27^th July 2022, Manama, Kingdom of Bahrain | Aligned with its role as an advocate of the Islamic financial services industry (IFSI), the General Council for Islamic Banks and Financial Institutions (CIBAFI), the global umbrella of Islamic financial institutions, announced that it has submitted its comments today to the International Sustainability Standards Board (ISSB). The submission included comments on the Exposure Drafts (EDs) on “IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information” and “IFRS S2 Climate-related Disclosures”.

The EDs have been issued on 31^st March 2022 and were open for public consultation until 29^th July 2022.

In its comments, CIBAFI thanked the ISSB for giving the opportunity to the IFSI to comment on the EDs and provided collective feedback of its member banks from over 30 jurisdictions. CIBAFI’s comments comprised the following key points.

IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information

First, CIBAFI noted that the requirements outlined in the ED could be difficult to meet in full for smaller institutions that might possess limited resources for the identification, assessment, and reporting of sustainability-related financial information. It was thus recommended that additional guidance is provided to ease smaller institutions’ application of the standard.

Second, the ED outlines requirements for entities to disclose information on their governance of sustainability-related risks and opportunities. CIBAFI noted that some disclosure elements could be missing for a complete picture of the governance process of an entity. In particular, greater disclosure was recommended on the structure of reporting by management to the body responsible for the oversight and, where that body is not itself the board, how both the management and the body itself communicate with the board on sustainability issues.

Third, the ED proposes that the reporting entity of sustainability-related financial information should be the same as for the main financial statements, implying consolidated reporting for a group. CIBAFI and its members see that, while consolidation will be a familiar process for financial statements, there is some possibility that this may be less straightforward for sustainability-related disclosures, given that many of the risks and opportunities may have been considered and managed on a local basis.

IFRS S2 Climate-related Disclosures

First, similar to the comments provided on the ED IFRS, CIBAFI and its members recommend the provision of additional guidance to ease smaller institutions’ application of these standards where their lack of resources could impede their ability to identify, measure, and report on climate-related information.

Second, CIBAFI members noted that they may have limited familiarity with preparing detailed climate-related disclosures and have not generally had to do so at the level of the industry-based requirements derived from the Sustainability Accounting Standards Board. CIBAFI considers that this should be taken into account when determining the effective date for the standard.

Full comments submitted to the ISSB are available on CIBAFI’s website: http://www.cibafi.org.

In addition to Advocacy of Islamic finance Values and related Policies & Regulations, CIBAFI continues to support the IFSI through various activities and initiatives. These include providing industry stakeholders with a platform to discuss emerging issues, representing the industry at major global financial events, and sharing knowledge through specialized publications and comprehensive training programmes.