29 July 2022
Emmanuel Faber, Chair
Suzanne Lloyd, Vice-Chair
International Sustainability Standards Board
The IFRS Foundation
Columbus Building, 7 Westferry Circus
Canary Wharf, London, E14 4HD
United Kingdom

Comments on the Exposure Draft (ED/2022/S1) General Requirements forDisclosure of Sustainability-related Financial Information
Introduction
1. The Sustainability Standards Board of Japan (‘the SSBJ’ or ‘we’) welcome theopportunity to provide our comments on the International Sustainability Standards
Board (the ‘ISSB’)’s Exposure Draft (ED/2022/S1) IFRS S1 General Requirements
for Disclosure of Sustainability-related Financial Information (‘proposed S1Standard’), published in March 2022. Our comments on the Exposure Draft(ED/2022/S2) IFRS S2 Climate-related Disclosures (‘proposed S2 Standard’) havebeen submitted separately and we expect that they are read together with ourcomments in this letter. In this letter, we refer to the proposed S1 Standard and the
proposed S2 Standard collectively as the ‘ED’.
Development of global standards
2. Sustainability-related financial disclosures is an issue to be addressed globally, andwe believe that the ISSB can develop internationally consistent standards. However,sustainability-related financial disclosures have a relatively short history comparedto financial statements, and the number of jurisdictions and entities that provide suchdisclosures is smaller than the number of those that disclose financial statements.
In addition, sustainability-related financial disclosures are yet to be fully establishedwithin the corporate reporting system, and we observe that we are currently in thetrial-and-error stage. Accordingly, we believe that it is important to provide
stakeholders around the world sufficient opportunities to participate in the standard1 / 55

setting process, and that it is necessary to put in place processes allowing flexible
standard-setting, acknowledging that sustainability disclosure standards may be more
frequently subject to change when compared with accounting standards.
3. Our understanding is that IFRS Sustainability Disclosure Standards that will be
developed by the ISSB will not automatically become global standards. Rather, it
is for each jurisdiction to decide whether to apply them, and the ISSB does not havethe authority to determine who should or could apply them. Accordingly, we
believe that IFRS Sustainability Disclosure Standards must be accepted byjurisdictions around the world to become truly global standards.
4. In this context, it is necessary to consider that the progress of initiatives to disclosesustainability-related financial information varies from jurisdiction to jurisdiction,and from entity to entity within the same jurisdiction. In order to enhanceinteroperability and compatibility of the sustainability disclosure standards between
the ISSB and each jurisdiction, we believe that the ISSB should adopt a phased
approach where the ISSB would initially set out the most core disclosure
requirements that are useful to both users and preparers and are actually applicablein each jurisdiction, and enhance the core disclosure requirements once those core
disclosure requirements are accepted in each jurisdiction.
the following should be considered:

In doing so, we believe(a) We agree with the objective in the ED that an entity discloses information about
its significant sustainability-related risks and opportunities that is useful to theprimary users of general purpose financial reporting when they assess enterprisevalue and decide whether to provide resources to the entity. While thedisclosure requirements proposed in the ED are considered to be necessary tomeet this objective, some of the disclosure requirements may be difficult for
certain jurisdictions or entities, whose disclosures of sustainability-related
financial information are not fully advanced, to meet the requirements set by the
ISSB to achieve global consistency. For example, jurisdictions or entities may
not be ready to establish corporate reporting systems and processes to provide
sustainability-related financial disclosures about the entity’s value chain, togather information that serves as the basis to determine whether to provide
disclosures about a specific theme in the absence of the specific thematicstandards, and to establish systems and processes for quantitative disclosures
regarding expected financial impacts of significant sustainability-related risks
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and opportunities over the short-, medium- and long-term.
(b) Regarding industry-based standards, we believe it is critically important to reachglobal consensus on the industry classification and industry-based disclosure
requirements. However, at this moment, we do not think there is global
consensus.
Our understanding is that the SASB Standards have beendeveloped to address a wide range of sustainability-related themes and should
not be ‘processed’ to become guidance limited to climate. Nevertheless, we
believe that the ISSB should consider whether the industry classification in the
proposed S2 Standard will serve as the appropriate industry classification evenwhen developing industry-based standards that address sustainability-related
themes other than climate.
5. The majority of jurisdictions around the world have not yet established organisations
for setting sustainability disclosure standards, and it is likely that many jurisdictions
do not have in place procedures to collect and discuss the views within thejurisdiction. Accordingly, we believe that the ISSB should have the perspective of
inclusion and conduct highly transparent discussions, so that the discussions on the
ED and deliverables to be published by the ISSB in the future include views not only
from specific stakeholders who are advanced in sustainability efforts.
6. Specifically, as a global standard setter, the ISSB should ensure sufficient time forthe comment period, considering the time needed for translation and discussion.
Otherwise potentially diverse comments from jurisdictions where English is not thenative language may be in substance restricted.
References to guidance published by organisations other than the ISSB
7. The ED refers to guidance published by organisations other than the ISSB.
Appendix B Industry-based disclosure requirements of the proposed S2 Standard
includes many proposals saying:
The entity shall consider [the name of the guidance published by anorganisation other than the ISSB] as a normative reference, thus any
updates to the guidance made year-on-year shall be considered updates
to this guidance.
8. We have reservations with proposals suggesting that guidance published byorganisations other than the ISSB which the ISSB cannot control automatically forms
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part of IFRS Sustainability Disclosure Standards. If the ISSB were to prescribe
requirements that refer to organisations other than the ISSB in IFRS Sustainability
Disclosure Standards, we suggest that the ISSB’s due process clearly state and thus
the ISSB comply, in accordance with its due process, with a process that would
require the ISSB to validate any guidance (including any updates or amendments
thereto) published by organisations other than the ISSB. We think, for example, thefollowing criteria should be included in the ISSB’s due process when the ISSB
considers the validity of the guidance:(a) Whether the information provided by the guidance published by organisations
other than the ISSB is relevant to the objectives of IFRS Sustainability
Disclosure Standards;(b) Whether the information provided by the guidance published by organisations
other than the ISSB possesses the ‘qualitative characteristics of usefulsustainability-related financial information’ that are prescribed in Appendix Cof the proposed S1 Standard; and(c) Whether the due process to develop the guidance is appropriately in place andthe organisation other than the ISSB is complying with such due process.
9. Considering the fact that sustainability disclosure standards have a relatively shorthistory and are currently in the trial-and-error stage, the guidance mentioned above
may be updated or amended frequently, and more appropriate guidance may be
developed. Accordingly, we believe that IFRS Sustainability Disclosure Standards
should maintain a certain level of flexibility so as to respond to such changes.
10. While we believe that all requirements prescribed by the ISSB should follow
extensive due process, we suggest classifying guidance issued by the ISSB into two,
namely, ‘the main text’ and ‘the addendum’, based on the expected likelihood of thefrequency of the amendments. In our view, this would enable the ISSB to pursue
both stability and flexibility of its standards and also enhance the predictability of
constituents in terms of which part of the ISSB Standards are likely to change
relatively frequently and which are not. From a standard-setting perspective, we
believe this would lead to higher acceptance by constituents when the ISSB decides
to have longer or shorter comment periods for proposals to amend the ISSB Standards.
We think guidance issued by the ISSB can be classified into ‘the main text’ and ‘theaddendum’ in the following manner:
4 / 55(a) ‘The main text’ would prescribe only the most core disclosure requirements.
The requirements prescribed in ‘the main text’ would be subject to the postimplementation review, but they generally are not expected to be amended
frequently, and thus the common understanding would be that ‘the main text’
will continue to be used for a certain period of time, thereby it achieves thestability of the ISSB Standards. As such, new additions or amendments to ‘themain text’ are likely to warrant a relatively long comment period. ‘The maintext’ generally would not refer to guidance published by specific organisations
other than the ISSB, such as the GHG Protocol. Rather, ‘the main text’ may
use expressions such as ‘measurement criteria for greenhouse gases that areused internationally and widely’.
(b) ‘The addendum’ would prescribe guidance that is expected to change relatively
frequently.
‘The addendum’ may specify metrics and references toorganisations other than the ISSB regarding the measurement of such metrics toenhance comparability (for example, the GHG Protocol that is referred to in
calculating GHG emissions in the proposed S2 Standard, and various guidance
published by organisations other than the ISSB that are referred to in Appendix
B of the proposed S2 Standard Industry-based disclosure requirements). If the
ISSB develops measurement guidance on its own, it may include them in ‘theaddendum’. There would be no difference between the guidance in ‘the maintext’ and ‘the addendum’ in the sense that both types of guidance would be
authoritative.
When guidance published by organisations other than the ISSB but are referred
to in ‘the addendum’ are amended or the measurement guidance developed by
the ISSB on its own need to be amended, the ISSB should consider the validityof the change and further amend ‘the addendum’ if necessary. We think aprocess similar to that used by the International Accounting Standards Board (the‘IASB’) for ‘narrow-scope amendments’ can be adopted. By doing so, the
ISSB will maintain the flexibility in modifying its standards in a timely manner.
We think it is important that the ISSB communicates to its constituents inadvance that the comment period for changes to ‘the addendum’ would generally
be shorter than the comment period for changes to ‘the main text’.
11. In addition, given that practices related to the disclosures of sustainability-related
financial information are under development and currently diversity in practice exists,

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we are of the view that entities should be permitted to refer to guidance that are notreferred to in ‘the addendum’. However, in this case, the entities should be required
to disclose why they referred to guidance which is not referred to in ‘the addendum’.
Global baseline
12. We agree with the building block approach whereby the ISSB provides a‘comprehensive global baseline’ and each jurisdiction prescribes additional
disclosure requirements on top of such baseline to meet the needs of users.
13. In this context, we think the proposals regarding sustainability-related financial
information disclosures published by the U.S. Securities and Exchange Commission(‘the SEC’) and the European Financial Reporting Advisory Group (‘EFRAG’),respectively, at a timing close to when the ISSB published the ED, can be used as test
cases. Given that these proposals come from jurisdictions where practices related
to disclosures of sustainability-related financial information are relatively advanced
and, if we are to view these proposals as the result of adding jurisdiction-specificrequirements to the ‘comprehensive global baseline’, we believe that the‘comprehensive global baseline’ that is to be developed by the ISSB should notinclude disclosure requirements that exceed these proposals (please note that thestandard to be compared should mainly be the proposed S2 Standard, because the
SEC’s proposals relate to climate-related disclosures only).1
14. Because sustainability-related risks and opportunities differ significantly in terms of
their magnitude and likelihood depending on the industry, in light of the objective of
the ED to provide information that contributes to the assessment of enterprise value,
there is a certain level of support in our jurisdiction for industry-based standards.
15. However, we specifically would like to note that the SEC’s proposal does not include
industry-based standards, and that EFRAG expects to address industry-based
standards in the future. We believe that the industry-based standards should be
developed based on global consensus but the proposed S2 Standard has been
proposed without such global consensus. We believe global consensus is needed
for several issues, such as the use of industry classification based on the SASBThe U.S. Securities and Exchange Commission (SEC) published a proposed rule on climate-related
disclosures for investors on 21 March 2022. In addition, the European Financial Reporting Advisory
Group (EFRAG) published its first exposure draft of the European Sustainability Reporting Standards(ESRS) on 29 April 2022.
1

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Standards, the granularity of requirements in the industry-based standards, clarifying
the context in which the requirements are derived from the disclosure objectives anddisclosures by entities that conduct business in more than one industry. We are of
the view that there are many issues that the ISSB needs to resolve if it were toincorporate the SASB Standards into IFRS Sustainability Disclosure Standards.
(Nevertheless, we think the disclosure topics are useful in identifying sustainabilityrelated risks and opportunities.)
16. In addition, it is our understanding that the SASB Standards have been developed toaddress a wide range of sustainability-related themes and thus they should not be‘processed’ to become guidance limited to climate-related industry-based standards.
Nevertheless, because the ED tries to isolate climate-specific industry-based
standards within the SASB Standards, the ED includes disclosure topics or metrics
that have little relevance to climate. As a result, we are concerned that these
disclosures could be onerous to entities.
For the reasons discussed above, we recommend that, as the policy of developingthe ‘comprehensive global baseline’, the ISSB give higher priority to thedevelopment of the thematic requirements (including disclosure topics) and develop
industry-based requirements once the above issues have been resolved.
Developing standards based on the principles-based approach
17. We are of the view that the ISSB should develop standards by adopting a principlesbased approach, which involves clearly explaining how specific disclosure
requirements were derived from the disclosure objectives. In addition, we think the
ISSB should explicitly declare this policy.
18. However, there are some proposals in the ED, particularly in Appendix B of the
proposed S2 Standard, where it is unclear how the disclosure requirements were
derived from the disclosure objectives and the description as to why the disclosure
requirements were needed is insufficient. Please refer to our comment letter to the
proposed S2 Standard for more detailed comments on the proposals in the proposed
S2 Standard.
Need to clarify the structure of Standards
19. The proposed S1 Standard consists of the ‘core content’ section and the ‘generalfeatures’ section. We are of the view that these should be separated into different

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standards because these sections address different issues.
20. We believe that separating the proposed S1 Standard will clearly distinguish between
the disclosures of the four elements of the ‘core content’ to be described at the entity
level and the theme-specific disclosures. We also believe that separating the
proposed S1 Standard will clarify the relationship between thematic standards, which
require detailed disclosures on the specific theme, and the general standards that
apply in the absence of specific thematic standards. Furthermore, we also believethat separating the proposed S1 Standard will clarify that requirements regarding thegeneral features apply to all IFRS Sustainability Disclosure Standards.
Materiality
Concept of Materiality: Interaction between ‘Significance’ and ‘Materiality’
21. Our understanding is that the ISSB is proposing a two-step process to identify the
information to be disclosed by requiring the reporting entity to ‘disclose material
information about all of the significant sustainability-related risks and opportunities
to which it is exposed’ (paragraphs 1 and 2 of the proposed S1 Standard). We
believe that the term ‘significant’ has a critically important role in this ED. Therefore,
we believe that the ISSB should explain and clarify the meaning of ‘significant
sustainability-related risks and opportunities’ and clarify what should be taken into
account when assessing ‘significance’ in the proposed S1 Standard.
22. In this context, paragraph BC40 of the Basis for Conclusions on the proposed S1Standard provides an explanation about ‘significant risks’, and we believe that the
ISSB could clarify the concept of ‘significant sustainability-related risks andopportunities’ in the proposed S1 Standard based on this explanation. We also
believe that the ISSB should clarify that the concept of ‘significance’ isfundamentally different from the concept of ‘materiality’, which is the basis to judge
whether an information could reasonably be expected to influence decisions that the
primary users of general purpose financial reporting make on the basis of thatreporting (that is, the basis to judge whether an information could be omitted).
Definition and application of ‘Material’
23. Paragraph BC71 of the Basis for Conclusions on the proposed S1 Standard states that‘materiality judgements about sustainability-related financial information will differ
from those for general purpose financial statements’. However, our understanding
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is that the definition of ‘material’ in paragraph 56 of the proposed S1 Standard isaligned with the definition of ‘material’ used in the IASB’s Conceptual Framework
for Financial Reporting and IAS 1 Presentation of Financial Statements. Therefore,
the ISSB should note that this might cause confusion for some readers who interpretthat the materiality judgements (that is, judgements regarding whether an information
could be omitted) for sustainability-related financial information would be the samefor general purpose financial statements.
24. We believe that there would be differences in the outcome of materiality judgements
between about the information reported in the financial statements and sustainabilityrelated financial information. This is because the scope of sustainability-related
financial information could be broader than the scope of information reported ingeneral purpose financial statements in terms of time horizon and likelihood as statedin paragraph 6 of the proposed S1 Standard, not because of the differences in thejudgements regarding whether a specific item is ‘material’.
25. Accordingly, we believe that the ISSB should sufficiently explain the differences in
the materiality judgements between about the information reported in general
purpose financial statements and sustainability-related financial information in theBasis for Conclusions on the proposed S1 Standard. Further, if there are points toconsider when making materiality judgements regarding sustainability-related
financial information, we recommend clarifying such considerations by reflecting
them in ‘the main text’ of the proposed S1 Standard.
Conceptual framework
26. We believe that the IASB’s Conceptual Framework for Financial Reporting (CFW)
and the ISSB’s Conceptual Framework for Sustainability Disclosure Standards
should be commonalised to the extent possible.
27. However, as stated in the ‘Introduction’ of Appendix C Qualitative characteristics
of useful sustainability-related financial information of the proposed S1 Standard,some concepts in the IASB’s CFW can be applied to sustainability-related financial
information, but others cannot, due to the differences between the nature of some of
the information to meet the objective of the ED and the nature of the information
provided in general purpose financial statements (for example, while the concept of‘neutral’ prescribed in paragraph 2.15 of the IASB’s CFW may be applied toquantitative information, ‘balance’ is likely to be more appropriate for qualitative
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information, in the context of sustainability-related financial information). Where
common concepts cannot be applied, we believe that the clarification of suchcircumstances is useful for the users of the standards.
28. We also note that some terms have different meanings depending on whether they
are used in the context of Accounting Standards or in the context of Sustainability
Disclosure Standards. We believe that the clarifications of such differences are also
useful to the users of the standards.
29. Further, we believe that the IASB and the ISSB should work together to clarify the
relationships between the above concepts and the concepts in the Exposure Draft of
the IFRS Practice Statement on Management Commentary (ED/2021/6).
Reporting entity
30. We agree with the proposal in paragraph 37 of the proposed S1 Standard which
proposes that ‘an entity’s sustainability-related financial disclosures shall be for thesame reporting entity as the related general purpose financial statements’.
31. However, we are of the view that the following issues need to be considered (pleaserefer to paragraph 23 of the Appendix to this letter for detailed information):(a) Paragraph 8 of the proposed S1 Standard does not require entities to apply IFRS
Accounting Standards when providing disclosures of sustainability-related
financial information in accordance with IFRS Sustainability DisclosureStandards. If entities are permitted to prepare general purpose financial
statements in accordance with the standards other than IFRS AccountingStandards, all entities, including those applying IFRS Accounting Standards,
should be required to disclose which accounting standards they have used as thebasis for preparing their general purpose financial statements.
(b) Our understanding is that information about the value chain is useful for primaryusers in assessing the entity’s enterprise value. However, describing the value
chain disclosure requirements in paragraphs 40 and 41 of the proposed S1Standard within the ‘Reporting entity’ section is potentially misleading in thesense that it could be interpreted as entities in the value chain also comprise thereporting entity. For this reason, disclosures of information about the value
chain should be included in a separate section of the proposed S1 Standard (forexample, with a new section following the ‘Reporting entity’ section). We also
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think that it should be clarified that information about the value chain is notnecessarily limited to information directly measured or reported by entities otherthan the reporting entity, but that such information may be disclosed by thereporting entity using estimation.
Frequency of reporting
Reporting at ‘the same time’
32. The ED proposes that an entity report its sustainability-related financial disclosuresat the same time as its financial statements (paragraph 66 of the proposed S1Standard). Given the ISSB’s objective of assessing the impact of significant
sustainability-related risks and opportunities on an entity’s enterprise value and the
ISSB’s position that sustainability-related financial information supplements andcomplements the information contained in the entity’s financial statements(paragraph BC6 of the proposed S1 Standard), we agree with this requirement inprinciple. However, in some jurisdictions, disclosures of sustainability-related
financial information and financial statements have evolved from different laws andregulations, and changes in these systems or practices (or both) are likely to be costly
and time-consuming.
If an entity becomes subject to both disclosures ofsustainability-related financial information and financial statements, the implicationsof the ED would be that information for both types of information would be due
whichever is due earlier under the laws and regulation, which could be impossible orsignificantly increase the burden on the entity. In addition, if disclosures for bothtypes of information were voluntary, the implications of the ED would be thatsustainability-related financial information would not be disclosed until the financial
statements are disclosed (or vice versa), and we are concerned that the timelinesswould be impaired when compared to current practices.
33. We believe that a global baseline should accommodate the various corporate
reporting system that exist around the world. Acknowledging that reporting at thesame time is desirable, we believe that the ISSB should permit entities to report at
different timings.
Reporting on ‘the same period’
34. Paragraph 66 of the proposed S1 Standard also proposes that the disclosures ofsustainability-related financial information cover the same reporting period covered

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in the financial statements. We agree with this requirement in principle, because
having the same reporting period for both types of disclosures is likely to provide
useful information and it enhances the connectivity of the information. However,
we note that, in the preparation of consolidated financial statements, accounting
standards permit the incorporation of financial statements of subsidiaries withdifferent accounting periods if the difference is less than three months (paragraph
B93 of IFRS 10 Consolidated Financial Statements). When a different accounting
period is used for the preparation of consolidated financial statements, we think
information of subsidiaries for the preparation of disclosures of sustainability-related
financial information should also be based on this different accounting period, andthat the S1 Standard should clarify this point.
35. Our understanding is that reporting entity may need to obtain a large amount of
information and basic data from interested parties outside the consolidated group in
preparing disclosures of sustainability-related financial information, and that current
year information may not be available in preparing disclosures of sustainabilityrelated financial information for the current year, particular given the time permitted
for entities to file their financial statements under the applicable laws and regulations.
For this reason, while the ISSB should require the same reporting period in principle
for the disclosures of sustainability-related financial information and financial
statements, the ISSB should permit different reporting periods, provided that theentity disclose that fact and its reasons, if an entity cannot report on the same
reporting period .
Judgements by each jurisdiction
36. The issues of reporting at the same time and reporting on the same period not only
relate to corporate reporting, but also to various systems in each jurisdiction,
including taxation and non-financial regulations. As stated in paragraph 3 of thecover letter, we believe that IFRS Sustainability Disclosure Standards must be
accepted by jurisdictions around the world to become truly global standards.
Accordingly, while we agree with these requirements in principle, we think the ISSB
should permit reporting at different timings and reporting for the different periods.
The specific exceptions should be determined by each jurisdiction.
Location of the information
37. We believe it is necessary to determine the core medium to increase the
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understandability of the disclosures of sustainability-related financial informationand to enhance the availability of information. One idea may be to determine thatthe annual report that includes the related financial statements (paragraph 8 of the
proposed S1 Standard) would be the core medium.
38. Once we define the core medium, we agree with the proposal to permit the use ofcross-references (paragraph 75 of the proposed S1 Standard). However, if crossreferences were to be permitted, it is necessary to clarify the extent to which thereferenced information is considered to be within the scope of the disclosures ofsustainability-related financial information in accordance with IFRS Sustainability
Disclosure Standards.
39. In addition, if the use of cross-references is permitted without any restriction, we areconcerned that information may be scattered, and the clarity and understandability of
the information may be reduced. Accordingly, we think the S1 Standard should
explicitly prescribe the type of information that should be included in the core
medium. Examples of such information would include the basic information
related to the ‘core content’ and the measurement criteria for metrics, which are
pieces of information that are essential to the understanding of the overview of theentity’s disclosures of sustainability-related financial information.
40. If a core medium is defined, sustainability-related financial information and related
financial statements will be disclosed at the same time for the contents to be disclosed
in the core medium. However, the core medium is likely to provide a summary,and specific metrics are likely to be provided outside this core medium via crossreferencing, and it may be the case that the information is provided at a different
timing. In such cases, entities should be required to explicitly state in the core
medium: when information is (or will be) provided in the other medium; as of what
date (or periods) the information provided in the other medium relates to; and how
to access the other medium. Entities should also be required to explicitly state in
the other medium: information about the specific metrics; and any updates to theinformation stated in the core medium.
When disclosure of information required by IFRS Sustainability DisclosureStandards is prohibited by local laws or regulations
41. We understand the intent of paragraphs 62 and 92 of the proposed S1 Standard toallow entities to assert compliance with IFRS Sustainability Disclosure Standards
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when they do not provide the required disclosures because such disclosures areprohibited by local laws or regulations. However, we are concerned that this may
impair comparability. Accordingly, we are of the view that the ISSB should impose
certain restrictions on items that need not be disclosed because they are prohibitedby local laws or regulations. One idea might be to allow this exception only whencomplying with IFRS Sustainability Disclosure Standards would significantly impact
the environment or human rights in a negative manner.
42. Other than the exception discussed in the previous paragraph, we do not think
exceptions should be permitted. If information that is generally considered
unfavourable in a jurisdiction (say, Jurisdiction A) is prohibited to be disclosed inthat jurisdiction, entities in Jurisdiction A would be able to assert compliance withIFRS Sustainability Disclosure Standards, even though those entities may not beshowing their complete pictures. If the disclosures of entities from anotherjurisdiction (say, Jurisdiction B) with no such prohibition are compared with thedisclosures of entities from Jurisdiction A, the enterprise value of the entities injurisdiction B may be undervalued. We think that this is inappropriate and that this
could undermine the benefits of entities applying IFRS Sustainability Disclosures
Standards.
Updated estimates in the disclosures of comparative information
43. Paragraph 64 of the proposed S1 Standard requires disclosures of comparative
information to reflect updated estimates of ‘to help provide the best information
possible about trends to users of general purpose financial reporting’ (paragraph
BC82 of the proposed S1 Standard). This requirement differs from the treatment inaccounting standards (paragraph 36 of IAS 8 Accounting Policies, Changes in
Accounting Estimates and Errors) that recognises the effects of changes inaccounting estimates prospectively.
44. Paragraph 64 of the proposed S1 Standard states that ‘when providing sustainabilityrelated financial disclosures an entity shall disclose comparative information thatreflects updated estimates’. This means that entities would be required, for all items,
to review whether the comparative information requires updates.
45. Our understanding is that accounting standards recognise the effects of changes inaccounting estimates prospectively because the changes in accounting estimates are
driven by new information and revisions to prior period estimates in the current
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period involve the use of ‘hindsight’ and thus are less reliable. Updating estimates
incurs additional costs on entities and, therefore, it is not necessarily appropriate toprovide updated estimates for comparative information and the determination should
be made by comparing the costs and benefits.
46. Accordingly, we think the first sentence in paragraph 64 of the proposed S1 Standard
should be revised to read ‘When providing sustainability-related financial
disclosures an entity may disclose comparative information that reflects updated
estimates’. Nevertheless, when there is a change in an estimate that is material due
to a change in the assumptions, the details of the change in the estimate may need tobe disclosed.
47. The implications of our proposals in the previous paragraph can be summarised asfollows:(a) There will be no disclosure if the change in the estimate is immaterial.
(b) When comparative information reflecting updated estimates is not disclosed,
disclosures will be provided for significant changes in estimates.
(c) When comparative information reflecting updated estimates is disclosed,
disclosures will be provided for significant changes in estimates, specifically,
the difference between the amounts reported in the prior period and thecomparative updated amounts, and the reason the amounts were updated.
Comments on the specific questions
48. For our comments on the specific questions in the proposed S1 Standard, please referto the Appendix to this letter. We hope our comments are helpful for the ISSB’s
consideration. If you have any questions, please feel free to contact us.

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Yours sincerely,

Yasunobu Kawanishi
Chair
Sustainability Standards Board of Japan

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Appendix
Question 1—Overall approach
The Exposure Draft sets out overall requirements with the objective of disclosing
sustainability-related financial information that is useful to the primary users of theentity’s general purpose financial reporting when they assess the entity’s enterprisevalue and decide whether to provide resources to it.
Proposals in the Exposure Draft would require an entity to disclose material
information about all of the significant sustainability-related risks and opportunities towhich it is exposed. The assessment of materiality shall be made in the context of theinformation necessary for users of general purpose financial reporting to assess
enterprise value.
(a)

Does the Exposure Draft state clearly that an entity would be required to
identify and disclose material information about all of the sustainabilityrelated risks and opportunities to which the entity is exposed, even if suchrisks and opportunities are not addressed by a specific IFRS Sustainability
Disclosure Standard? Why or why not? If not, how could such a requirement
be made clearer?

(b)

Do you agree that the proposed requirements set out in the Exposure Draft
meet its proposed objective (paragraph 1)? Why or why not?

(c)

Is it clear how the proposed requirements in the Exposure Draft would beapplied together with other IFRS Sustainability Disclosure Standards,
including the [draft] IFRS S2 Climate-related Disclosures? Why or why not?
If not, what aspects of the proposals are unclear?

(d)

Do you agree that the requirements proposed in the Exposure Draft would
provide a suitable basis for auditors and regulators to determine whether anentity has complied with the proposals? If not, what approach do you suggest
and why?

Objectives-based approach
1. Our understanding is that the overall disclosure objectives are set out in paragraph 1of the proposed S1 Standard, the specific disclosure objectives of the four elementsof the ‘core content’ are set out from paragraphs 11 through 35, and disclosure
requirements corresponding to the four elements are set out thereafter.

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Appendix
2. We are of the view that the ISSB should adopt a principles-based approach instandard-setting and that the ISSB should explicitly declare this policy. Specifically,
we believe that the standards should build on objectives (please refer to paragraphs
13 through 18 of this Appendix ‘Developing standards based on the principles-based
approach’ for further details).
Need to clarify the structure of standards
3. The proposed S1 Standard consists of the ‘core content’ section and the ‘generalfeatures’ section (including Appendix C of the proposed S1 Standard Qualitative
characteristics of useful sustainability-related financial information). We are of
the view that these sections should be separated into different standards because these
sections address different issues as follows:(a) The ‘core content’ section addresses the four elements of ‘governance’,‘strategy’, ‘risk management’, and ‘metrics and targets’ for significant
sustainability-related risks and opportunities. We believe that this section
could be positioned as a generalised standard of a thematic standard, such as the
proposed S2 Standard.
This section would comprise disclosure requirements for the four elements ofthe ‘core content’ at the entity level as well as disclosure requirements for
significant risks and opportunities associated with areas that are not specified in
specific thematic standards.
(b) The ‘general features’ section sets out, a framework for sustainability-related
financial disclosures. We believe that this section will help ensure thatsustainability-related financial disclosures are prepared in accordance with a
globally consistent framework.
4. As previously mentioned, we believe that separating the proposed S1 Standard willclearly distinguish between the disclosures of the four elements of the ‘core content’
to be described at the entity level and the theme-specific disclosures. We also
believe that separating the proposed S1 Standard will clarify the relationship between
thematic standards, which require detailed disclosures on the specific theme, and thegeneral standards that apply in the absence of specific thematic standards.
5. In the absence of specific thematic standards, we believe that it would be too onerous
to require entities to provide disclosures with the granularity prescribed in the
proposed S2 Standard, and that, in the absence of the specific thematic standards,
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disclosures of relatively low granularity should be permitted. If the relationshipbetween thematic standards and general standards is clarified as we propose, users of
the Standards can understand the differences in the intended granularity of thedisclosures.
6. Furthermore, we believe that separating the proposed S1 Standard into two standards
will clarify that descriptions relevant to general features are applied to all IFRS
Sustainability Disclosure Standards. For example, we note that there are some who
think that the guidance in paragraph 60 of the proposed S1 Standard stating that anentity need not provide a specific disclosure if the information resulting from that
disclosure is not material, would not apply to requirements in the S2 Standard.
Developing a standard that focuses on prescribing the sustainability-related financial
disclosure frameworks reduce the risk of such misunderstanding.

Question 2—Objective (paragraphs 1–7)
The Exposure Draft sets out proposed requirements for entities to disclosesustainability-related financial information that provides a sufficient basis for the
primary users of the information to assess the implications of sustainability-relatedrisks and opportunities on an entity’s enterprise value.
Enterprise value reflects expectations of the amount, timing and uncertainty of future
cash flows over the short, medium and long term and the value of those cash flows in
the light of the entity’s risk profile, and its access to finance and cost of capital.
Information that is essential for assessing the enterprise value of an entity includes
information in an entity’s financial statements and sustainability-related financial
information.
Sustainability-related financial information is broader than information reported in
the financial statements that influences the assessment of enterprise value by the
primary users. An entity is required to disclose material information about all of thesignificant sustainability-related risks and opportunities to which it is exposed.
Sustainability-related financial information should, therefore, include information
about the entity’s governance of and strategy for addressing sustainability-relatedrisks and opportunities and about decisions made by the entity that could result in
future inflows and outflows that have not yet met the criteria for recognition in the

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Question 2—Objective (paragraphs 1–7)
related financial statements. Sustainability-related financial information also depicts
the reputation, performance and prospects of the entity as a consequence of actions it
has undertaken, such as its relationships with, and impacts and dependencies on,
people, the planet and the economy, or about the entity’s development of knowledgebased assets.
The Exposure Draft focuses on information about significant sustainability-relatedrisks and opportunities that can reasonably be expected to have an effect on an
entity’s enterprise value.
(a)Is the proposed objective of disclosing sustainability-related financial
information clear? Why or why not?

(b)

Is the definition of ‘sustainability-related financial information’ clear (seeAppendix A)? Why or why not? If not, do you have any suggestions for
improving the definition to make it clearer?

Definition of terms regarding the disclosure objectives
7. The proposed S1 Standard requires an entity to disclose material information about
all of the significant sustainability-related risks and opportunities to which it is
exposed. However, as we note in the response to Question 1, the term ‘significant
sustainability-related risks and opportunities’ is not defined nor explained.
Accordingly, we believe that this term should be clearly explained as we note inparagraphs 38 and 39 of the Appendix to this letter.
8. In addition, with regard to the term ‘sustainability’ when used in the context of theterm ‘sustainability-related financial information,’ we believe that the definition ofthis term should be clarified because it is not defined anywhere in the ED, although
there is an explanation about its background in paragraph BC30 of the Basis forConclusions on the proposed S1 Standard. In particular, we believe that it would
be useful for the ISSB to clarify whether the term ‘sustainability’ is used in themeaning of ‘outside the financial statements’ because this would enable the users of
the Standards to compare with the terms used in sustainability disclosure standards
developed by other standard setters.

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Concepts
9. Paragraph 3 of the proposed S1 Standard states that ‘an entity’s general purpose
financial reporting shall include a complete, neutral and accurate depiction of its
sustainability-related financial information’. However, we believe that the ISSB
should reword this sentence to include ‘relevance’ and ‘faithful representation’rather than ‘complete’, ‘neutral’ and ‘accurate’, considering the proposals made in
Appendix C Qualitative characteristics of useful sustainability-related financial
information of the proposed S1 Standard. We also believe that the use of the terms‘accuracy’ and ‘free from error’ should be strictly distinguished because these terms
seem to be used interchangeably.
10. Paragraph C2 of Appendix C of the proposed S1 Standard states that the nature ofsome of the sustainability-related financial information differs from the information
provided in general purpose financial statements. We are concerned that thedescriptions based on the IASB’s CFW and the descriptions based on the Exposure
Draft of IFRS Practice Statement on Management Commentary (ED/2021/6) seems
to be used interchangeably in this paragraph. Accordingly, we believe that the ISSB
should explain, for each qualitative characteristic, which guidance the ISSB intends
to base its discussions and the relevant reasons in the Basis for Conclusions on the
proposed S1 Standard.

Question 3—Scope (paragraphs 8–10)
Proposals in the Exposure Draft would apply to the preparation and disclosure ofsustainability-related financial information in accordance with IFRS Sustainability
Disclosure Standards. Sustainability-related risks and opportunities that cannot
reasonably be expected to affect users’ assessments of the entity’s enterprise value areoutside the scope of sustainability-related financial disclosures.
The Exposure Draft proposals were developed to be applied by entities preparing
their general purpose financial statements with any jurisdiction’s GAAP (so withIFRS Accounting Standards or other GAAP).
Do you agree that the proposals in the Exposure Draft could be used by entities that
prepare their general purpose financial statements in accordance with any

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Appendix
Question 3—Scope (paragraphs 8–10)
jurisdiction’s GAAP (rather than only those prepared in accordance with IFRS
Accounting Standards)? If not, why not?

Accounting standards applied in the related financial statements
11. We agree with the proposal in paragraph 8 of the proposed S1 Standard that an entity
may apply IFRS Sustainability Disclosure Standards even if the entity’s related
financial statements are prepared in accordance with generally accepted accounting
principles (GAAP) other than IFRS Accounting Standards.
12. However, the ISSB should consider the following points:(a) The proposed S1 Standard should clarify that sustainability-related financial
disclosures provide useful information by supplementing the relevant financial
statements (that is, that sustainability-related financial disclosures prepared inaccordance with IFRS Sustainability Disclosure Standards are not achieving
comparability on a stand-alone basis).
(b) The proposed S1 Standard should clarify that, when an entity provides connected
information in accordance with paragraph 42 of the proposed S1 Standard, itshould be noted that there are differences in the information to be provided due
to differences in the accounting standards applied to in the related financial
statements.
(c) Because sustainability-related financial disclosures are to provide informationthat supplements and complements the entity’s financial statements for the
primary users to assess enterprise value, entities should disclose which
accounting standards were applied to the related financial statements.

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Question 4—Core content (paragraphs 11–35)
The Exposure Draft includes proposals that entities disclose information that enables
primary users to assess enterprise value. The information required would represent
core aspects of the way in which an entity operates.
This approach reflects stakeholder feedback on key requirements for success in the
Trustees’ 2020 consultation on sustainability reporting, and builds upon the wellestablished work of the TCFD.
Governance
The Exposure Draft proposes that the objective of sustainability-related financial
disclosures on governance would be:
to enable the primary users of general purpose financial reporting tounderstand the governance processes, controls and procedures used tomonitor and manage significant sustainability-related risks andopportunities.
Strategy
The Exposure Draft proposes that the objective of sustainability-related financial
disclosures on strategy would be:
to enable users of general purpose financial reporting to understandan entity’s strategy for addressing significant sustainability-relatedrisks and opportunities.
Risk management
The Exposure Draft proposes that the objective of sustainability-related financial
disclosures on risk management would be:
to enable the users of general purpose financial reporting tounderstand the process, or processes, by which sustainability-relatedrisks and opportunities are identified, assessed and managed. These
disclosures shall also enable users to assess whether those processes
are integrated into the entity’s overall risk management processes andto evaluate the entity’s overall risk profile and risk management
processes.
Metrics and targets

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Question 4—Core content (paragraphs 11–35)
The Exposure Draft proposes that the objective of sustainability-related financial
disclosures on metrics and targets would be:
to enable users of general purpose financial reporting to understandhow an entity measures, monitors and manages its significant
sustainability-related risks and opportunities. These disclosures shallenable users to understand how the entity assesses its performance,
including progress towards the targets it has set.
(a)

Are the disclosure objectives for governance, strategy, risk management andmetrics and targets clear and appropriately defined? Why or why not?

(b)

Are the disclosure requirements for governance, strategy, risk management
and metrics and targets appropriate to their stated disclosure objective? Whyor why not?

Developing standards based on the principles-based approach
13. There are many detailed requirements in the ED, specially, in Appendix B of the
proposed S2 Standard, and the ED seems to adopt a rules-based approach that
requires detailed and fixed disclosures. Given the current pace of change in thereporting environment, standards developed based on the rules-based approach are
likely to become obsolete immediately.
14. We believe that there are two possible alternatives to solve this issue. One is toestablish a system that enables standard-setting in a timely manner. However, we
believe this alternative would be difficult for the ISSB to take because it takes time
to develop international sustainability disclosure standards with sufficient input fromaround the world.
15. The other alternative is to develop standards under the principles-based approach.
This would enable the international sustainability disclosure standards to respond to
rapid changes in the environment. In addition, principles-based standards are also
likely to accommodate differences between jurisdictions that adopt IFRS
Sustainability Disclosure Standards.
16. For these reasons, we are of the view that the ISSB should adopt a principles-based
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Appendix
approach in developing IFRS Sustainability Disclosure Standards as the ‘global
baseline’ and should explicitly declare this policy. Specifically, the following
objectives-based approach may be adopted.
Objectives-based approach(a) Establish overall disclosure objectives initially.
(b) Develop specific disclosure objectives (including why the users need thedisclosures and how those users are likely to use the disclosures) to meet theoverall disclosure objectives in (a).
(c) Develop specific disclosure requirements that would become the ‘global
baseline’ based on (b), taking into account the costs and benefits of therequirements.
(d) Describe, in the Basis for Conclusions, how the disclosure requirements were
derived from the disclosure objectives (including the relationship between theoverall disclosure objectives in (a) and the specific disclosure objectives in (b),and why the specific disclosure requirements in (c) are necessary to meet thedisclosure objectives in (a) and (b)).
17. We believe that, for entities to provide entity-specific disclosures in accordance withprinciples-based standards that are derived from disclosure objectives, entities needto understand how the disclosure requirements were derived from the disclosure
objectives, why such disclosures are necessary and how the users are likely to use
the disclosures. By providing such information, we believe that the benefits ofrequiring disclosures will become clear, and such information will be helpful for
entities in determining how they should provide disclosures when it is not necessarily
clear from the requirements in the standards. In addition, we believe that suchinformation is likely to be useful in conducting audits (or providing assurance) andfor regulatory enforcement. Accordingly, we are of the view that the ISSB should
provide such information in the Basis for Conclusions.
18. Such approach was also discussed in the ‘Guidance for the Board to use whendeveloping and drafting disclosure requirements in IFRS Standards’ included in the
Exposure Draft (ED/2021/3) Disclosure Requirements in IFRS Standards—A Pilot
Approach issued by the IASB on 25 March 2021. Although the AccountingStandards Board of Japan (ASBJ) provided comments on 12 January 2022 on the

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Appendix
proposals in the Exposure Draft, the SSBJ agree with the direction of the Exposure
Draft, which seeks to derive disclosure requirements from disclosure objectives.
Accordingly, we believe that the ISSB should align its standard-setting approach with
the IASB.
Structuring the standard based on the TCFD recommendations
19. We note that the recommendations by the Financial Stability Board’s Task Force on
Climate-Related Financial Disclosures (the ‘TCFD’) are widely accepted.
Accordingly, we support the ISSB in developing the ‘core content’ section of IFRS
Sustainability Disclosure Standards based on the structure of the TCFD
recommendations (that is, to require disclosures in the international sustainability
disclosure standards in relation to the four elements of ‘governance’, ‘strategy’, ‘risk
management’ and ‘metrics and targets’).
‘Core content’ section of the proposed S1 Standard
20. We are of the view that the ‘core content’ section of the proposed S1 Standard should
address two types of information: firstly, disclosures at the entity level, and secondly,
disclosures in the absence of thematic standards.
For example, regarding
disclosures in general on ‘governance’ and ‘risk management’, disclosures on theentity’s business model within ‘strategy’, and disclosures on executive management
remuneration within ‘metrics and targets’, we believe that the entity may not
associate these items to a specific theme, but may provide the entity-level disclosuresand provide additional disclosures relevant to a specific theme when they are material.
21. In addition, regarding metrics, we believe that disclosing the metrics together with
their measurement criteria will enhance the understanding of users of general purpose
financial reporting.
Accordingly, disclosure requirements relevant to themeasurement criteria for metrics may be set out in the ‘core content’ section of the
proposed S1 Standard.

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Appendix
Question 5—Reporting entity (paragraphs 37–41)
The Exposure Draft proposes that sustainability-related financial information would
be required to be provided for the same reporting entity as the related general purpose
financial statements.
The Exposure Draft proposals would require an entity to disclose material
information about all of the significant sustainability-related risks and opportunities towhich it is exposed. Such risks and opportunities relate to activities, interactions andrelationships and use of resources along its value chain such as:•

its employment practices and those of its suppliers, wastage related to the
packaging of the products it sells, or events that could disrupt its supply
chain;•

the assets it controls (such as a production facility that relies on scarce water
resources);•

investments it controls, including investments in associates and joint ventures(such as financing a greenhouse gas-emitting activity through a joint
venture); and•sources of finance.

The Exposure Draft also proposes that an entity disclose the financial statements towhich sustainability-related financial disclosures relate.
(a)

Do you agree that the sustainability-related financial information should be
required to be provided for the same reporting entity as the related financial
statements? If not, why?

(b)

Is the requirement to disclose information about sustainability-related risks
and opportunities related to activities, interactions and relationships, and to
the use of resources along its value chain, clear and capable of consistent
application? Why or why not? If not, what further requirements or guidance
would be necessary and why?

(c)

Do you agree with the proposed requirement for identifying the related
financial statements? Why or why not?

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Appendix
Reporting entity
22. We agree with the proposal of paragraph 37 of the proposed S1 Standard which
proposes that ‘an entity’s sustainability-related financial disclosures shall be for thesame reporting entity as the related general purpose financial statements’.
23. However, we are of the view that the following issues need to be considered:(a) Paragraph 8 of the proposed S1 Standard does not require entities to apply IFRS
Accounting Standards when providing disclosures of sustainability-related
financial information in accordance with IFRS Sustainability DisclosureStandards. If entities are permitted to prepare general purpose financial
statements in accordance with the standards other than IFRS AccountingStandards, all entities, including those applying IFRS Accounting Standards,
should be required to disclose which accounting standards they have used as thebasis for preparing their general purpose financial statements.
(b) Our understanding is that information about the value chain is useful for primaryusers in assessing the entity’s enterprise value. However, describing the value
chain disclosure requirements in paragraphs 40 and 41 of the proposed S1Standard within the ‘Reporting entity’ section is potentially misleading in thesense that it could be interpreted as entities in the value chain also comprise thereporting entity. For this reason, disclosures of information about the value
chain should be included in a separate section of the proposed S1 Standard (forexample, with a new section following the ‘Reporting Entity’ section).
(c) If the ED requires the provision of information about the value chain, we areconcerned that entities may misunderstand that information of those in theirvalue chain must be obtained with the same precision as subsidiaries. For thisreason, when providing quantitative information about the value chain, thestandard should explicitly state that information is not necessarily limited to
information directly measured or reported by entities other than the reporting
entity, but that such information may be disclosed by the reporting entity using
estimation.
In this case, both data quality (in general, data quality is considered to be higher
for directly measured or reported information and lower for estimates. A
similar concept is adopted in the standards of the Partnership for Carbon
Accounting Financials (PCAF)) and timely provision of information are to be

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pursued, but there can be trade-offs between the two. Accordingly, guidanceshould be provided by the ISSB on how entities should pursue both and how thetrade-offs between them should be considered, taking into account existing
practices.
(d) The definition of ‘value chain’ in Appendix A of the proposed S1 Standard statesthat the value chain includes the reporting entity’s business model, implying thatthe reporting entity itself is part of the value chain. The ISSB should explain
this in the Basis for Conclusions on the proposed S1 Standard, because in somecontexts, the term ‘value chain’ is referred to entities located upstream anddownstream of the reporting entity and may not include the reporting entity
itself.2
Reporting by entities engaged in multiple businesses
24. In our jurisdiction, many entities, typically conglomerates, engage in multiple
businesses and often set up subsidiaries for each business. As a result, some of these
entities, for example, entities called ‘general trading companies’, have hundreds ofsubsidiaries and associates. Such entities operate in a number of jurisdictions andoften hold minority stakes due to the laws and regulations that apply in thejurisdiction in which they operate. For these reasons, such entities consider entities
that are classified as associates to be part of the same group and manage them as such.
Subsidiaries and associates may have investors other than the reporting entity, andcontracts may stipulate that the consent of such other investors must be obtained
before information about the subsidiaries or the associates can be obtained anddisclosed. The form of such agreements varies from subsidiary to subsidiary andfrom associate to associate, and are subject to laws and regulations that apply in eachjurisdiction, which can be very different. Accordingly, it may require considerable
time and effort to gather information from each of these entities, even when theyFor example, the proposed rule on Climate Related Disclosures for Investors released by the U.S.
SEC on March 21, 2022 defines the value chain as follows (underline added):
Value chain means the upstream and downstream activities related to a registrant's operations.
Upstream activities in connection with a value chain may include activities by a party other than
the registrant that relate to the initial stages of a registrant's production of a good or service(e.g., materials sourcing, materials processing, and supplier activities). Downstream activities inconnection with a value chain may include activities by a party other than the registrant that
relate to processing materials into a finished product and delivering it or providing a service tothe end user (e.g., transportation and distribution, processing of sold products, use of soldproducts, end of life treatment of sold products, and investments).
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Appendix
relate to material information.
25. For those entities referred to in the preceding paragraph, with regard to information
on value chains, we are concerned that some suppliers have relationships withmultiple entities within the same group, and there is the risk of disclosing informationthat could potentially be misleading due to the so-called ‘double counting’ of
information on such suppliers.
Furthermore, regarding disclosures by industry, these entities may be involved in a
number of industries based on the SICS®, making it difficult for these entities toselect more than one industry by exercising materiality judgements. Moreover, even
if the industries can be identified, for the reasons discussed above, there may be
restrictions on the availability of information, which may make it difficult for these
entities to disclose certain metrics.
26. Based on the discussions above, we believe that the ISSB should address the issuesof selecting the industry (or industries) and collecting information when the entity
has a number of subsidiaries and associates that engage in many industries and thus
the disclosures of sustainability-related financial information could be onerous. We
propose the following measures:(a) The ISSB should re-emphasise that an entity is not required to provide
disclosures for all of the industry-based disclosure requirements which relate to
the entity’s relevant industry (or industries); rather the entity is required to
identify significant sustainability-related risks and opportunities from theperspective of a reporting entity as a whole and disclose material information
about all of the significant sustainability-related risks and opportunities. The
ISSB could also clarify that the scope of subsidiaries whose information would
be collected may differ depending on the item to be disclosed based onmateriality judgements.
In paragraph 48 of the Appendix to this letter, wesuggest that the ISSB develop guidance on materiality, and we think this pointshould be clarified in this guidance.
(b) The ISSB should permit an entity not to disclose information about subsidiaries
and associates for which it is impracticable to collect disclose information due
to the contractual terms with the investors other than the reporting entity,
provided that the entity discloses that fact and the reasons for the impracticability.

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Identification of related financial statements
27. Paragraph 38 of the proposed S1 Standard requires all entities disclose the financial
statements to which the sustainability-related financial disclosures relate, but it ispossible that the related financial statements will not necessarily be provided within
the same medium as the sustainability-related financial disclosures. Accordingly,
the proposed S1 Standard should require entities to disclose how the related financial
statements can be accessed.
28. In addition, entities may prepare multiple sets of financial statements in accordancewith multiple sets of accounting standards (for the same reporting period of the same
reporting entity). For example, financial statements for domestic securities filing
purposes may be prepared applying local GAAP, while another set of financial
statements may be prepared for the benefit of foreign investors on a voluntary basis
applying IFRS Accounting Standards. In such cases, entities may refer to thefinancial figures in the two sets of financial statements in their sustainability-related
financial disclosures and explain the differences. For this reason, the ISSB should
clarify whether multiple sets of financial statements prepared in accordance withmultiple sets of accounting standards can be identified as ‘sustainability-related
financial disclosures’.

Question 6—Connected information (paragraphs 42–44)
The Exposure Draft proposes that an entity be required to provide users of general
purpose financial reporting with information that enables them to assess theconnections between (a) various sustainability-related risks and opportunities; (b) the
governance, strategy and risk management related to those risks and opportunities,
along with metrics and targets; and (c) sustainability-related risks and opportunities
and other information in general purpose financial reporting, including the financial
statements.
(a)Is the requirement clear on the need for connectivity between various
sustainability-related risks and opportunities? Why or why not?

(b)

Do you agree with the proposed requirements to identify and explain theconnections between sustainability-related risks and opportunities and

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Question 6—Connected information (paragraphs 42–44)
information in general purpose financial reporting, including the financial
statements? Why or why not? If not, what do you propose and why?

Need for guidance on ‘Connectivity’
29. The proposed S1 Standard states that sustainability-related financial disclosures areprovided ‘to enable users of general purpose financial reporting to assess theconnections between various sustainability-related risks and opportunities, and toassess how information about these risks and opportunities are linked to informationin the general purpose financial statements’ (paragraph 42 of the proposed S1Standard).
30. Our understanding is that the term ‘connections’ may be understood differently
among the preparers, users, and other stakeholders and, therefore, may be difficult toapply. For this reason, we believe that the ISSB should provide additional guidance.
(a) For example, if a sustainability-related risk is identified but that risk is unlikely
to materialise in the short-term, information related to that risk is unlikely to bedisclosed in the financial statements. In this situation, it is unclear what
disclosures should be made in the sustainability-related financial disclosures toensure information is connected.
(b) There could be cases where two pieces of information may appear to bedisconnected when they are based on different assumptions (such as different
time horizons). Accordingly, it should be clarified that the concept of‘connectivity’ means that users can understand the relationship between theinformation in the sustainability-related financial disclosures and theinformation in the financial statements.

Question 7—Fair presentation (paragraphs 45–55)
The Exposure Draft proposes that a complete set of sustainability-related financial
disclosures would be required to present fairly the sustainability-related risks and

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Appendix
Question 7—Fair presentation (paragraphs 45–55)
opportunities to which an entity is exposed. Fair presentation would require thefaithful representation of sustainability-related risks and opportunities in accordancewith the proposed principles set out in the Exposure Draft. Applying IFRS
Sustainability Disclosure Standards, with additional disclosure when necessary, is
presumed to result in sustainability-related financial disclosures that achieve a fairpresentation.
To identify significant sustainability-related risks and opportunities, an entity would
apply IFRS Sustainability Disclosure Standards. In addition to IFRS Sustainability
Disclosure Standards to identify sustainability-related risks and opportunities, theentity shall consider the disclosure topics in the industry-based SASB Standards, the
ISSB’s non-mandatory guidance (such as the CDSB Framework application guidance
for water- and biodiversity-related disclosures), the most recent pronouncements ofother standard‑setting bodies whose requirements are designed to meet the needs ofusers of general purpose financial reporting, and sustainability-related risks andopportunities identified by entities that operate in the same industries or geographies.
To identify disclosures, including metrics, that are likely to be helpful in assessing
how sustainability-related risks and opportunities to which it is exposed could affectits enterprise value, an entity would apply the relevant IFRS Sustainability DisclosureStandards. In the absence of an IFRS Sustainability Disclosure Standard that applies
specifically to a sustainability-related risk and opportunity, an entity shall use its
judgement in identifying disclosures that (a) are relevant to the decision‑making
needs of users of general purpose financial reporting; (b) faithfully represent theentity’s risks and opportunities in relation to the specific sustainability-related risk oropportunity; and (c) are neutral. In making that judgement, entities would consider
the same sources identified in the preceding paragraph, to the extent that they do notconflict with an IFRS Sustainability Disclosure Standard.
(a)Is the proposal to present fairly the sustainability-related risks andopportunities to which the entity is exposed, including the aggregation of
information, clear? Why or why not?

(b)

Do you agree with the sources of guidance to identify sustainability-relatedrisks and opportunities and related disclosures? If not, what sources should
the entity be required to consider and why? Please explain how any

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Appendix
Question 7—Fair presentation (paragraphs 45–55)
alternative sources are consistent with the proposed objective of disclosing
sustainability-related financial information in the Exposure Draft.

Identification of sustainability-related risks and opportunities and related
disclosures
31. Paragraphs 51 through 54 of the proposed S1 Standard proposes guidance related tothe identification significant sustainability-related risks and opportunities and related
disclosures, but we think the draft standard is difficult to understand.
32. Specifically, when identifying sustainability-related risks and opportunities, andwhen considering the disclosures to be made about those risks or opportunities, it isdifficult to understand in what order the thematic IFRS Sustainability DisclosureStandards, industry-based standards and other standards described in paragraph 54of the proposed S1 Standard, should be applied.
33. Accordingly, we think that paragraphs 51 through 54 of the proposed S1 Standard
should be absolutely clear as to whether the requirements are to be ‘applied’,‘referred to’ or ‘considered’ and whether the entity ‘shall’ apply or ‘may’ apply thoserequirements.
34. Paragraph 12 of IAS No. 8 Accounting Policies, Changes in Accounting Estimates,
and Errors, allows that management may also consider the most recent
pronouncements of other standard-setting bodies in the absence of an IFRS Standard
that is specifically applicable, while paragraphs 51 and 54 of the proposed S1Standard state that entities ‘shall consider’ such guidance. Accordingly, we areconcerned that the scope that an entity must consider could be unlimited, and suchrequirement would impose excessive burdens on entities. We are also concernedthat this may lead to diversity in disclosures, which would impair comparability.
For this reason, the wording ‘shall consider’ in paragraphs 51 and 54 of the proposed
S1 Standard should be replaced with ‘may consider’.
35. We agree with the sources of guidance to identify sustainability-related risks andopportunities and related disclosures described in paragraphs 51 and 54 of the
proposed S1 Standard.
When entities refer to standards other than IFRS

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Sustainability Disclosure Standards, entities should disclose the guidance that they
have referred to, so as to achieve a certain level of discipline.
36. On the other hand, in the absence of specific thematic IFRS Sustainability DisclosureStandards, we believe that it would be too onerous to require entities to provide
disclosures with the granularity prescribed in the proposed S2 Standard. Accordingly,
we think that the proposed S1 Standard should clarify that, in the absence of specificthematic IFRS Sustainability Disclosure Standards, disclosures of relatively low
granularity should be permitted.

Question 8—Materiality (paragraphs 56–62)
The Exposure Draft defines material information in alignment with the definition in
IASB’s Conceptual Framework for General Purpose Financial Reporting and IAS 1.
Information ‘is material if omitting, misstating or obscuring that information could
reasonably be expected to influence decisions that the primary users of general
purpose financial reporting make on the basis of that reporting, which provides
information about a specific reporting entity’.
However, the materiality judgements will vary because the nature of sustainabilityrelated financial information is different to information included in financial
statements. Whether information is material also needs to be assessed in relation toenterprise value.
Material sustainability-related financial information disclosed by an entity may
change from one reporting period to another as circumstances and assumptions
change, and as expectations from the primary users of reporting change. Therefore, an
entity would be required to use judgement to identify what is material, and materiality
judgements are reassessed at each reporting date. The Exposure Draft proposes thateven if a specific IFRS Sustainability Disclosure Standard contained specificdisclosure requirements, an entity would need not to provide that disclosure if theresulting information was not material. Equally, when the specific requirements
would be insufficient to meet users’ information needs, an entity would be required toconsider whether to disclose additional information. This approach is consistent withthe requirements of IAS 1.

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Question 8—Materiality (paragraphs 56–62)
The Exposure Draft also proposes that an entity need not disclose information
otherwise required by the Exposure Draft if local laws or regulations prohibit theentity from disclosing that information. In such a case, an entity shall identify the typeof information not disclosed and explain the source of the restriction.
(a)Is the definition and application of materiality clear in the context ofsustainability-related financial information? Why or why not?

(b)

Do you consider that the proposed definition and application of materiality
will capture the breadth of sustainability-related risks and opportunities
relevant to the enterprise value of a specific entity, including over time? Whyor why not?

(c)

Is the Exposure Draft and related Illustrative Guidance useful for identifying
material sustainability-related financial information? Why or why not? If not,what additional guidance is needed and why?

(d)

Do you agree with the proposal to relieve an entity from disclosing
information otherwise required by the Exposure Draft if local laws or
regulations prohibit the entity from disclosing that information? Why or why
not? If not, why?

Concept of Materiality: Interaction between ‘Significance’ and ‘Materiality’
37. Our understanding is that the ISSB proposes two-step process to identify information
to be disclosed by requiring a reporting entity to ‘disclose material information about
all of the significant sustainability-related risks and opportunities to which it is
exposed’ (paragraphs 1 and 2 of the proposed S1 Standard) in order to achieve
objective for the entity to disclose information about sustainability-related risks andopportunities that are useful for the primary users’ decisions.
38. We believe that the term ‘significant’ has a critically important role in this ED.
However, the term ‘significant sustainability-related risks and opportunities’ is notdefined nor explained in the proposed S1 Standard and their implications are unclear.
For this reason, we are concerned that this might result in variation in practice upon
its application in each jurisdiction. We are also concerned that since the term
‘significant’ is also used in IFRS Accounting Standards without any definition, the36 / 55

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definition of this term could not be provided only in IFRS Sustainability Disclosures
Standards. Therefore, in order to address these concerns and require entities toapply two-step process to identify information to be disclosed, we believe that the
ISSB should explain ‘significant sustainability-related risks and opportunities’ andclarify the process to assess ‘significance’ in the proposed S1 Standard.
39. Paragraph BC40 of the Basis for Conclusions on the proposed S1 Standard states that
‘Significant risks are those that an entity prioritises for management responses’ and‘They include risks and events that in the short-, medium- or long-term could disrupt
the entity’s business model or its strategy for sustaining and developing the businessmodel that could affect the resources or relationships on which the entity depends orthat threaten the viability of, or creates opportunities for, the entity’ as an explanation
about ‘significant risk’. We believe that the ISSB could clarify ‘significant
sustainability-related risks and opportunities’ in the proposed S1 Standard based on
this paragraph. We also believe that the ISSB should clarify that the concept of‘significance’ is fundamentally different from the concept of ‘materiality’, which isthe basis to judge whether an information could reasonably be expected to influence
decisions that the primary users of general purpose financial reporting make on thebasis of that reporting (that is, the basis to judge whether an information could beomitted).
40. In addition, we believe that ISSB should illustrate the process of applying materiality
judgements against identified all of the ‘significant sustainability-related risks andopportunities’ in order to clarify the process. We note that paragraph 51 of the
proposed S1 Standard and Illustrative Guidance on [Draft] IFRS S1 General
Requirements for Disclosure of Sustainability-related Financial Information include
explanation and illustration with regard to materiality judgements and the process ofidentifying significant sustainability-related risks and opportunities. However, weare concerned that the overall flow is still unclear. Therefore, we suggest that the
ISSB consider clarifying the process, such as by using illustrations or diagrams,
within the guidance regarding making materiality judgements about sustainabilityrelated risks and opportunities as we proposed in paragraph 48 of the Appendix tothis letter.
41. The IASB’s Exposure Draft of IFRS Practice Statement on Management
Commentary (ED/2021/6) requires disclosure of key matters for each of the areas ofcontent and adopts an approach that allows omitting immaterial information by

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applying the definition of material.
We believe that, from the perspective of
connectivity between the ISSB and the IASB, the consistency with this approachshould be clarified. We also believe that the ISSB could use key matters andconsiderations to be taken into account described in the Exposure Draft of IFRS
Practice Statement on Management Commentary as references regarding how toassess ‘significance’ as we noted in paragraph 48 of the Appendix to this letter.
Definition and application of ‘material’
42. The definition of ‘material’ in paragraph 56 of the proposed S1 Standard can beinterrupted as a criteria to judge whether an information could be omitted since thatdefinition is aligned with the definition of ‘material’ used in the IASB’s CFW and
IAS 1 Presentation of Financial Statements. However, paragraph BC71 of theBasis for Conclusions on the proposed S1 Standard states ‘materiality judgements
about sustainability-related financial information will differ from those for general
purpose financial statements’, which can be interrupted that the ISSB intends torequire different considerations to entities from those in materiality judgements madein the context of accounting standards.
43. In this regard, as the definition of ‘material’ in paragraph 56 of the proposed S1Standard is aligned with the definition of ‘material’ used in the IASB’s CFW and
IAS 1 Presentation of Financial Statements, we recommend the ISSB to take into
account that this might cause confusion for some readers to interrupt that thosemateriality judgements (that is, judgements regarding whether an information could
be omitted) for sustainability-related financial information would be the same forgeneral purpose financial statements.
44. We believe that there would be differences in the outcome of materiality judgements
between about the information reported in the financial statements and sustainabilityrelated financial information. This is because the scope of sustainability-related
financial information could be broader than the scope of information reported ingeneral purpose financial statements in terms of time horizon and likelihood as statedin paragraph 6 of the proposed S1 Standard, not because of the differences in thejudgements regarding whether a specific item is ‘material’.
For example, financial implications of interactions throughout the value chain, as
noted in paragraph BC71 of the Basis for Conclusions on the proposed S1 Standard,might impact a reporting entity over longer time horizon and could be judged asmaterial sustainability-related financial information even if they have low likelihood.
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This is because those information might give insight into sustainability-related risks
and opportunities that affect entity’s activities and provide a sufficient basis for usersof general purpose financial reporting to assess resources and relationships on which
an entity’s business model and strategy for sustaining and developing that model
depend.
45. Accordingly, we believe that the ISSB should sufficiently explain the differences in
the materiality judgements between about the information reported in the general
purpose financial statements and sustainability-related financial information in theBasis for Conclusions on the proposed S1 Standard. Further, if there are points toconsider when making materiality judgements regarding sustainability-related
financial information, we recommend clarifying such considerations by reflecting
them in ‘the main text’ of the proposed S1 Standard.
46. Further, paragraph BC72 on the proposed S1 Standard includes matters which arerequired considerations to be taken into account when making materiality judgements
by entities. We also recommend if entities are required for the matters, they should
also be included in ‘the main text’ of the proposed S1 Standard.
47. We also note that the differences between ‘significant’ and ‘material’ should beclarified as we stated in paragraph 22 of the cover letter and paragraph 39 of the
Appendix to this letter.
Guidance on applying materiality judgements
48. We note that the ISSB could develop additional guidance about the process ofidentifying sustainability-related financial information and the way of making
materiality judgements through that process (for example, utilising diagrams andcharts to illustrate the process) in IFRS Sustainability Disclosure Standards. We
believe this would correspond to the IASB’s IFRS Practice Statement 2 Making
Materiality Judgements. We also believe that this could be achieved by enhancing
the Illustrative Guidance on the proposed S1 Standard and include, for example, thefollowing:(a) Our understanding is that it would be difficult to make material judgements
qualitatively since (i) sustainability-related financial information would requiremateriality judgements qualitatively in many situations, such as considering the
medium or long time horizon and identifying risks and opportunities throughout
the value chain, and (ii) the way of making such materiality judgements
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qualitatively has not been established yet. Therefore, we believe that it would be
helpful for the ISSB to develop guidance about making materiality judgements
qualitatively.
(b) We recognise that in many cases it is inappropriate to judge the materiality ofsustainability-related financial information on the basis of financial figures suchas revenue and profits of individual companies, and that metrics as benchmark
are likely to differ from country to country and region to region, so it is notpossible to judge materiality on the basis of relevant metrics. For this reason,
we believe that it would be helpful for the ISSB to develop guidance about
making materiality judgements in this context.
When disclosure of information required by IFRS Sustainability DisclosureStandards is prohibited by local laws or regulations
49. The ED proposes that case in which local laws or regulations prohibit the entity fromdisclosing the information required by an IFRS Sustainability Disclosure Standard,
asserting compliance with IFRS Sustainability Disclosure Standards can be made byidentifying the type of information not disclosed and explain the source of therestriction (paragraphs 62 and 92 of the proposed S1 Standard). The intent of suchprovisions are understandable, however we are concerned that the application of suchitems may impair comparability. Accordingly, we are of the view that the ISSB
should impose certain restrictions on items that need not be disclosed because they
are prohibited by local laws or regulations. One idea might be to allow thisexception only when complying with IFRS Sustainability Disclosure Standards
would significantly impact the environment or human rights in a negative manner.
50. Other than the exception discussed in the previous paragraph, we do not think
exceptions should be permitted. If information that is generally considered
unfavourable in a jurisdiction (say, Jurisdiction A) is prohibited to be disclosed inthat jurisdiction, entities in Jurisdiction A would be able to assert compliance withIFRS Sustainability Disclosure Standards, even though those entities may not beshowing their complete pictures. If the disclosures of entities from anotherjurisdiction (say, Jurisdiction B) with no such prohibition are compared with thedisclosures of entities from Jurisdiction A, the enterprise value of the entities injurisdiction B may be undervalued. We think that this is inappropriate and that this
could undermine the benefits of entities applying IFRS Sustainability Disclosures
Standards.
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51. Since the relief proposed in paragraph 62 of the proposed S1 Standard are notconsidered to be proposals on materiality, if included, they should be transferred tothe section on the statement of compliance with the proposed S1 Standard.

Question 9—Frequency of reporting (paragraphs 66–71)
The Exposure Draft proposes that an entity be required to report its sustainabilityrelated financial disclosures at the same time as its related financial statements, andthe sustainability-related financial disclosures shall be for the same reporting period
as the financial statements.
Do you agree with the proposal that the sustainability-related financial disclosureswould be required to be provided at the same time as the financial statements towhich they relate? Why or why not?

Reporting at ‘the same time’
52. The ED proposes that an entity shall report its sustainability-related financial
disclosures at the same time as its financial statements (paragraph 66 of the proposed
S1 Standard). Given the ISSB’s objective of assessing the impact of significant
sustainability-related risks and opportunities on an entity’s enterprise value and theposition that sustainability-related financial information supplements andcomplements the information contained in the entity’s financial statements(paragraph BC6 of the proposed S1 Standard), we agree with this requirement inprinciple. However, in some jurisdictions, disclosures of sustainability-related
financial disclosures and financial statements have evolved from different laws andregulations, and changes in these systems or practices (or both) are likely to be costly
and time-consuming.
53. For example, in our jurisdiction, there are entities that are legally required to reporttheir greenhouse gas emissions. While a March year-end entity is required to reportto the authorities by the end of July, entities are required to file their financial
statements to their securities regulators by the end of June. As a result, theinformation required to prepare sustainability-related financial information may not
be available by the date the financial statements are due, even when the information
is available, it may be difficult for entities to prepare sustainability-related financial
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disclosures when the related financial statements are due to be filed with thesecurities regulator.
54. If an entity becomes subject to both disclosures of sustainability-related financial
information and financial statements, the implications of the ED would be that
information for both types of information would be due whichever is due earlier
under the laws and regulation, which could be impossible or significantly increase
the burden on the entity. In addition, if disclosures for both types of information
were voluntary, the implications of the ED would be that sustainability-related
financial information would not be disclosed until the financial statements aredisclosed (or vice versa), and we are concerned that the timeliness would be impaired
when compared to current practice.
55. We believe that the global baseline should accommodate the various corporate
reporting systems that exist around the world. Accordingly, acknowledging thatreporting at the same time is desirable, we believe that the ISSB should permit entities
to report at different timings.
Reporting on ‘the same period’
56. Paragraph 66 of the proposed S1 Standard also proposes that the disclosures ofsustainability-related financial information cover the same reporting period coveredin the financial statements. We agree with this requirement in principle, because
having the same reporting period for both types of disclosures is likely to provide
useful information because it enhances the connectivity of the information. However,
we note that, in the preparation of consolidated financial statements, accounting
standards permit the incorporation of financial statements of subsidiaries withdifferent accounting periods if the difference is less than three months (paragraph
B93 of IFRS 10 Consolidated Financial Statements). When a different accounting
period is used for the preparation of consolidated financial statements, we think
information of subsidiaries for the preparation of disclosures of sustainability-related
financial information should also be based on this different accounting period, andthat the S1 Standard should clarify this point.
57. Our understanding is that the reporting entity may need to obtain a large amount of
information and basic data from interested parties outside the consolidated group in
preparing disclosures of sustainability-related financial information, such as
emission factors in Scope 3 greenhouse gas emissions and emission information of

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investee or counterparty for financed emissions. Given the time permitted forentities to file their financial statements under the applicable laws and regulations, in
preparing sustainability-related financial disclosures for the current fiscal year,
information and other information may not be available for the current fiscal year.
(In particular, we note that covering the same reporting period as that covered in thefinancial statements is especially difficult for the disclosure of financed emissions,because the calculation of such financed emissions would be based on theinformation provided by the investee or counterparty. For this reason, the PCAF
Standards and others allow entities to calculate based on information in previous
years.)
There are also greenhouse gas emissions that are required to be reported forreporting periods that are different from the fiscal year and for which the periods
covered by the calculation are determined for each greenhouse gas. For this reason,
while sustainability-related financial disclosures and financial statements while it isdesirable for, different reporting period should be permitted by requiring an entity todisclose that fact and its reason, if an entity is note able to do so.
Judgements by each jurisdiction
58. The issues of reporting at the same time and reporting on the same period not only
relate to corporate reporting, but also to various systems in each jurisdiction,
including taxation and non-financial regulations. As stated in paragraph 3 of thecover letter, we believe that IFRS Sustainability Disclosure Standards must be
accepted by jurisdictions around the world to become truly global standards.
Accordingly, while we agree that reporting at the same time and reporting on thesame period is desirable, we think the ISSB should permit reporting at different
timings and reporting for the different periods. The specific exceptions should bedetermined by each jurisdiction.

Question 10—Location of information (paragraphs 72–78)
The Exposure Draft proposes that an entity be required to disclose information
required by the IFRS Sustainability Disclosure Standards as part of its general
purpose financial reporting—ie as part of the same package of reporting that istargeted at investors and other providers of financial capital.

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Question 10—Location of information (paragraphs 72–78)
However, the Exposure Draft deliberately avoids requiring the information to beprovided in a particular location within the general purpose financial reporting so as
not to limit an entity’s ability to communicate information in an effective andcoherent manner, and to prevent conflicts with specific jurisdictional regulatory
requirements on general purpose financial reporting.
The proposal permits an entity to disclose information required by an IFRS
Sustainability Disclosure Standard in the same location as information disclosed tomeet other requirements, such as information required by regulators. However, theentity would be required to ensure that the sustainability-related financial disclosures
are clearly identifiable and not obscured by that additional information.
Information required by an IFRS Sustainability Disclosure Standard could also be
included by cross-reference, provided that the information is available to users ofgeneral purpose financial reporting on the same terms and at the same time as theinformation to which it is cross-referenced. For example, information required by an
IFRS Sustainability Disclosure Standard could be disclosed in the related financial
statements.
The Exposure Draft also proposes that when IFRS Sustainability DisclosureStandards require a disclosure of common items of information, an entity shall avoid
unnecessary duplication.
(a)

Do you agree with the proposals about the location of sustainability-related
financial disclosures? Why or why not?

(b)

Are you aware of any jurisdiction-specific requirements that would make it
difficult for an entity to provide the information required by the Exposure
Draft despite the proposals on location?

(c)

Do you agree with the proposal that information required by IFRS
Sustainability Disclosure Standards can be included by cross-reference
provided that the information is available to users of general purpose
financial reporting on the same terms and at the same time as the information
to which it is cross-referenced? Why or why not?

(d)

Is it clear that entities are not required to make separate disclosures on each
aspect of governance, strategy and risk management for individual

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Question 10—Location of information (paragraphs 72–78)
sustainability-related risks and opportunities, but are encouraged to makeintegrated disclosures, especially where the relevant sustainability issues aremanaged through the same approach and/or in an integrated way? Why or
why not?

Use of cross-references
59. We believe a core medium is needed to enhance the understandability ofsustainability-related financial disclosures and to improve user availability. For
example, an annual report that includes the related financial statements (paragraph 8of the proposed S1 Standard) could be the core medium.
60. We agree with the proposal to permit cross-references (paragraph 75 of the proposed
S1 Standard) provided that this core medium is defined. However, if crossreferences are permitted, we think the following points need to be considered:(a) When an entity includes information by cross-reference, the scope of the ofsustainability-related financial disclosures in accordance with IFRS
Sustainability Disclosure Standards to be included by cross-reference should beclearly identified and disclosed; and(b) The concept ‘on the same terms and at the same time’ in the ED need to beclarified.
61. In addition, if the use of cross-references is permitted without any restriction, we areconcerned that information may be scattered, and the clarity and understandability of
the information may be reduced. Accordingly, we think the S1 Standard should
explicitly prescribe the type of information that should be included in the core
medium. Examples of such information would include the basic information
related to the ‘core content’ and the measurement criteria for metrics, which are
pieces of information that are essential to the understanding of the overview of theentity’s disclosures of sustainability-related financial information.
62. If a core medium is defined, sustainability-related financial information and related
financial statements will be disclosed at the same time for the contents to be disclosed
in the core medium. However, the core medium is likely to provide a summary,
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and specific metrics are likely to be provided outside this core medium via crossreferencing, and it may be the case that the information is provided at a different
timing. In such cases, entities should be required to explicitly state in the core
medium: when information is (or will be) provided in the other medium; as of what
date (or periods) the information provided in the other medium relates to; and how
to access the other medium. Entities should also be required to explicitly state in
the other medium: information about the specific metrics; and any updates to theinformation stated in the core medium.

Question 11—Comparative information, sources of estimation andoutcome uncertainty, and errors (paragraphs 63–65, 79–83 and 84–90)
The Exposure Draft sets out proposed requirements for comparative information,
sources of estimation and outcome uncertainty, and errors. These proposals are basedon corresponding concepts for financial statements contained in IAS 1 and IAS 8.
However, rather than requiring a change in estimate to be reported as part of thecurrent period disclosures, the Exposure Draft proposes that comparative information
which reflects updated estimates be disclosed, except when this would be
impracticable—ie the comparatives would be restated to reflect the better estimate.
The Exposure Draft also includes a proposed requirement that financial data andassumptions within sustainability-related financial disclosures be consistent withcorresponding financial data and assumptions used in the entity’s financial
statements, to the extent possible.
(a)Have these general features been adapted appropriately into the proposals? If
not, what should be changed?

(b)

Do you agree that if an entity has a better measure of a metric reported in theprior year that it should disclose the revised metric in its comparatives?

(c)

Do you agree with the proposal that financial data and assumptions withinsustainability-related financial disclosures be consistent with corresponding
financial data and assumptions used in the entity’s financial statements to theextent possible? Are you aware of any circumstances for which thisrequirement will not be able to be applied?

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Updated estimates in the disclosures of comparative information
63. Paragraph 64 of the proposed S1 Standard requires disclosures of comparative
information to reflect updated estimates of ‘to help provide the best information
possible about trends to users of general purpose financial reporting’ (paragraph
BC82 of the proposed S1 Standard). This requirement differs from the treatment in
IFRS Accounting Standards (paragraph 36 of IAS 8 Accounting Policies, Changes
in Accounting Estimates and Errors) that recognises the effects of changes inaccounting estimates prospectively.
64. Paragraph 64 of the proposed S1 Standard states that ‘when providing sustainabilityrelated financial disclosures an entity shall disclose comparative information thatreflects updated estimates’. This means that entities would be required, for all items,
to review whether the comparative information requires updates.
65. Our understanding is that accounting standards recognise the effects of changes inaccounting estimates prospectively because the changes in accounting estimates are
driven by new information and revisions to prior period estimates in the current
period involve the use of ‘hindsight’ and thus are less reliable. Updating estimates
incurs additional costs on entities and, therefore, it is not necessarily appropriate toprovide updated estimates for comparative information and the determination should
be made by comparing the costs and benefits.
66. Accordingly, we think the first sentence in paragraph 64 of the proposed S1 Standard
should be revised to read ‘When providing sustainability-related financial
disclosures an entity may disclose comparative information that reflects updated
estimates’. Nevertheless, when there is a change in an estimate that is material due
to a change in the assumptions, the details of the change in the estimate may need tobe disclosed.
67. The implications of our proposals in the previous paragraph can be summarised asfollows:(a) There will be no disclosure if the change in the estimate is immaterial.
(b) When comparative information reflecting updated estimates is not disclosed,
disclosures will be provided for significant changes in estimates.
(c) When comparative information reflecting updated estimates is disclosed,
disclosures will be provided for significant changes in estimates, specifically,
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the difference between the amounts reported in the prior period and thecomparative updated amounts, and the reason the amounts were updated.
Consistency of financial data and assumptions
68. We agree with the proposal in paragraph 80 of the proposed S1 Standard that
financial data and assumptions shall be consistent with the corresponding financial
data and assumptions in the entity’s financial statements, to the extent possible.
69. However, sustainability-related financial information inherently may provide
estimates for longer periods than financial statements. In such cases, we are of theview that disclosures should be provided to explain the differences between
sustainability-related financial information and information in the financial
statements, in accordance with the disclosure requirements related to connected
information (paragraph 42 of the proposed S1 Standard).
Estimation and outcome uncertainty
70. The proposed S1 Standard does not define nor explain the terms ‘measurement
uncertainty’, ‘estimation uncertainty’ and ‘outcome uncertainty’. We think theseterms need to be defined or explained in the proposed S1 Standard.
71. Regarding the outcome uncertainty, we think that it may be difficult to accurately
predict, to a sufficient extent, the results that may be considered at the time of
preparing sustainability-related financial disclosures, comprehensively and withoutbias for positive or negative outcomes for the entity. Accordingly, the ISSB should
acknowledge that there are cases where it may difficult to achieve ‘faithfulrepresentation’, which is a fundamental qualitative characteristic that is useful
information in assessing enterprise value, described in paragraphs C9 through C15
of Appendix C of the proposed S1 Standard.

Question 12—Statement of compliance (paragraphs 91-92)
The Exposure Draft proposes that for an entity to claim compliance with IFRS
Sustainability Disclosure Standards, it would be required to comply with theproposals in the Exposure Draft and all of the requirements of applicable IFRS
Sustainability Disclosure Standards. Furthermore, the entity would be required to

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Question 12—Statement of compliance (paragraphs 91-92)
include an explicit and unqualified statement that it has complied with all of theserequirements.
The Exposure Draft proposes a relief for an entity. It would not be required todisclose information otherwise required by an IFRS Sustainability DisclosureStandard if local laws or regulations prohibit the entity from disclosing that
information. An entity using that relief is not prevented from asserting compliancewith IFRS Sustainability Disclosure Standards.
Do you agree with this proposal? Why or why not? If not, what would you suggest
and why?

Statement of compliance
72. We are concerned that the application of the relief in paragraph 62 of the proposed
S1 Standard may impair comparability, as stated in paragraphs 41 and 42 of the cover
letter and paragraphs 49 and 50 of the Appendix to this letter.
Accordingly, we
are of the view that the ISSB should impose certain restrictions on items that neednot be disclosed because they are prohibited by local laws or regulations. One idea
might be to allow this exception only when complying with IFRS Sustainability
Disclosure Standards would significantly impact the environment or human rights ina negative manner.

Question 13—Effective date (Appendix B)
The Exposure Draft proposes allowing entities to apply the Standard before theeffective date to be set by the ISSB. It also proposes relief from the requirement topresent comparative information in the first year the requirements would be applied tofacilitate timely application of the Standard.
(a)When the ISSB sets the effective date, how long does this need to be after a
final Standard is issued? Please explain the reason for your answer, including
specific information about the preparation that will be required by entities

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Question 13—Effective date (Appendix B)
applying the proposals, those using the sustainability-related financial
disclosures and others.
(b)

Do you agree with the ISSB providing the proposed relief from disclosing
comparatives in the first year of application? If not, why not?

Effective Date
73. Sustainability-related financial disclosures is an issue to be addressed globally, andwe believe that the ISSB can develop internationally consistent standards.
However, sustainability-related financial disclosures have a relatively short history
compared to financial statements, and the number of jurisdictions and entities thatprovide such disclosures is smaller than the number of those that disclose financial
statements. In addition, sustainability-related financial disclosures are yet to be
fully established within the corporate reporting system, and we observe that we are
currently in the trial-and-error stage.
74. Although we recognise that sustainability-related financial disclosures are issues tobe addressed urgently, we believe that the ISSB should ensure sufficient time before
the effective date, given the situation of readiness by each jurisdiction and entity
described in the previous paragraph (for example, to apply the IFRS Sustainability
Disclosure Standard, entities must have a material sustainability related risks andopportunities need to be comprehensively identified or processes for collecting andcalculating the data required for disclosure and related internal controls need to beestablished. In particular, where confidentiality clauses exist in agreements enteredinto with companies in the value chain, it may be necessary to amend the agreements
in order to disclose sustainability-related financial information on the value chain.)
75. Regarding the industry-based standards, as described in paragraph 15 of the cover
letter, we are of the view that there are many issues that the ISSB needs to resolve if
it were to incorporate the SASB Standards into IFRS Sustainability DisclosureStandards. (Nevertheless, we think the disclosure topics are useful in identifying
sustainability-related risks and opportunities.) It is also recognised that the SASB
Standards have been developed to address a wide range of sustainability-related
themes and should not be ‘processed’ to become guidance limited to climate-only

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industry-based standards. Nevertheless, because the ED tries to isolate climatespecific industry-based standards within the SASB Standards, the ED includes
disclosure topics or metrics that have little relevance to climate. As a result, we areconcerned that these disclosures could be onerous to entities.
For the reasons discussed above, we recommend that, as the policy of developingthe ‘comprehensive global baseline’, the ISSB give higher priority to thedevelopment of the thematic requirements (including disclosure topics) and develop
industry-based requirements once the above issues have been resolved.
76. As described in paragraph 4 of the cover letter, we believe that the ISSB should adopt
a phased approach in which the ISSB should initially set out the most core disclosure
requirements that are useful to both users and preparers, and are actually applicablein each jurisdiction, and once those core disclosure requirements are accepted in eachjurisdiction, in which disclosures should be enhanced in line with the developmentof practice. We recognise that while disclosures on climate are desired as soon as
possible, we are still at the stage where we are beginning to build up disclosure
practices on themes other than climate. For this reason, a relief could be added inrelation to the effective date of the proposed S1 Standard to allow for a delay in theapplication of disclosure requirements for the ‘core content’ of themes other thanclimate.
Transition
77. One characteristic of sustainability-related financial information is that it is relatively
difficult to compare it with other entities when compared with financial information,and it is important that users can understand the trends in the same entity.
Accordingly, one idea is to require the disclosure of comparative information in thefirst period of application of IFRS Sustainability Disclosure Standards.
78. However, in light of the growing information needs of users for sustainability-related
financial disclosures and the urgent need for climate-related disclosures in particular,
we agree to the proposal in paragraph B2 of Appendix B of the proposed S1 Standard,
as it is expected that the application of IFRS Sustainability Disclosure Standards will
be promoted by not requiring disclosure of comparative information in the first yearof application.
79. We also agree to the proposal in paragraph B1 of Appendix B of the proposed S1Standard to allow earlier application for the aforementioned reason.

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Question 14—Global baseline
IFRS Sustainability Disclosure Standards are intended to meet the needs of the usersof general purpose financial reporting to enable them to make assessments ofenterprise value, providing a comprehensive global baseline for the assessment ofenterprise value. Other stakeholders are also interested in the effects of sustainabilityrelated risks and opportunities. Those needs may be met by requirements set byothers, including regulators and jurisdictions. The ISSB intends that suchrequirements by others could build on the comprehensive global baseline establishedby the IFRS Sustainability Disclosure Standards.
Are there any particular aspects of the proposals in the Exposure Draft that you
believe would limit the ability of IFRS Sustainability Disclosure Standards to be usedin this manner? If so, what aspects and why? What would you suggest instead andwhy?

Global baseline
80. We agree with the building block approach whereby the ISSB provides‘comprehensive global baseline’ and each jurisdiction prescribes additional
disclosure requirements on top of such baseline to meet the needs of users.
81. In this context, we think the proposals regarding sustainability-related financial
information disclosures published by the U.S. Securities and Exchange Commission(‘the SEC’) and the European Financial Reporting Advisory Group (‘EFRAG’),respectively, at a timing close to when the ISSB published the ED, can be used as test
cases. Given that these proposals come from jurisdictions where practices related
to disclosures of sustainability-related financial information are relatively advanced
and, if we are to view these proposals as the result of adding jurisdiction-specificrequirements to the ‘comprehensive global baseline’, we believe that the‘comprehensive global baseline’ that is to be developed by the ISSB should notinclude disclosure requirements that exceed these proposals (please note that thestandard to be compared should mainly be the proposed S2 Standard, because the
SEC’s proposals relate to climate-related disclosures only).

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82. Because sustainability-related risks and opportunities differ significantly in terms of
their magnitude and likelihood depending on the industry, in light of the objective of
the ED to provide information that contributes to the assessment of enterprise value,
there is a certain level of support in our jurisdiction for industry-based standards.
83. However, we specifically would like to note that the SEC’s proposal does not include
industry-based standards, and that EFRAG expects to address industry-based
standards in the future. We believe that the industry-based standards should be
developed based on global consensus but the proposed S2 Standard has been
proposed without such global consensus. We believe global consensus is needed
for several issues, such as the use of industry classification based on the SASB
Standards, the granularity of requirements in the industry-based standards, clarifying
the context in which the requirements are derived from the disclosure objectives anddisclosures by entities that conduct business in more than one industry. We are of
the view that there are many issues that the ISSB needs to resolve if it were toincorporate the SASB Standards into IFRS Sustainability Disclosure Standards.
(Nevertheless, we think the disclosure topics are useful in identifying sustainabilityrelated risks and opportunities.)
84. In addition, it is our understanding that the SASB Standards have been developed toaddress a wide range of sustainability-related themes and thus they should not be‘processed’ to become guidance limited to climate-related industry-based standards.
Nevertheless, because the ED tries to isolate climate-specific industry-based
standards within the SASB Standards, the ED includes disclosure topics or metrics
that have little relevance to climate. As a result, we are concerned that these
disclosures could be onerous to entities.
For the reasons discussed above, we recommend that, as the policy of developingthe ‘comprehensive global baseline’, the ISSB give higher priority to thedevelopment of the thematic requirements (including disclosure topics) and develop
industry-based requirements once the above issues have been resolved.

Question 15—Digital reporting
The ISSB plans to prioritise enabling digital consumption of sustainability-related
financial information prepared in accordance with IFRS Sustainability Disclosure

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Appendix
Question 15—Digital reportingStandards from the outset of its work. The primary benefit of digital consumption ascompared to paper-based consumption is improved accessibility, enabling easierextraction and comparison of information. To facilitate digital consumption of
information provided in accordance with IFRS Sustainability Disclosure Standards,
an IFRS Sustainability Disclosures Taxonomy is being developed by the IFRSFoundation. The Exposure Draft and [draft] IFRS S2 Climate-related Disclosures
Standards are the sources for the Taxonomy.
It is intended that a staff draft of the Taxonomy will be published shortly after the
release of the Exposure Draft, accompanied by a staff paper which will include an
overview of the essential proposals for the Taxonomy. At a later date, an Exposure
Draft of Taxonomy proposals is planned to be published by the ISSB for public
consultation.
Do you have any comments or suggestions relating to the drafting of the Exposure
Draft that would facilitate the development of a Taxonomy and digital reporting (forexample, any particular disclosure requirements that could be difficult to tag
digitally)?

Digital Reporting
85. There are no specific comments on digital reporting.

Question 16—Costs, benefits and likely effects
The ISSB is committed to ensuring that implementing the Exposure Draft proposals
appropriately balances costs and benefits.
(a)Do you have any comments on the likely benefits of implementing the
proposals and the likely costs of implementing them that the ISSB should
consider in analysing the likely effects of these proposals?

(b)

Do you have any comments on the costs of ongoing application of the
proposals that the ISSB should consider?

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Cost vs benefit
86. Cost versus benefit is mentioned individually in the comments to each question.

Question 17—Other comments
Do you have any other comments on the proposals set out in the Exposure Draft?

Terms used in standards
87. Apparently, the terminology used throughout the ED is inconsistent. For example,
paragraph 5 of the proposed S1 Standard contains the phrase ‘the amount, timing andcertainty of future cash flows’. This term ‘amount’ may be ‘value’ or the term‘certainty’ may be ‘uncertainty’. Those who carefully read the standards are likely
to question whether a difference in the terminology implies a different meaning and,
therefore, we urge the ISSB to be careful in terminology used in the standards.
Examples of sustainability-related financial disclosures
88. Stakeholders in our jurisdictions note that there are psychological hurdles to apply
the proposals in the ED because it is difficult to imagine how the whole picture of
the disclosures resulting from the ED would look like.
89. Although consideration should be given to ensure that practice would not be
constrained by presenting illustrative examples, we suggest that the ISSB consider
whether it should provide illustrative examples of disclosures of sustainabilityrelated financial disclosures in order to facilitate the application of IFRS
Sustainability Disclosure Standards.
90. For example, we think it would be useful to clarify in the illustrative examples
whether disclosing industry metrics in explaining the entity’s strategies would meetthe industry-based disclosure requirements.

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