The IFRS Foundation Trustees (IFRSFT) has announced a series of measures intended to provide global financial markets with high-quality disclosures on climate and other sustainability issues.
Amid high-profile climate change discussions at the COP26 summit in Glasgow, UK, the new developments lay the technical groundwork for a global sustainability disclosure standard-setter for the financial markets.
The announcement covers the introduction of three new measures. First, the formation of a new International Sustainability Standards Board (ISSB) to develop a comprehensive global baseline of high-quality sustainability disclosure standards intended to meet investors’ information needs.
The IFRSFT’s decision to create the ISSB is informed by the feedback received in its two public consultations, discussions with advisory groups, dialogue with the IFRS Foundation monitoring board and with support from the International Organization of Securities Commissions (IOSCO) and others.
The ISSB will have a global and multi-location presence. All regions will be covered, and engagement with developing and emerging economies will be an important priority.
Second, the IFRSFT announced a commitment by leading investor-focused sustainability disclosure organizations to consolidate into the new board. The IFRS Foundation will complete the consolidation of the Climate Disclosure Standards Board (CDSB, a CDP initiative) and the Value Reporting Foundation (VRF), which houses the International Integrated Reporting Framework and the SASB Standards, by June 2022.
Finally, the trustees also revealed the publication of prototype climate and general disclosure requirements developed by the Technical Readiness Working Group (TRWG), a group formed by the IFRSFT to undertake preparatory work for the ISSB.
These prototypes are the result of six months of joint work by representatives of the CDSB, the International Accounting Standards Board, the Financial Stability Board’s TCFD, the VRF and the World Economic Forum, supported by IOSCO and its Technical Expert Group of securities regulators. The TRWG has consolidated key aspects of these organizations’ content into an enhanced, unified set of recommendations for consideration by the ISSB.
The IFRS Foundation says many investors and regulators have called for the organization to build upon market-led initiatives and to use its experience in creating accounting standards used in more than 140 jurisdictions to bring globally comparable reporting on sustainability matters to the financial markets.
In a statement, the IFRSFT say the three developments in combination create the necessary institutional arrangements, set out in the IFRS Foundation’s constitution, to fulfil the growing and urgent demand for streamlining and formalizing corporate sustainability disclosures.
Talking about the new measures, Erkki Liikanen, chair of the IFRSFT, says: ‘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 VRF and others will provide the foundations to achieve this goal.’
