The IFRS Foundation’s International Sustainability Standards Board (ISSB) will take over responsibility for monitoring progress of companies’ climate-related disclosures from the Financial Stability Board’s (FSB) Task Force on Climate-related Financial Disclosures (TCFD) as of next year, following a request from the FSB.
The transfer of responsibilities marks a significant step in the ongoing consolidation of sustainability reporting standards, following the publication last month of the ISSB’s global standards for sustainability and climate reporting.
The TCFD was established by the FSB in 2015, with the goal of developing consistent disclosure standards for companies, in order to enable investors and other stakeholders to assess the companies’ climate-related financial risk. The recommendations were published in June 2017, and have until now effectively been serving as the industry standard for climate-related disclosure.
The TCFD recommendations were also broadly incorporated into the requirements of the ISSB’s climate related disclosure standard.
The ISSB was launched in November 2021 at the COP26 climate conference, with the goal to develop IFRS Sustainability Disclosure Standards, driven by demand from investors, companies, governments and regulators to provide a global baseline of disclosure requirements enabling a consistent understanding of the effect of sustainability risks and opportunities on companies’ prospects.
In its plenary meeting last week, the FSB said that the publication of the new ISSB standards “can be seen as a culmination of the work of the TCFD.”
The FSB added that it “thanked the TCFD for its work over the years and the major contribution it has made to the progress in improving climate-related financial disclosures around the world,” and requested that the work of monitoring and reporting on progress in companies’ climate-related disclosures be taken over by the ISSB following the delivery of the TCFD’s 2023 annual status report.
In a statement from the IFRS Foundation confirming that it will take over the TCFD’s responsibilities, ISSB Chair Emmanuel Faber said:
“The ISSB has built from and consolidated the market-leading investor-focused sustainability-reporting initiatives to deliver the ISSB Standards, with the TCFD recommendations at the heart of this. As such, the ISSB welcomes the FSB’s request to transfer the TCFD’s monitoring responsibilities to the ISSB from 2024 and the opportunity to build on TCFD’s legacy. This announcement provides yet further clarification of the so-called ‘alphabet soup’ of ESG initiatives for companies and investors.”