Stockholm (NordSIP) – One of the most recurring challenges facing sustainable investors is the lack of available or consistent data to allow comparisons over time and across companies and asset managers. One of the main milestones in overcoming this hurdle is the establishment of common industry standards for the disclosure of sustainability data.
As world leaders meet in Glasgow for COP26, the International Financial Reporting Standards Foundation (IFRS) announced it had taken steps towards creating the necessary institutional arrangements for a global sustainability disclosure standard-setter for financial markets. The decision follows extensive preparatory technical work and consultations since the beginning of 2021.
Creating a New Institutional Framework
The main development from the IFRS is the creation of the International Sustainability Standards Board (ISSB), which will be responsible for establishing a comprehensive global baseline of sustainability disclosure standards. The Trustees’ decision to create the ISSB is informed by the feedback received in their two public consultations, discussions with advisory groups, frequent dialogue with the IFRS Foundation Monitoring Board, and with support from IOSCO and others.
The IFRS trustees also committed to cooperating with the Climate Disclosure Project (CDP) and the Value Reporting Foundation (VRF) to consolidate the new board. The IFRS Foundation will consolidate the CDP’s Climate Disclosure Standards Board (CDSB) and the VRF, which houses the Integrated Reporting Framework and the Sustainability Accounting Standards Board (SASB) Standards by June 2022. Last but not least, the IFRS also announced the publication of a prototype climate and general disclosure requirements, developed by the IFRS Foundation Trustees Technical Readiness Working Group (TRWG).
The new prototype climate and general disclosure requirements were developed by the TRWG together with the CDSB, the International Accounting Standards Board (IASB), the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD), the VRF and the World Economic Forum, supported by the International Organization of Securities Commissions (IOSCO) and its Technical Expert Group of securities regulators. The TRWG has consolidated key aspects of these organisations’ content into an enhanced, unified set of recommendations for consideration by the ISSB.
“Sustainability, and particularly climate change, is the defining issue of our time. To properly assess related opportunities and risks, investors require high-quality, transparent and globally comparable sustainability disclosures that are compatible with the financial statements. 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,” says Erkki Liikanen, Chair of the IFRS Foundation Trustees.
The ISSB will cooperate with the IASB to ensure compatibility between IFRS Accounting Standards and the ISSB’s standards. Both boards will be overseen by the Trustees, who are in turn accountable to a Monitoring Board of capital market authorities responsible for corporate reporting in their jurisdictions. The ISSB and the IASB will be independent, and their standards will complement each other.
Following the upcoming appointment of a Chair and Vice-Chair(s) to the ISSB, the IFRS Trustees will begin searching for the remaining members of the 14-strong board. The ISSB will start its work once the Chair and Vice-Chair(s) have been appointed and will begin public consultations regarding the ISSB’s work plan and proposals informed by recommendations from the TRWG.