Sustainability is no longer optional—it’s essential. Across industries, businesses are being held accountable for their environmental and social impacts. The finance industry, in particular, is facing increased pressure from investors, regulators, and consumers to provide greater transparency on sustainability performance.
With growing awareness and demand for responsible business practices, sustainability standards are evolving to help financial institutions and businesses measure, manage, and disclose their environmental, social, and governance (ESG) performance. These standards aim to reduce risk, drive accountability, and align companies with global sustainability goals.
The International Sustainability Standards Board (ISSB) issued two foundational standards in June 2023—ISSB S1 and ISSB S2—which are expected to be adopted by businesses starting in 2024.
ISSB S1 requires companies to report on the financial impacts of sustainability-related risks and opportunities. Key disclosures include:
The nature and extent of exposure to sustainability-related risks and opportunities
The company’s sustainability-related policies, governance, and risk management processes
The financial impact of these risks and opportunities on business performance
ISSB S2 expands on S1 by focusing specifically on climate-related disclosures, including:
Greenhouse gas (GHG) emissions across Scopes 1, 2, and 3
Climate transition plans and decarbonization strategies
Exposure to physical and transition risks related to climate change
To align with these standards and future-proof their operations, businesses should take the following strategic steps:
Assess Current Sustainability Performance
Evaluate current environmental and social practices to identify key gaps.
Set Clear Sustainability Goals
Establish SMART (Specific, Measurable, Achievable, Relevant, Time-bound) targets to guide progress.
Develop a Sustainability Roadmap
Create an actionable plan to reduce environmental impact and enhance social responsibility.
Implement Sustainability Management Systems
Introduce systems to track sustainability KPIs and integrate them into broader risk management.
Start Collecting and Organizing ESG Data
Consistent, high-quality data will be essential for future reporting under ISSB S1 and S2.
Update Financial Reporting Processes
Ensure alignment between sustainability reporting and existing financial disclosures.
Communicate Transparently
Create communication strategies to engage investors, customers, and stakeholders effectively.
Embracing ISSB S1 and S2 standards isn’t just about compliance—it’s a strategic advantage. Key benefits include:
Attracting Sustainable Investment
Investors favor businesses with strong ESG performance and transparent reporting.
Winning and Retaining Customers
Consumers are increasingly loyal to brands that reflect their sustainability values.
Reducing Regulatory Risk
Stay ahead of evolving regulations and minimize the risk of non-compliance.
Boosting Operational Efficiency
Sustainability initiatives often lead to cost savings and resource optimization.
Enhancing Brand Reputation
A credible commitment to sustainability strengthens brand trust and employee engagement.
The introduction of ISSB S1 and S2 marks a pivotal shift in sustainability reporting. For businesses, the time to act is now. Early preparation not only ensures compliance but also unlocks competitive advantages—from enhanced transparency and reduced risk to stronger stakeholder relationships and long-term success.
By aligning with global sustainability standards, businesses in the finance industry—and beyond—can lead with purpose, create meaningful impact, and thrive in an increasingly ESG-conscious world.