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New board consolidates voluntary guidance around sustainability disclosures

As world leaders meet in Glasgow for COP26, the UN global summit to address the critical and urgent issue of climate change, the IFRS Foundation Trustees (Trustees) announce three significant developments to provide the global financial markets with high-quality disclosures on climate and other sustainability issues: 

The first is the formation of a new International Sustainability Standards Board (ISSB) to develop—in the public interest—a comprehensive global baseline of high-quality sustainability disclosure standards to meet investors’ information needs. 

Secondly a commitment by leading investor-focused sustainability disclosure organisations to consolidate into the new board. The IFRS Foundation will complete consolidation of the Climate Disclosure Standards Board (CDSB—an initiative of CDP) and the Value Reporting Foundation (VRF—which houses the Integrated Reporting Framework and the SASB Standards) by June 2022; 

Finally the publication of prototype climate and general disclosure requirements developed by the Technical Readiness Working Group (TRWG), a group formed by the IFRS Foundation Trustees 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 (IASB), the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD), the VRF and the World Economic Forum (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. 

Together, these developments create the necessary institutional arrangements, set out in the Foundation’s revised Constitution, and lay the technical groundwork for a global sustainability disclosure standard-setter for the financial markets. They fulfil the growing and urgent demand for streamlining and formalising corporate sustainability disclosures. 

The ISSB will sit alongside and work in close cooperation with the IASB, ensuring connectivity and compatibility between IFRS Accounting Standards and the ISSB’s standards—IFRS Sustainability Disclosure Standards. To ensure public interest legitimacy, 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 to provide comprehensive information to investors and other providers of capital. 

Major development 

“A major development from COP26, that is set to have a significant impact for financial professionals and institutions globally, is the creation of a new International Sustainability Standards Board (ISSB),” Jill Klindt, senior vice president and chief financial officer, Workiva, said. “Announced on Wednesday by the IFRS Foundation, it is a vital step towards consolidating the current patchwork of voluntary guidance around sustainability disclosures.  

“The ISSB will help introduce a single set of norms for companies reporting the impact of climate change on their business – eventually extending to ESG matters beyond the environment. With a global trend towards green finance and sustainable investment, this will prove valuable for the financial sector by providing a single framework for understanding and comparing sustainability performance between businesses. 

“As ESG metrics move up the priority list for investors and regulators – and with new standards on the horizon – organisations could take this opportunity to improve how they report and display this information; enabling would-be investors to have a clear understanding of their practices and intentions. Ultimately, every financial decision should take sustainability and climate change into account.  

“Any investment made without considering the climate impact, heavily scrutinised due to the financial and reputational harm that a poor sustainability record can have on a business.  

In addition to new mandates, standards, and regulations that are designed to bring clarity to ESG reporting, cloud-native technology solutions can help improve and simplify this process further. Businesses can integrate workstreams and enable automation to collect and aggregate data from different areas of the business, to create accurate and auditable reports. This will foster greater trust with an organisation’s stakeholders – investors and employees – and strengthen its reputation, as the global community looks to improve ESG standards and regulations.” 

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