Regulators back new ‘baseline’ standard for sustainability disclosures
Data gaps in public and private enterprises’ non-financial disclosures have always been a huge challenge for investors. The International Organization of Securities Commissions (Iosco) has reiterated the urgent need to improve the consistency, comparability, and reliability of sustainability reporting for investors.
The call for a global, over-arching sustainability standard has only been getting lounder. Recently, the G7 finance ministers and Central Bank governors welcoming the International Financial Reporting Standards’ (IFRS) endeavour to develop a “baseline standard under robust governance and public oversight, built from the Task Force on Climate-related Financial Disclosures (TCFD) and the work of sustainability standard-setters”.
Iosco is considering a potential endorsement of these future standards created by IFRS’ newly created vertical, International Sustainability Standards Board (ISSB). Erik Thedéen, chair of Iosco’s Sustainable Finance Task Force and the Director General of Swedish regulator, Finansinspektionen, said, “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.”
Sitting alongside the International Accounting Standards Board (IASB), the ISSB is tasked to deliver a global set of investor-oriented, sustainability-related disclosure standards focussed on enterprise value-creation. Different jurisdictions could consider these upcoming standards when setting or implementing sustainability-related disclosure requirements, consistent with their domestic legal frameworks.
The ISSB will build on existing sustainability-related reporting principles, frameworks and guidance, including the TCFD framework and will encourage a ‘building blocks’ approach. Iosco has set out its approach in a detailed report and will continue to engage with the IFRS as preparations are underway to establish the ISSB by November this year.