ISSB Consults on Nature-Related Disclosures

On 22 October 2026, the International Sustainability Standards Board (ISSB) published an Exposure Draft of IFRS Sustainability Disclosure Practice Statement 1 Nature-related Disclosures (the Exposure Draft or practice statement). The Exposure Draft sets out disclosure requirements, incremental to IFRS S1 and IFRS S2, for nature-related risks and opportunities that could reasonably be expected to affect an entity’s cash flows, access to finance, or cost of capital. The consultation closes on 19 February 2027.

In this article, we consider the key features of the proposals, the choice of a practice statement over a standard, and how the requirements could become mandatory in future.

Background

IFRS S1’s framework standard, to the extent adopted as law in a particular jurisdiction, already requires entities to disclose material information about all sustainability-related risks and opportunities, including those related to nature. However, in response to investor demand for more consistent, comparable, and verifiable nature-related information, the Exposure Draft focusses on providing additional detail on how entities can provide this information. The Exposure Draft draws on the recommendations, metrics, and additional guidance from the Taskforce on Nature-related Financial Disclosures (TNFD).The TNFD was created in 2021 and published its final recommendations in 2023. The recommendations provide companies and financial institutions with a risk management and disclosure framework for identifying, assessing, managing, and, where appropriate, disclosing nature-related, impacts, risks, and opportunities. The framework consists of general requirements and recommended disclosures organised under four pillars (governance. strategy, risk and impact management, and metrics and targets), which are based on, and consistent with, those of the Task Force on Climate-related Financial Disclosures (TCFD).

The Exposure Draft follows the four core content areas of IFRS S1. Selected requirements under the Exposure Draft include:

1. Governance: Entities must disclose whether and how oversight bodies and management take account of location-related considerations, and the entity’s interactions with indigenous peoples, local communities, and affected stakeholders.
2. Strategy: Entities must disclose how they have responded, and plan to respond, to nature-related risks and opportunities, regardless of whether those actions form part of a transition plan.
3. Risk management: Entities must disclose whether and how they use nature-related scenario analysis to inform their assessment of nature-related risks and their identification of nature-related opportunities.
4. Metrics and targets: Entities must disclose the amount and percentage of assets or business activities vulnerable to nature-related risks, as well as the amount and percentage aligned with nature-related opportunities. For each nature-related target, entities must disclose what the target relates to, its location-specific aspects, and whether and how it was informed by law or regulation.

Key Features of the Exposure Draft

Objectives and Connection With Climate

The Exposure Draft aims to help an entity disclose information about its nature-related risks and opportunities that is useful to primary users of general purpose financial reports, and to help users understand how an entity’s nature-related and climate-related risks and opportunities are connected.

Under the Exposure Draft, entities must also disclose trade-offs between climate and nature goals. The draft gives the example of an investment in on-site renewable energy to reduce greenhouse gas emissions which, through land use or infrastructure development, might affect local ecosystems, biodiversity, or soil quality. This will be particularly relevant for energy and infrastructure projects, where decarbonisation investments may give rise to nature-related risks.

Terminology and Identifying Risks

The Exposure Draft refers to “environmental resources” rather than the TNFD term “environmental assets”, as elements of nature do not necessarily meet the accounting definition of an asset. Nature-related risks comprise physical and transition risks, with transition risks including policy, legal, technological, market, and reputational risks; entities would not be required to distinguish between the two in their disclosures.

When identifying nature-related risks and opportunities, an entity must consider (a) the location of its assets and activities throughout the value chain, including the characteristics of nature in those locations; and (b) its interactions, including engagement, with indigenous peoples, local communities, and affected stakeholders. Sensitive locations include water-stressed areas, areas important for biodiversity, areas of high or rapidly declining ecosystem integrity, and areas important for ecosystem services. In identifying nature-related risks, entities may, but are not required to, use the TNFD’s LEAP approach.The LEAP approach intends to assist organisations in the identification and assessment of nature-related issues. It involves four phases of assessment: locate, evaluate, assess, and prepare.

Practice Statement Over Standard

The ISSB chose a practice statement rather than a standard, with a stated goal of minimising disruption to the ongoing global implementation and adoption of IFRS S1 and IFRS S2. A practice statement is subject to the same due process as a standard, but an entity can assert compliance with IFRS Sustainability Disclosure Standards without applying the practice statement. As such, an entity that does apply the finalised Exposure Draft may claim compliance with it only if the entity complies with all of the relevant requirements and those of IFRS Sustainability Disclosure Standards.

 

Jurisdictions adopting the ISSB standards, or using them to develop national standards, may choose to make the final Exposure Draft mandatory or available on a voluntary basis. This creates potential tension for companies reporting in multiple jurisdictions.

 

A jurisdiction need not mandate the final Exposure Draft to be described as an adopter of the ISSB standards. However, jurisdictions adopting the ISSB standards, or using them to develop national standards, may choose to make the final Exposure Draft mandatory or available on a voluntary basis. This creates potential tension for companies reporting in multiple jurisdictions, which may face nature-related disclosure obligations in some markets but not others, alongside different approaches under the EU’s European Sustainability Reporting Standards (ESRS).

Potential Move to Mandatory Reporting

Although voluntary at the ISSB level, the final Exposure Draft could become mandatory in two ways. First, the ISSB has said that it could later issue nature-related content as a standard, either as a stand-alone standard or in another form such as an appendix to IFRS S1. Any such step would be subject to further public consultation and could take into account global progress in adopting IFRS S1 and IFRS S2 and market experience from voluntary or mandatory application of the final Exposure Draft. The form of the practice statement therefore allows the ISSB to assess developments over time before deciding whether to make the requirements part of the core standards. The current consultation already asks whether the content should instead be issued as a standard and, if so, what effective date should apply.

Second, individual jurisdictions could mandate the final Exposure Draft independently of any ISSB decision, for example when adopting or updating national standards based on IFRS S1 and IFRS S2 (such as the UK SRS). Companies should therefore monitor both the ISSB’s post-consultation decisions and the positions taken by regulators in each jurisdiction in which they report.

Application and Transition

The final Exposure Draft would be available for use from its issuance date by entities applying IFRS S1 and IFRS S2. The date of initial application must be the beginning of an annual reporting period, and entities would not be required to provide comparative information in the first year of application.

Implications and Next Steps

The consultation closes on 19 February 2027, and affected stakeholders may consider responding. The consultation questions cover 17 topics, including the choice of a practice statement format over a standard, possible effective dates, interoperability with ESRS and Global Reporting Initiative standards, proportionality, and whether the requirements could be assured at reasonable cost.

This article was prepared with the assistance of Samantha Banfield at Latham & Watkins.

Latham & Watkins will continue to monitor developments relating to the ISSB and nature-related disclosure landscape.