IOSCO Outlines its Vision for Sustainability Disclosure
IOSCO, the leading international policy forum and standards setter for securities regulators, announced today the publication of its Report on Sustainability-Related Issuer Disclosure, setting out its vision for sustainability reporting for companies. Developed by the organization’s Sustainable Finance Taskforce (STF), the report highlights the urgent need to improve the consistency, comparability and reliability of sustainability reporting for investors, according to IOSCO.
The report comes as progress towards the development of sustainability reporting standards has gained significant momentum, most notably with the initiative by the International Financial Reporting Standards Foundation (IFRS) to establish an International Sustainability Standards Board (ISSB). IOSCO has announced its support for the IFRS project, and recently launched a Technical Expert Group (TEG) tasked with assessing the technical recommendations to be developed as part of the initiative.
The report outlines several priority areas of improvement in the current sustainability reporting environment, with highlights including a lack of complete, consistent and comparable disclosure by issuers, selective reporting, limited quantitative metrics, and disconnects between companies’ financial and non-financial performance. Resulting priorities for a new disclosure framework include one that encourages globally consistent standards, promotes comparable metrics and narratives, and coordinates across approaches.
The vision laid out in the new report aligns with the IFRS initiative, and calls for the establishment of an ISSB with a strong governance foundation, encourages the development of sustainability standards based on existing frameworks including TCFD recommendations, GRI framework and SASB standards, and encourages a ‘building blocks’ approach to establishing a global sustainability reporting system.
Going forward, IOSCO stated that it will continue its engagement with the IFRS Foundation Trustees as they continue their technical preparations towards potentially establishing an ISSB by November 2021, while also engaging with other stakeholders. The organization will also work on securities regulators’ supervision of sustainability-related disclosures; and the development of an audit and assurance framework and related standards for corporate sustainability-related disclosures.
Ashley Alder, IOSCO Chair and Chief Executive Officer of the Securities and Futures Commission (SFC) of Hong Kong, said:
“Full, timely and comprehensive corporate level reporting, including of sustainability-related information, is absolutely foundational for the proper functioning of markets and for investor protection. This report sets out IOSCO´s vision for a global baseline of investor-focussed sustainability standards under the IFRS Foundation to improve the global consistency, comparability and reliability of sustainability reporting. It is imperative that the ISSB establish strong governance, proven independence and rigorous due process. The ISSB’s planned ‘climate first’ approach is a sensible one, and I look forward to seeing the ISSB move quickly to meet investors’ needs for information about other ESG topics.”
Erik Thedéen, Chair of the IOSCO Sustainable Finance Task Force and Director General of Finansinspektionen of Sweden, said:
“IOSCO is engaging closely with and monitoring the IFRS Foundation Trustees´ technical preparatory work on the design and establishment of the ISSB by November 2021. Provided that IOSCO´s expectations are satisfied, we will consider setting a pathway for the ISSB’s sustainability standards to serve as the global baseline for consistent, comparable, and reliable sustainability reporting and encouraging relevant authorities to consider those standards in their approaches to mandatory sustainability-related disclosures. I look forward to the work of the Technical Expert Group over the coming months to help IOSCO form its views on the potential endorsement of the ISSB and to the upcoming complementary IOSCO consultation reports on asset managers’ sustainability-related disclosures and on ESG data and rating providers.”
Click here to view the full IOSCO report.