The Securities and Exchange Commission of Malaysia announced the launch by its Advisory Committee on Sustainability Reporting (ACSR) of a consultation on the proposal to use the IFRS Foundation's International Sustainability Standards Board (ISSB) as a basis for mandatory reporting requirements for large, listed companies.
The consultation follows the launch by the Securities and Exchange Commission of Malaysia of the ACSR last year, with the aim of facilitating the use of ISSB standards in a new National Sustainability Reporting Framework for Malaysia (NSRF), as well as identifying and support other elements of QREN, including a framework for assurance and capacity building.
The ISSB was launched in November 2021 at the COP26 climate conference, with the aim of developing IFRS Sustainability Disclosure Standards, driven by demand from investors, companies, governments and regulators to provide a global baseline of disclosure requirements, enabling a consistent understanding of the effect of sustainability risks and opportunities on companies' prospects.
IFRS released the first general sustainability (IFRS S1) and climate (IFRS S2) reporting standards in June 2023, and in July IOSCO, the leading international policy forum and standard-setter for securities regulators, called to regulators to incorporate standards into their sustainability. regulatory reporting frameworks.
Since the launch of the ISSB, many jurisdictions have announced their intention to adopt the standards, including the United Kingdom, Canada, Brazil, Japan and South Korea, among others, and the EU and Australia have moved to establish their own standards with strong interoperability with ISSB.
Noting these developments, the consultation document said:
“In light of the growing support and demand for the use of the ISSB Standards, alignment with these developments is exponentially crucial for Malaysia as an export-oriented country that is intrinsically integrated into global supply chains.”
The new consultation seeks feedback on key issues relating to the implementation of IFRS S1 and S2, including the scope and timing of implementation, transition measures and assurance issues.
The document outlines a potential approach to adopting the standards that would make them mandatory for issuers on the main market of Bursa Malaysia (“main market listed issuers”), and potentially extending reporting requirements to issuers in the growth market (ACE Market ), as well as for large unlisted companies. The proposed timelines for main market companies would see the start of reporting for fiscal years ending on or after December 31, 2025 for IFRS S2 with exemptions in place, and IFRS S1 for disclosures about climate-related risks and opportunities, one year later for IFRS S1 with exemptions, and full adoption of both standards for years ending on or after December 31, 2027. For the ACE Market and large unlisted companies, adoption of each step would begin two years later than schedule from the Main Market.
In addition to the exemptions included in the ISSB IFRS standards, the consultation lists a number of additional exemptions, including allowing companies not to disclose the impacts of climate-related risks and opportunities on strategy and decision-making, as well as some Scope 3 emissions for in the first 2 years of S2, as well as focusing on sustainability-related financial disclosures specifically for key business segments and not disclosing the impacts of sustainability-related risks and opportunities on strategy and decision-making in the first year of S2. S1.
The consultation also envisages a move to mandatory assurance for sustainability reporting, intended to provide a similar level of confidence to financial reporting, with an initial focus on limited assurance for greenhouse gas emissions, starting two years after the adoption of IFRS S2.
The public consultation period for the article is open until March 21, 2024. Click here to access the consultation document.
