which the SEC recently announced a temporary stay on the rules as it awaits the result of legal action – and identify where the standard setter has additive requirements, such as on Scope 3 disclosures.

“In its rule, the SEC noted that some companies asked that it allow the use of the ISSB’s climate standards as an alternative to its climate rule,” Faber says.

However, the US regulator is not yet ready to allow companies to do so.

In its final rule, published at the start of March, the SEC wrote that while it acknowledges the similarities with the ISSB’s disclosure standards and that registrants may operate or be listed in jurisdictions that will adopt or apply the ISSB standards in whole or in part, “those jurisdictions have not yet integrated the ISSB standards into their climate-related disclosure rules”.

The SEC added: “Accordingly, at this time we decline to recognise the use of the ISSB standards as an alternative reporting regime.”

As RI reported in March, SEC commissioner Caroline Crenshaw has also said the commission should “think about issuing an order to recognise alternative regimes that would satisfy compliance with the rule we finalised today”.

She noted that the idea was “overwhelmingly popular” in the comments to the consultation on the rule, both from corporates and investors.

Many US companies already report under the Sustainability Accounting Standards Board’s (SASB) standards and the TCFD – both of which are part of the ISSB standards – so companies are “well prepared” to disclose voluntarily under the ISSB, Faber says.

Separately under the new European Sustainability Reporting Standards (ESRS) – which will eventually require around 50,000 companies to disclose on various sustainability metrics they deem material – the SEC estimates as many as 3,700 US companies could fall in scope, once it is fully implemented.

Faber says he expects US companies to also use the ISSB standards as part of their reporting under the ESRS. The EU’s rules are based on double materiality, which Faber says builds on the ISSB’s global baseline, which is financial materiality based.

While EU disclosure requirements cover a range of topics, including pollution, water and marine resources, biodiversity and workforce, the ISSB has initially focused on climate and a set of broader sustainability disclosures.

The standard setter recently confirmed that it would only begin research into new standards, but not necessarily write new standards, in its next two-year workplan.

Standards adoption

This year is big for the ISSB, as its jurisdictions begin adopting S1 and S2.

Investors, including trillion-dollar fund Norges Bank Investment Management (NBIM), have been very vocal in their push for the ISSB’s global baseline, and have called out individual markets, such as Malaysia, for deviating from this.

Faber also issued a plea to policymakers to not stray from the baseline at the ISSB Symposium in New York in February.

But he said it was “clear from day one” that not every country would use the ISSB standards in the same way.

To help support implementation, the ISSB earlier this year issued a preview of its adoption guide, with different pathways and transition reliefs.

While the standards have been widely endorsed, just under 20 countries are in the process of adopting them.

Alongside differing voluntary and mandatory disclosures, Faber notes some jurisdictions will start with climate and then move on to further disclosures.

But some markets have deviated further from the ISSB’s reporting exemptions and introduced additional transition reliefs for their individual markets.

Some APAC markets and Canada, for example, have proposed two-year disclosure delays – as opposed to the one year delay suggested by the ISSB – for Scope 3 reporting, and disclosures on sustainability-related matters under IFRS S1.

Others, such as Malaysia and Japan, are also consulting with local stakeholders on whether any additional transition reliefs should be introduced.

Meanwhile, Turkey has fully adopted both standards from the start, while Australia has only currently adopted the ISSB’s climate disclosure standard. (These divergent approaches are closely followed by RI in the ISSB Adoption Tracker, which covers reporting timelines, assurance requirements and reporting exemptions.)


For the ISSB, it is “very important” that jurisdictions like Egypt, Kenya, Nigeria and South Africa are looking into adopting the standards, Faber says, because it shows they are “proportionate enough, including with the reliefs the ISSB has proposed, to be implemented wherever in the value chains of the global capital markets”.

He acknowledges that global standards need to address jurisdictions that have larger capital markets.

“But we absolutely also need jurisdictions that may be significantly smaller, and that may not have such sophisticated capital markets,” he adds.

The ISSB chair last month visited Kenya, Nigeria and South Africa to meet with governments and regulators, and begin capacity building initiatives.

Faber also doubles down on the message he has been delivering since the launch of S1 and S2: this is not only a compliance exercise, but an opportunity to redirect capital. Companies and governments are looking for the standards to “enhance the competitiveness of their economy”, he tells RI.

Faber also suggests the ISSB standards could have a role to play in facilitating global trade.

For Brazil, which will make ISSB disclosures mandatory from 2026, transparency from its side, as well as from the African countries it has trade agreements with, may increase trade potential and efficiency, he says.

Faber adds that disclosures made under ISSB standards can also feed into CSRD reporting, effectively creating a virtuous cycle of sustainability disclosures.

As an example, he says Nigeria adopting S1 and S2 means there will be better quality data from local companies falling into EU supply chains, and that this could also “ease the cost of assurance” for those reporting under the bloc’s rules.