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FSA Credential Level I study materials
FSA Credential Level I study resources

FSA Credential Level I: IFRS Sustainability Disclosure Standards (ISSB Standards)

FSA Credential Level I · Work through your exam, one topic at a time.

All guide sections

IFRS Sustainability Disclosure Standards (ISSB Standards)

IFRS S1 and IFRS S2 form the ISSB's global baseline for sustainability-related financial disclosures. The exam tests how the two standards fit together, how materiality and connectivity operate, and which transition reliefs exist.

Architecture

  • IFRS S1 sets general requirements; IFRS S2 adds climate-specific requirements. Both use four pillars: governance, strategy, risk management, and metrics and targets.
  • The objective is decision-useful information for primary users of general purpose financial reports, not a broad stakeholder sustainability report. Materiality is judged by whether omitting or misstating information could reasonably be expected to influence those users.
  • Report the same reporting entity as the financial statements, at the same time, with comparatives and connected information. Sustainability disclosures should reconcile to financial statements where relevant.
  • IFRS S2 covers physical and transition risks and opportunities, scenario analysis for resilience, GHG emissions (Scope 1, 2 and 3), targets and industry-based metrics. IFRS S1 can draw on SASB Standards and other investor-focused frameworks to identify industry metrics.

Worked example

A food retailer concludes that water scarcity is a material sustainability risk. Under IFRS S1 it discloses board oversight, the effect on strategy and financial planning, risk-management processes, and water withdrawal and recycling metrics with targets. If the risk is climate-related, IFRS S2 also requires GHG emissions and climate resilience analysis. The reasoning: start from materiality and enterprise value, then connect governance, strategy, risk management and metrics; do not paste an ESG report.

Traps

  • Treating the ISSB Standards as a complete ESG code covering every stakeholder issue.
  • Disclosing topics that are popular but not material.
  • Omitting connectivity to financial statements, or reporting outside the financial reporting timetable.
  • Assuming first-year reliefs, such as climate-only reporting or Scope 3 deferral, continue indefinitely.