The International Sustainability Standards Board Standards S1 and S2: six key points to know and implications for Malaysian companies

The International Sustainability Standards Board (ISSB), which is part of the International Financial Reporting Standards Foundation (IFRS), was established in response to calls from investors and regulators to develop globally comparable reporting standards on sustainability.
After consultation from various stakeholders the ISSB released its first two IFRS Sustainability Disclosure Standards on 26 June 2023:
  1. IFRS S1, General Requirements for Disclosure of Sustainability-related Financial Information; and
  2. IFRS S2, Climate-related Disclosures.
These standards, which are said to revolutionise sustainability reporting, will be effective for annual reporting years starting after 1 January 2024.
IFRS S1 provides a set of disclosure requirements designed to enable companies to communicate to investors about the sustainability-related risks and opportunities they face over the short, medium and long term. IFRS S2 sets out specific climate-related disclosures and is designed to be used with IFRS S1.1 Together, they are meant to ensure that companies provide sustainability-related information alongside financial statements within the same reporting package.
Here are six key points you need to know about IFRS S1 and IFRS S2:2
Point 1: IFRS S1 and S2 are global disclosure standards
The two reporting standards harmonise disclosures for capital markets on a global level and are thus truly global disclosure standards. They allow companies and investors alike to have one single, global baseline for sustainability disclosures. The support for a comprehensive global baseline is a clear sign of the widespread demand for a consistent understanding of how sustainability factors may affect a company’s prospects.
Additional requirements set forth by national regulators may be built on top of the two standards. Given the plethora of existing standards and the complaint by many stakeholders that there is not one single, unified standard, IFRS S1 and S2 certainly have the potential to become sustainability standards which are used all around the world.
Point 2: IFRS S1 and S2 have received support from around the world
Although formally IFRS standards, IFRS S1 and S2 are a joint effort by investors, companies, policy makers and market regulators from around the world. Among those involved were the International Organization of Securities Commissions (IOSCO), the Financial Stability Board, the G20 and the G7 Leaders.
The approach taken was extremely rigorous. IFRS S1 and S2 used the same approach that is generally used to develop IFRS Accounting Standards. In total, there were over 1,400 responses to the proposals made.
The wide involvement from key stakeholders and decision makers from around the world give IFRS S1 and S2 the support and credibility ISSB is aiming for. Given the fact that the International Financial Reporting Standards have replaced many different national accounting standards around the world, it would not surprise if IFRS S1 and S2 were to eventually become the leading sustainability reporting standards around the world.
Point 3: IFRS S1 and S2 focus on the disclosure of capital markets
The information that must be disclosed under IFRS S1 and S2 is limited to information that is material, proportionate and decision-useful to investors. The standards thus focus exclusively on capital markets.
As financial reporting standards, it makes sense the IFRS S1 and S2 focus on financial measures only. They allow companies to report their sustainability-related risks and opportunities and to make specific climate-related disclosures as are required by financial markets. The reporting is made for the short, medium and longer term.
Point 4: IFRS S1 and S2 build on and consolidate the existing framework of initiatives
IFRS S1 and S2 did not reinvent the wheel by starting everything from scratch. Rather, they build on existing frameworks and recommendations and consolidate them. This includes the World Economic Forum metrics to streamline sustainability disclosures, the Task Force on Climate-Related Financial Disclosures (TFCD) Recommendations, the Climate Disclosure Standards Board (CDSB) Framework and others. 
By not starting afresh but rather building on existing frameworks and initiatives and consolidating them, IFRS S1 and S2 are an important step towards harmonization. Companies around the world which have already invested significant amounts of money in sustainability disclosures will not have made these investments in vain. This will greatly contribute to the wider acceptance of the two standards.
Point 5: IFRS S1 and S2 will reduce duplicative reporting
In line with the fact that IFRS S1 and S2 build on existing frameworks and consolidate other standards, with their aim to achieve global comparability for financial markets, the standards will reduce the need for duplicative reporting.
The decision to design the standards in a way that national requirements may build on the existing framework was further extremely helpful. This easily allows national legislators to develop further requirements and add them on top of the standards.
Furthermore, it is noteworthy that there is a partnership between the ISSB and the Global Reporting Initiative (GRI). As a result, IFRS S1 and S2 are interoperable with GRI standards. This reduces the disclosure burden for companies which use both IFRS S1 and S2 on the one hand and GRI Standards on the other hand.
Point 6: IFRS S1 and S2 are closely connected with financial statements
IFRS S1 and S2 are not “standalone” standards. They complement financial reporting standards by building on the concepts underpinning IFRS Accounting Standards, which are already required for use by more than 140 jurisdictions around the world.
The fact that IFRS S1 and S2 work with any accounting requirements and alongside financial statements as part of the same reporting package means that they meaningfully complement general financial reporting standards. This makes it easier for companies which want to report reliable data to financial markets, as well as for investors in search of such reliable data.
How do IFRS S1 and S2 affect Malaysian companies?
The Paris Agreement entered into force on 4 November 2016 and has over 190 signatories, with Malaysia being one of them. However, the Paris Agreement as an international treaty could only be incorporated as local laws by an Act of Parliament.3 The authors have been unable to locate any such Act of Parliament. As things stand now, the Paris Agreement is thus not in force in Malaysia.
Nevertheless, on 26 June 2023, the Malaysian Prime Minister has affirmed Malaysia’s determination to be well-positioned to play its part in reducing emissions while ensuring that it is ready for the growth of the low-carbon economy. He further said that the Nationally Determined Contribution was revised with the goal now being to reduce the intensity of greenhouse gas emissions by 45% by 2030 compared to 2005 levels.4
With respect to IFRS S1 and S2 specifically, Malaysia has not taken many steps so far. However, the Securities Commission Malaysia has recently established a national-level Advisory Committee on Sustainability Reporting (ACSR), with the endorsement of the Ministry of Finance, in an effort to support the new IFRS standards in Malaysia.5 The ACSR is looking into the enablers to facilitate the implementation of the ISSB Standards in Malaysia.
The efforts by the Malaysian regulators are very much welcomed as sustainability reporting becomes increasingly important, especially to foreign investors. For instance, legislations in other countries, such as the German Supply Chain Responsibility Act, or the soon to be passed European Corporate Sustainability Directive, will increase the demand for a more reliable environmental (and social responsibility) reporting.
Malaysian companies which have already implemented international stadards will be in an advantageous position because they can more easily report relevant information. To that end, the authors hope that the consultations by ACSR will soon be concluded so that Malaysian companies do not fall behind in comparison to those from other countries.
Aside from IFRS S1 and S2, sustainability reporting has already been made mandatory for all publicly listed companies in Malaysia from 2016 onwards. Further, on 26 September 2022, Bursa Malaysia Securities Berhad (Bursa Malaysia) announced amendments to enhance the sustainability reporting requirements in the Main Market Listing Requirements and the ACE Market Listing Requirements.6
Any company listed in Malaysia is required to have a Sustainability Statement, which is a narrative statement of the company’s management of material economic, environmental and social risks and opportunities and comprises part of the annual report. The listed company must disclose the following information in its Sustainability Statement:
  • the governance structure to manage the economic, environmental and social risks and opportunities (“sustainability matters”);
  • the scope of the Sustainability Statement and the basis for the scope;
  • how material sustainability matters are identified and why they are important to the listed corporation; and
  • how material sustainability matters are managed, including details on policies to manage such matters, measures taken to deal with these matters and indicators which demonstrate the performance of the listed corporation in managing the said matters.
The above requirements will apply to Sustainability Statements issued by a listed corporation for a financial year which ends on or after 31 December 2024. Notwithstanding this, it is important for Malaysian companies to be ready to have the proper framework and take the requisite steps for implementation already at this stage. To assist listed issuers and listed corporations to embark on this phase of their sustainability journey, Bursa Malaysia has updated its Sustainability Reporting Guide and Toolkits, which can be accessed here.
For further information on this topic please contact Dr. Harald Sippel, Head of Skrine’s European Desk (, +60 18 211 4958) or Raja Nadhil Aqran, Senior Associate (, +60 10 212 9691).

1 IFRS, ISSB issues inaugural global sustainability disclosure standards, 26 June 2023, available at: (last accessed on 2023-07-03).
2 For additional information, see IFRS, Ten things to know about the first ISSB Standards, 27 June 2023, available at: (last accessed on 2023-07-03).
3 See the Court of Appeal in AirAsia Bhd v Rafizah Shima bt Mohamed Aris [2014] 5 MLJ 318 (pages 329 to 332) and Shankar J (as he then was) in Public Prosecutor v Narongne Sookpavit & Ors [1987] 2 MLJ 100 (page 105).
4 The Star, Two roadmaps on sustainable energy security by second half of 2023, says PM, 26th June 2023, available at: (last accessed on 2023-07-03).
5 Securities Commission Malaysia, SC sets up inter-agency committee to support implementation of the ISSB standards, 24 May 2023, available at (last accessed on 2023-07-03).
6 Bursa Malaysia, Bursa Malaysia enhances sustainability reporting framework with new climate change reporting, 26 September 2022, available at  (last accessed on 2023-07-03).

This alert contains general information only. It does not constitute legal advice nor an expression of legal opinion and should not be relied upon as such. For further information, kindly contact