The world of global sustainability reporting is about to shift again in 2025, with regulators fine-tuning disclosure practices and investors trying to get solid returns in a reporting landscape that’s constantly changing.
To help smooth things out, the International Sustainability Standards Board (ISSB) was set up to address the patchwork of sustainability disclosures, ensuring investors get high-quality, decision-useful information. The ISSB operates under the IFRS Foundation, which already has a trusted process for financial reporting. In June 2023, the ISSB rolled out two major standards: S1 and S2. These focus on general sustainability disclosures (S1) and climate-related disclosures (S2), so companies know exactly what to report and investors know what to look for.
Recently, in a webinar hosted by Goldman Sachs, experts from the IFRS Foundation shared insights into how these standards are being adopted globally and what companies can expect when it comes to new disclosure requirements.
ISSB standards are gaining traction around the world, with 35 jurisdictions at different stages of implementation. Big economies like Brazil, the UK, Japan, and Turkey are already moving towards full adoption, with Turkey even leading the charge in making reporting mandatory.
Plus, the International Organisation of Securities Commissions (IOSCO) has been working on a network within its Growth and Emerging Markets Committee (GEMC) to support emerging markets in rolling out these standards. However, the adoption process varies by region, and ISSB is actively working to keep things consistent across jurisdictions with guides and support materials to avoid fragmentation.
One of the main challenges, though, is the different ESG standards across regions. This has led to talks about simplifying the reporting requirements. ISSB advocates for a “building block” approach, where regions can add their own specific policies on top of a solid, globally consistent baseline. To help with the complexity, ISSB even released an “interoperability guide” in early 2024, which is designed to help companies navigate the differences, especially when it comes to aligning with Sustainability Accounting Standards Board (SASB) sector standards, transition plan disclosures, and digital reporting.
Looking ahead, there’s talk of new areas of focus like biodiversity and human capital disclosures. New standards (S3, S4) are being considered for these topics, and the IFRS team also pointed out that investor input is key to refining sustainability reporting tailored to specific industries.
So, what do investors think about all of this? Fidelity International, in partnership with Coalition Greenwich, recently published a survey that sheds light on investor views regarding sustainable investing.
The Fidelity Professional Investor Survey revealed that sustainability is becoming more embedded in investment strategies, but there are still challenges in properly measuring and implementing ESG factors. The survey found that one of the biggest hurdles for investors is the difficulty in measuring the impact of their investments. Without credible data on material physical risks, the costs of inaction are unclear. This lack of transparency makes it tough for companies to integrate sustainability into their strategies, and it hampers investors’ ability to assess and value these factors accurately.
When it comes to achieving positive returns, surveyed investors said that portfolio decarbonisation is the second most effective strategy, after thematic investing. However, this approach often lacks a significant real-world impact and can contribute to confusion around ESG terminology. For example, simply excluding energy companies from a portfolio doesn’t solve environmental issues; it just shifts them elsewhere.
Interestingly, more and more investors are focusing on allocating capital not just to climate solutions but also to companies that help scale those solutions – think grid expansion companies. There’s also growing interest in transition finance, especially for sectors that are tough to decarbonise, as well as engaging with major emitters to help them shift toward a lower-carbon economy. All of this points to a clear need for better measurement tools, clearer definitions, and stronger regulatory frameworks to keep advancing sustainable investing practices. One thing is for sure—ESG will continue to be at the core of institutional investment strategies for years to come.
