As the November meeting of the International Sustainability Standards Board (ISSB) drew to a close, the faithful audience waited to see if white smoke would appear to announce the arrival of a new standard.
Well, there was no white smoke, because there was never going to be a new standard born there and then. But lo and behold, the ISSB members voted and unanimously approved moving forward with standard-setting activities in relation to nature-related risks and opportunities. This came with two caveats: the form of the standard setting will be subject to a separate discussion, and the formal decision to move to standard setting will be a separate discussion – so the smoke remains very black.
This vote was the second in a series of three. In a first vote, the board unanimously agreed to build on the TNFD recommendations for their nature-related work - hardly surprising.
And, in the third vote, ISSB members were asked whether they agreed that educational materials [should be] undertaken after the standard setting – to which everyone, except Elizabeth Seeger, voted in favour.
Most of the meeting was devoted to the thorny issue of educational material versus standards setting and the order in which they should be undertaken. Seeger was supportive of educational material for several reasons, mainly tied to improving understanding, supporting implementation, and avoiding confusion in the market.
She said the requirement in IFRS S1 to disclose all sustainability-related risks and opportunities is "poorly understood", and argued that educational material could illustrate how this requirement applies in practice, including for nature-related topics. This, she argued, would help with capacity building for companies trying to implement IFRS S1 and IFRS S2.
Seeger warned that the market tends to group issues (like climate, nature, social topics) separately. She believes that educational material could clarify how different sustainability topics are connected, as per IFRS S1's requirements, which would "prevent the market from treating nature as an isolated disclosure topic."
While supportive of standard setting for nature-related risks and opportunities, Seeger said "the world is not ready for another IFRS S2-level standard right now", and therefore educational materials can be a practical interim step while more robust due process happens for standards.
Richard Barker was the most vocal opponent of education material being undertaken now rather than later, for three reasons.
First, there is no agreed content to educate people on yet, he argued. "Educational material can only explain board decisions, not create new concepts. The board has not agreed on key concepts, definitions or metrics for nature. So, he said, there is nothing legitimate to 'educate' stakeholders about."
Since IFRS S1 contains no nature-specific requirements, any educational material would either repeat what is already obvious, or start making claims the board has not agreed to, Barker continued.
Secondly, he noted that the development of educational material has a weaker due process than standard setting, as it is not exposed to full public consultation, unlike standards.
"Releasing guidance without transparency risks looking like the board is working in an 'ivory tower' and not engaging the market," he told fellow board members. "Because the whole board is not involved in developing educational materials, it would bypass proper governance and reduce the board's ownership of the thinking."
Finally, Barker believes developing educational materials would slow down real progress, because the IFRS staff resources are limited, and any time spent on educational materials would directly delay standard-setting work.
"Standard setting could be done quickly if the first phase focuses only on foundational concepts (scope, definitions, ecosystem services, etc.) and draws heavily from TNFD," he said.
ISSB vice chair Jingdong Hua acknowledged the value of educational material, especially for capacity building and helping preparers, for example on topics like the nature/climate link or how nature fits within IFRS S1 reporting.
However, he shared Barker's, and some other board members', concerns about how educational material is positioned relative to standard setting.
As a result, he was supportive of producing educational material, but only after or alongside standard setting - not before it, and only if it does not distract from the main task of creating a high-quality standard.
ISSB vice chair Sue Lloyd echoed these comments, arguing that educational material may be useful, but it should be a secondary step - created after the standard is developed, not before or alongside it.
Hence, she proposed and went ahead with a vote on producing educational material that would be sequenced after standard setting, not in parallel or before it.
