Climate Disclosure Standards Board, Value Reporting Foundation consolidated into IFRS
Marking a major step towards the establishment of unified and globally consistent sustainability-related corporate disclosure, the International Sustainability Standards Board (ISSB) was officially launched by the International Financial Reporting Standards Foundation (IFRS) today at the COP26 climate conference.
The movement to establish the ISSB was initiated in October 2020, with the launch of a consultation process by the IFRS Foundation, seeking input on the potential formation of a global sustainability reporting standards board, and on the Foundation’s own place in that process. After receiving positive responses to its consultation paper, the IFRS launched a Technical Readiness Working Group to do preparatory work for the proposed standards, and released its views towards the strategic direction to be taken in the formation of the new ISSB, focusing on information that is material to the decisions of investors, lenders and other creditors, beginning with climate-related issues, and extending to other ESG matters.
The new ISSB will sit alongside the International Accounting Standards Board (IASB), with both boards overseen by the IFRS Foundation Trustees. The IFRS Foundation stated that the boards will be independent, and will work in close cooperation to establish complementary standards to provide comprehensive information to investors and other providers of capital.
Along with the establishment of the ISSB, IFRS Foundation Trustees Chair Erkki Liikanen also announced that leading sustainability reporting standards organizations the Climate Disclosure Standards Board (CDSB) and the Value Reporting Foundation – recently formed through the merger of the International Integrated Reporting Council (IIRC) and Sustainability Accounting Standards Board (SASB) – will be consolidated into the IFRS Foundation by June 2022.
“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 Value Reporting Foundation and others will provide the foundations to achieve this goal.”
Additionally, Liikanen announced the publication of two prototype disclosure-focused documents today, including one focused specifically on climate-related disclosure, and another setting out general sustainability disclosures. Click here to view the climate and general disclosure prototypes.
Sustainability-focused organizations, investors and professional services and accounting firms welcomed the new disclosure announcements. Calling today’s developments “a watershed moment for sustainability disclosure standards,” Bill Thomas, Global Chairman and CEO of KPMG, said:
“You can’t change what you can’t measure, and the creation of globally consistent and transparent sustainability disclosure standards will strengthen our capital markets by helping investors and business leaders make better decisions and refocus their dynamism on long-term value creation.”
Mary Schapiro, Head of the TCFD Secretariat, said:
“Development of the ISSB’s global baseline will deliver transformative change in sustainability disclosures for the financial markets. The TCFD welcomes the formation of the ISSB, which builds upon the foundation of the globally accepted TCFD framework and the work of an alliance of sustainability standard setters. The ISSB represents a major step forward in establishing consistent, comparable global reporting standards.”