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.

Monitoring board

Recent developments

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.

Sustainability Standards Board strategic direction

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:

  • TCFD
  • 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.

More information

Please contact Aletta Boshoff if you require assistance with ESG or sustainability reporting.

This publication has been carefully prepared, but is general commentary only. This publication is not legal or financial advice and should not be relied upon as such. The information in this publication is subject to change at any time and therefore we give no assurance or warranty that the information is current when read. The publication cannot be relied upon to cover any specific situation and you should not act, or refrain from acting, upon the information contained therein without obtaining specific professional advice. Please contact the BDO member firms in Australia to discuss these matters in the context of your particular circumstances.

BDO Australia Ltd and each BDO member firm in Australia, their partners and/or directors, employees and agents do not give any warranty as to the accuracy, reliability or completeness of information contained in this article nor do they accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this publication or for any decision based on it, except in so far as any liability under statute cannot be excluded. Read full Disclaimer.