IFRS announces global sustainability standards board

IFRS announces global sustainability standards board

The initiative will aim to fulfil the urgent demand for standardising corporate sustainability disclosures worldwide

IFRS announces global sustainability standards board

Efforts to establish a global consensus for climate and sustainability disclosures took a major step as the International Financial Reporting Standards Foundation (IFRS) announced a series of “significant developments” including its new International Sustainability Standards Board (ISSB).

The ISSB will consolidate with the Climate Disclosure Standards Board (CDSB) and the Value Reporting Foundation (VRF) by June 2022, resulting in the formation of a new global standards setter. The board’s inception was also accompanied by the publication of prototype climate disclosure requirements.

“To properly assess related opportunities and risks, investors require high-quality, transparent and globally comparable sustainability disclosures that are compatible with the financial statements,” said Erkki Liikanen, chair of the IFRS Foundation Trustees.

“Establishing the ISSB and building on the innovation and expertise of the CDSB, the Value Reporting Foundation and others will provide the foundations to achieve this goal.”

According to the IFRS Foundation, the prototype requirements were developed by the Technical Readiness Working Group (TWRG), a group formed by the IFRS Foundation Trustees to undertake preparatory work for the ISSB.

It is the result of six months of deliberations between a number of groups, including the International Accounting Standards Board (IASB), the Task Force on Climate-related Financial Disclosures (TCFD), and IOSCO.

The TRWG has consolidated key aspects of these organisations’ content into an enhanced, unified set of recommendations.

“This is a major step forward for reporting around sustainability and towards the development of a truly international corporate reporting system,” said Michael Izza, chief executive of the Institute for Chartered Accountants in England and Wales.

“This new board will address the urgent need for a set of global, high-quality and authoritative standards for non-financial reporting on climate and sustainability, and we strongly support its formation.”

Helen Brand, chief executive of the Association for Chartered Certified Accountants, hailed the ISSB as a “once in a lifetime opportunity to shape global reporting standards”.

“This is needed to address the scale of global environmental and social challenges today, accelerate the necessary reallocation of capital, and drive positive changes in corporate decision-making,” said Brand, who is also co-vice chair of the VRF.

“Proven demand”

The IFRS says its decision to create the ISSB is informed by feedback received during public consultations and discussions with advisory groups.

It also notes that there is a “significant demand” for high-quality, climate-related information as a result of financial markets’ need to assess risks and opportunities, and that a number of investors and regulators have called for the IFRS to bring globally comparable reporting on sustainability matters to the financial markets.

“The ISSB standards are an essential part of a system change that will be required to create a global baseline of sustainability information addressing the needs of global capital markets,” said Veronica Poole, Deloitte’s global IFRS leader.

“Worldwide adoption of the ISSB standards is needed to achieve true harmonisation, to replace the alphabet soup of voluntary standards and frameworks.”

This stance is shared by Jessica Fries, executive chairman of the Accounting for Sustainability (A4S) action group, which was founded by the Prince of Wales in 2004.

“Without the right information, companies and investors struggle to make informed decisions and assess whether they are on track to achieve the reductions in greenhouse gas emissions necessary to keep global temperature rise below 1.5 degrees Celsius.

“The proposed standards have the potential to provide investors with the consistent information they need to evaluate an organisation’s performance, inclusive of social and environmental factors.”

According to Fries, A4S has brought together key regulators, standard setters, businesses, investors and stakeholders over the years with the ultimate aim that the IFRS Foundation would take over and incorporate sustainability disclosure as a central part of corporate reporting.

“It has taken over a decade, but today’s announcement is a significant step towards realising that vision,” she said.

Next steps 

The IFRS Foundation Trustees are at advanced stages in appointing a chair and vice-chair to the ISSB. A search will shortly commence for the additional board positions.

The ISSB’s work is expected to commence as soon as positions have been appointed, and is set to begin with public consultations to inform the ISSB’s work plan and on proposals informed by recommendations from the TRWG.

Following these consultations, the ISSB’s work will follow the IFRS Foundation’s process, including public discussions by the ISSB of feedback received to the consultations, and possible improvements to the standards prior to their finalisation.


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