IFRS Foundation Trustees announce strategic direction for sustainability reporting
In October 2020 Accounting News, we showcased the IFRS Foundation Trustees’ proposals (contained in their Consultation Paper) to create a Sustainability Standards Board within the governance structure of the IFRS Foundation, as shown below.
At their meeting on 2-4 March 2021, the IFRS Foundation Trustees (Trustees) continued their analysis on feedback received about their Consultation Paper, which confirmed that:
- There is an urgent need for global sustainability reporting standards, and
- There is support for the IFRS Foundation to play a role in developing these standards.
In February 2021, the International Organisation of Securities Commissions (IOSCO) also announced that they would work with the IFRS Foundation to develop a plan for establishing a new Sustainability Standards Board which would meet the needs of capital markets.
Strategic direction – The way forward
The Trustees recognise that it in the public’s interest to have reporting standards that address both enterprise value as well as value creation for society and the environment. Therefore based on feedback from the consultation process, as well as IOSCO’s recent announcement, the Trustees have outlined the strategic direction of the new Sustainability Standards Board (Board):
- Investor focus for enterprise value – the new Board will focus on information that is material to the decisions of investors, lenders and other creditors
- Sustainability scope, prioritising climate – the new Board will focus initially on climate-related reporting while also working towards meeting investor needs for other ESG information
- Build on existing frameworks – the new Board will build on the work of the Task Force on Climate-Related Financial Disclosures (TCFD) and also the work of the alliance of leading standard-setters in sustainability reporting focused on enterprise value, and
- Building blocks approach – the new Board will provide a globally consistent and comparable sustainability reporting baseline, and also provide flexibility for co-ordination on the reporting requirements that cover wider sustainability impacts.
Working group on sustainability
Further to the strategy noted above, at their 22 March 2021 meeting, the Trustees announced the formation of a working group to:
- Accelerate convergence in global sustainability reporting standards focused on enterprise value, and
- Prepare for a potential international Sustainability Reporting Standards Board as part of the IFRS Foundation governance structure.
The working group will be chaired by the IFRS Foundation and its members will include the:
- Value Reporting Foundation, which represents an intended merger of the International Integrated Reporting Council (IIRC) and the Sustainability Accounting Standards Board (SASB)
- Climate Disclosure Standards Board, and
- World Economic Forum.
IOSCO will also participate as an observer. The first meeting of the working group is expected to take place in April 2021.
Please contact Aletta Boshoff if you require assistance with ESG or sustainability reporting.