ESG – IFRS announces formation of new standard-setting board

At COP26 in Glasgow, the International Financial Reporting Standards (IFRS) Foundation announced that it would be forming the International Sustainability Standards Board (ISSB) “to provide the global financial markets with high-quality disclosures on climate and other sustainability issues.”

The ISSB will begin work in 2022 and is set to create a comprehensive baseline of sustainability-related disclosure standards that can be used to compare information across industry and financial markets.

Why was the ISSB formed?

The ISSB aims to tackle greenwashing and “provide investors and other capital market participants with information about companies’ sustainability-related risks and opportunities to help them make informed decisions.”

The amalgamation of disclosure standards aims to avoid disjointed adoption by individual national regulators and if supported by the International Organization of Securities Commission (IOSCO) will enhance global compliance.

The Climate Disclosure Standards Board and the Value Reporting Foundation (VRF) which currently work towards improving sustainability disclosure for investors will merge with the ISSB by June 2022.

The ISSB is envisioned to be the counterpart of the IFRS’s International Accounting Standard Board, which oversees the standards governing financial statements.

What will it work on?

The ISSB will consider and consult on the prototype disclosure requirements developed by the Technical Readiness Working Group (TRWG), a group formed by the IFRS Foundation to undertake preparatory work for the ISSB.

The development of the prototype disclosures came about through 6 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 (WEF) and was supported by the International Organization of Securities Commissions (IOSCO) and its Technical Expert Group of securities regulators.

Where will it be based?

Although the ISSB will be based in Frankfurt, it will have offices in Montreal, London and San Francisco. Talks are still underway regarding additional offices in Beijing and Tokyo.