Stockholm (NordSIP) – One of the most often cited issues surrounding the feasibility of sustainable investments is the lack of consistency in company-level data due to the absence of a shared approach to corporate disclosures on ESG matters.
To address these challenges, the International Financial Reporting Standards Foundation (IFRS), whose accounting standards are the norm in over 140 countries, has been working toward the development of global sustainability disclosure standards for financial markets. After public consultations at the end of 2020, and the creation of the International Sustainability Standards Board (ISSB) on the margins of the COP26 by the IFRS, the new Sustainability standard-setter has now launched a consultation on its first two proposed standards, setting out general sustainability-related disclosure requirements and specific climate-related disclosure requirements.
“Rarely do governments, policymakers and the private sector align behind a common cause. However, all agree on the importance of high-quality, globally comparable sustainability information for the capital markets. These proposals define what information to disclose, and where and how to disclose it. Now is the time to get involved and comment on the proposals,” said Emmanuel Faber, Chair of the ISSB.
On the same occasion, the ISSB has set out its plan for how its work will build on the SASB Standards and industry-based standard-setting processes.
The Proposed Standards
The proposals set out requirements for the disclosure of material information about a company’s significant sustainability-related risks and opportunities that is necessary for investors to assess a company’s enterprise value.
The draft proposal on general sustainability disclosure requirements includes proposals for definitions and requirements and would require “an entity to disclose material information about all of the significant sustainability-related risks and opportunities to which it is exposed. The proposals include requirements and guidance to support the disclosure of material information about significant sustainability-related risks and opportunities not specifically addressed by an IFRS Sustainability Disclosure Standard.”
The draft proposal on climate-specific disclosure requirements demand that an entity to provide information on how its governance strategy, strategy, risk management and the metrics it chooses are aligned to provide a clear picture to investors of how it intends to tackle climate change.
The proposals, build upon the recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD), the Climate Disclosure Standards Board, the International Accounting Standards Board, the Value Reporting Foundation and incorporate industry-based disclosure requirements derived from Sustainability Accounting Standards Board (SASB) Standards. The proposals have been developed in response to requests from G20 leaders, the International Organization of Securities Commissions (IOSCO) and others for enhanced information from companies on sustainability-related risks and opportunities.
“IOSCO welcomes the publication of the ISSB’s two proposed IFRS Sustainability Disclosure Standards. We will review the proposals, with the objective to endorse them for use by our member jurisdictions. Endorsement by IOSCO can pave the way for the adoption of the Standards around the world, delivering much-needed consistency and comparability in sustainability-related information to the capital markets,” said Ashley Alder, Chairman of the IOSCO Board.
Next Steps
The ISSB is seeking feedback on the proposals over a 120-day consultation period closing on 29 July 2022. The ISSB will review feedback on the proposals in the second half of 2022 and aims to issue the new Standards by the end of the year, subject to the feedback.
Initial proposals for an IFRS Sustainability Disclosure Taxonomy, enabling structured electronic tagging of a company’s sustainability disclosures, will be published shortly.
The proposals will be presented in two live webinars on 28 April at 9am and 5pm BST. Information on how to register will shortly be announced.
