ISSB nature-related disclosures explained: what the proposed Practice Statement could require

The International Sustainability Standards Board (ISSB) is preparing nature-related disclosure guidance to sit alongside International Financial Reporting Standard S1 (IFRS S1) and International Financial Reporting Standard S2 (IFRS S2). It is not yet a final document, and the proposed IFRS Practice Statement would not be a mandatory third ISSB Standard. Its importance lies elsewhere: it could bring location-specific nature risk, dependencies and opportunities into the same investor-reporting system already used for climate.

A tonne of greenhouse gas has the same physical meaning wherever it is emitted. Nature does not work that way. A factory beside a water-stressed river, a mine near sensitive habitat and a food company dependent on pollination can face very different risks even when their corporate totals look similar.

That is the reporting problem the ISSB is now trying to address. IFRS S1 already covers sustainability-related risks and opportunities that could affect a company's prospects. The proposed nature guidance would add detail about how companies identify those risks, how much location matters and what information investors should receive.

The distinction between a Standard and a Practice Statement matters. A company can comply with ISSB Standards without applying the proposed nature document. If it chooses to claim compliance with the Practice Statement, however, the ISSB's tentative decisions would require it to meet all of that document's requirements as well as IFRS S1 and IFRS S2.

Where the ISSB nature project stands

The project moved from research into standard-setting after the ISSB concluded that investors needed more consistent information about nature-related risks and opportunities. Between January and June 2026, the board worked through the proposed content and form of the guidance.

The July agenda papers are staff papers, not final board decisions. They show how far the project has advanced and what the exposure draft is expected to contain, but the formal record remains the ISSB Update published after each meeting.

A Practice Statement, not IFRS S3

The ISSB could have proposed another Standard. Instead, it has chosen a Practice Statement: non-mandatory guidance developed through a standard-setting process.

That choice gives companies and jurisdictions flexibility. Applying the Practice Statement would not be necessary to state compliance with IFRS S1 and IFRS S2. A regulator could encourage it, adopt it or decide that the cost and benefit do not suit its market. A company could also use it voluntarily when nature-related risks are financially material.

Optional does not mean informal. The proposed document would contain incremental requirements for companies that apply it. July staff papers describe nature-related scenario analysis, information about assets or activities vulnerable to identified risks, information aligned with nature-related opportunities and consideration of the right level of location detail.

The result is a two-level system. IFRS S1 continues to require disclosure of material sustainability-related risks and opportunities. The Practice Statement would provide a more specific route for identifying and reporting nature-related information within that baseline.

Why location changes the reporting job

Climate disclosure often begins with corporate inventories, energy use, greenhouse gas emissions and transition assumptions. Nature reporting has to get much closer to the ground.

Water availability, soil condition, species, ecosystem services and community relationships vary by place. A company may have low direct land use but depend on suppliers operating in areas where water, habitat or land rights are under pressure. A portfolio may appear diversified by sector while remaining concentrated in the same river basin or agricultural system.

The proposed Practice Statement is expected to ask companies to consider what level of location-specific information is appropriate when identifying nature-related risks and opportunities and disclosing material information about them. That does not require every business to publish the coordinates of every supplier. It does mean a global percentage can be inadequate when the risk depends on where an asset, activity or supply chain sits.

This is also why the ISSB has considered interactions with Indigenous Peoples, Local Communities and affected stakeholders. Nature-related financial risk can be shaped by access to land and resources, contested development, legal rights, local knowledge and the durability of relationships around a site. Those issues can affect project timing, operating costs and access to finance without being reducible to a biodiversity score.

How TNFD would fit

The Taskforce on Nature-related Financial Disclosures (TNFD) has already created recommendations and the Locate, Evaluate, Assess and Prepare (LEAP) approach for identifying nature-related dependencies, impacts, risks and opportunities. The ISSB has used that work rather than starting from an empty page.

Its tentative decisions keep a boundary between the two systems. Companies applying the Practice Statement could refer to TNFD disclosure metrics when those metrics help meet IFRS S1's objective and do not conflict with ISSB requirements. The proposed document is also expected to note that LEAP may help a company identify nature-related risks and opportunities.

Neither step would make LEAP mandatory. A company could comply with the proposed Practice Statement without following the full TNFD assessment process, provided its own process satisfies the eventual requirements.

The relationship is therefore closer than simple interoperability but short of incorporation. TNFD supplies much of the nature-specific architecture. The ISSB decides which parts belong inside investor-focused sustainability-related financial disclosure.

What companies may need to build

Companies do not need to wait for final wording before checking whether their current systems can produce decision-useful nature information. They do need to avoid presenting tentative requirements as settled compliance duties.

A credible preparation process starts by locating material interfaces with nature across operations and value chains. That may require asset and supplier locations, water-basin data, land use, important ecosystem dependencies and known impact pathways. Industry metrics from the SASB Standards can help identify likely topics, but industry relevance does not prove company-level materiality.

The next step is to connect dependencies and impacts to financial risks or opportunities. A food company may depend on water and healthy soils. Investors need to know how deterioration could affect supply, prices, production or capital expenditure, and how management is responding. A description of the dependency alone is not enough.

Reporting teams will also need to decide which locations require deeper analysis, document the methods behind metrics and make sure risk, finance, sustainability, procurement and operational teams are working from compatible evidence. The existing sustainability reporting controls still apply: ownership, source records, review, change control and a clear audit trail.

Nature-related scenario analysis may be the least mature part of that work. The proposal would require companies applying the Practice Statement to use scenario analysis when explaining resilience to nature-related risks. That is not a forecast of the most likely future. It is a structured way to ask how the business performs under plausible changes in ecosystems, regulation, markets and access to resources.

What investors could gain

Current nature reporting is often rich in policy commitments and poor in financial connection. Companies may describe habitat projects, water targets or supply-chain programmes without showing which risks are material, where exposure sits or how it could alter the business.

The proposed guidance could make three improvements. It could give companies a common vocabulary for physical and transition risks, require more attention to vulnerable assets and activities, and bring location into the materiality judgement. It could also make it easier to compare a company's nature disclosures with the governance and strategy information already reported under IFRS S1 and IFRS S2.

Those gains are not guaranteed. The quality of disclosure will still depend on source data, boundaries, estimation and management judgement. Location-specific information can be commercially sensitive or difficult to obtain through long supply chains. Scenario analysis can create false precision if assumptions are not explained. Voluntary application may also produce uneven coverage between companies and jurisdictions.

Better disclosure would not prove that nature loss has slowed. It would show more clearly where a company believes nature can affect its prospects, what evidence supports that view and how management is responding.

What the proposal would not settle

The exposure draft is expected to focus on financially material nature-related risks and opportunities for investors. It would not replace broader impact reporting under the Global Reporting Initiative (GRI) or the European Sustainability Reporting Standards (ESRS). Nor would it make every dependency, impact or nature claim financially material.

It would not create a universal biodiversity metric. Nature is too dependent on ecosystem type, condition and place for one corporate number to carry the whole account. Cross-industry metrics can improve consistency, but they cannot remove the need for context.

The guidance would also remain separate from nature-market instruments. A disclosure about habitat dependency does not create a biodiversity credit. Buying a credit does not resolve the underlying operational exposure. Our biodiversity credits guide explains why additionality, location, durability and claims still require their own evidence.

Finally, an ISSB document does not become law everywhere by itself. Jurisdictions will decide whether and how it enters local reporting. Companies will need to track both the final Practice Statement and the rules that apply where they report.

What happens next

The first immediate decision is procedural. At its 21 and 22 July meeting, the ISSB is due to consider whether the required due-process steps are complete, whether staff can begin balloting the exposure draft and whether the public comment period should run for 120 days.

Staff papers plan publication in October 2026. That consultation will be the first chance to judge the proposed wording as a whole, including the burden of scenario analysis, the treatment of locations, the relationship with TNFD metrics and the clarity of the compliance statement.

Until then, the direction is more certain than the detail. Nature is moving from a general sustainability topic into investor-focused reporting. The harder question is whether companies can trace a risk from ecosystem and location, through operations and finance, into a disclosure that is specific enough to inform a decision.

Sources

• IFRS Foundation: Nature-related Disclosures project and June 2026 ISSB Update
• IFRS Foundation: ISSB meeting, 21 and 22 July 2026
• IFRS Foundation: due process steps and permission to ballot staff paper
• IFRS Foundation: likely effects of the proposed Practice Statement staff paper
• IFRS Foundation: IFRS S1 General Requirements
• TNFD: recommendations and guidance
• Feature image: tree measurement photograph by cottonbro studio on Pexels