Sustainability-related risks and opportunities
Sustainability-related risks and opportunities are environmental, social, or governance conditions that could reasonably be expected to affect an entity's prospects, including its cash flows, access to finance, or cost of capital over time. Under IFRS S1, entities disclose material information about these matters for users of general purpose financial reports.
In simple terms
An entity considers how its dependencies and impacts interact with resources, relationships, and external conditions to create financial effects over the short, medium, or long term. IFRS S1 provides the general disclosure requirements, while IFRS S2 addresses Climate-related risks and opportunities. The assessment is entity-specific: a matter is not automatically material merely because it is important to society, and a current accounting amount is not required before a risk or opportunity can affect prospects. Financial materiality guides which information is useful to primary users.
Why it matters
Identifying these risks and opportunities connects sustainability conditions with governance, strategy, risk management, metrics, targets, and financial planning. It helps investors understand how an entity may create or lose value over time. The phrase should not be used as a generic list of every sustainability topic; disclosures depend on materiality and the applicable reporting requirements.
Example
A food producer identifies water availability, worker retention, and packaging regulation as sustainability-related conditions. It assesses which could reasonably affect production, costs, financing, or demand, then discloses material governance, strategy, risk-process, and performance information under the ISSB requirements adopted in its jurisdiction.
How it differs
Climate-related risks and opportunities
Climate-related risks and opportunities concern climate specifically; Sustainability-related risks and opportunities are the broader IFRS S1 category and can include environmental, social, and governance matters beyond climate.
References
Current status
- As of
- Issuer
- International Sustainability Standards Board
- Instrument or version
- IFRS S1 General Requirements and IFRS S2 Climate-related Disclosures
- Status
- IFRS S1 and IFRS S2 were issued in June 2023 and are effective for annual reporting periods beginning on or after 1 January 2024.
Applicability: Actual mandatory use depends on adoption, endorsement, regulation, listing rules, contractual requirements, or voluntary application in the relevant jurisdiction. Preparers should consult the standards and requirements applicable to their reporting period.