IFRS Foundation Creates International Sustainability Standards Board and Announces Consolidation with the CDSB and VRF
By George Wilson
While the SEC has been working on its climate change and ESG rule proposal (see more below), the IFRS Foundation has been actively considering the need for a new sustainability standards board. This September 2020 “Consultation Paper” provided background and sought input about creating a separate sustainability standards board. In February 2021, the Foundation announced their intention to formally consider establishing a new board. One month later, this March 2021 statement set out the strategic direction for the proposed new board.
The Foundation’s work came to fruition quickly. On November 3, 2021, at the 26th UN Climate Change Conference of the Parties (COP26) in Glasgow, the IFRS Foundation Trustees announced that they have formed the International Sustainability Standards Board or ISSB. This Board will focus on building a “global baseline of high-quality sustainability standards to meet investors information needs.”
In addition to the creation of the ISSB, the Foundation also announced that the Climate Disclosure Standards Board and the Value Reporting Foundation will consolidate with the ISSB. The Climate Disclosure Standards Board is an initiative of the Carbon Disclosure Project (CDP). The Value Reporting Foundation was formed via the recent consolidation of the Sustainability Accounting Standards Board and the International Integrated Reporting Council.
The IFRS Foundation has already begun foundational work on standard setting, forming a Technical Readiness Working Group to develop prototype climate and general disclosure requirements. You can review progress so far in this “Summary of the Technical Readiness Working Group’s Programme of Work.”
While all this is happening in the international realm, the SEC is continuing to work on its approach to climate change and ESG reporting. Chair Gary Gensler made this clear in his speech “Prepared Remarks Before the Principles for Responsible Investment ‘Climate and Global Financial Markets’ Webinar”:
“Companies and investors alike would benefit from clear rules of the road. I believe the SEC should step in when there’s this level of demand for information relevant to investors’ decisions.
Thus, I have asked SEC staff to develop a mandatory climate risk disclosure rule proposal for the Commission’s consideration by the end of the year.
I think we can bring greater clarity to climate risk disclosures.
I believe, though, we should move forward to write rules and establish the appropriate climate risk disclosure regime for our markets, as we have in prior generations for other disclosure regimes.”
While it now appears that this proposal may happen in early 2022, the SEC is clearly working to establish its own reporting standards.
As always, your thoughts and comments are welcome!