Plans for the creation of a new sustainability standards board are progressing as the trustees of the IFRS Foundation launch a consultation on proposed amendments to the constitution of the Foundation to set out a framework for the formation of a new International Sustainability Standards Board (ISSB)
The new board’s standards will be known as ‘IFRS sustainability standards’ designed to help investors and other participants in the world’s capital markets to understand, compare and contrast a company’s sustainability performance with that of other companies, and to determine how a company’s performance relates to its value creation.
As a new division of the Foundation, new specialist staff with expertise in sustainability accounting will be recruited. The consultation is also seeking views on the future name of the organisation, with two options, the first to retain the current name, while option two would see the Foundation renamed as ‘the International Corporate Reporting Foundation’- 'thereby creating a sense of renewal, but at the cost of losing the benefit of building on the established brand of the Foundation’, the consultation stated.
The Foundation prefers option one but said that this would require a brand refresh to reflect the expanded standard-setting responsibilities.
The objectives of the ISSB will be to ‘develop, in the public interest, a single set of high quality, understandable, enforceable and globally accepted sustainability standards based upon clearly articulated principles. These standards should require high quality, transparent and comparable information in corporate reports to help investors and other participants in the world’s capital markets in their decision-making and connect with multi-stakeholder sustainability reporting’.
All decisions were discussed and agreed at the 26 April 2021 trustees meeting. The trustees recognised and appreciated the recent statements of support for a new sustainability board from the Financial Stability Board (FSB) and the International Organization of Securities Commissions (IOSCO), and remain on track to make a final determination about a new board in advance of the November 2021 United Nations COP26 conference.
There are four core elements of the proposals. These include:
- investor focus for enterprise value - the new board would focus on information that is material to the decisions of investors and other participants in the world’s capital markets;
- sustainability scope, prioritising climate - due to the urgent need for better information about climate-related matters, the new board would initially focus on climate-related reporting while also moving quickly to work towards meeting the information needs of investors on other environmental, social and governance (ESG) matters;
- build upon existing frameworks - the new board would build on the well-established work of the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD), as well as work by the alliance of leading standard-setters in sustainability and integrated reporting focused on enterprise value;
- building blocks approach - by working with standard-setters from key jurisdictions, standards issued by the new board would provide a globally consistent and comparable sustainability reporting baseline, while also providing flexibility for coordination on reporting requirements that capture wider sustainability impacts.
The process and operations of the new board would replicate the processes and operations of the International Accounting Standards Board (IASB).
As part of plans for the new body, a multi-stakeholder expert consultative committee will be set up. The trustees will begin work with the IOSCO and other organisations to explore the creation of a multi-stakeholder expert consultative committee within the Foundation’s structure to inform the standard-setting process of the new board.
Membership of the new board will be made up of professions with a broad base of skills, experience and perspectives, with potential ISSB members likely to have professional backgrounds that reflect a diverse range of expertise and roles that are relevant to sustainability.
The trustees are seeking feedback on proposed amendments to the Foundation’s Constitution to accommodate the potential formation and operation of the ISSB. The amendments include revisions to the objectives of the Foundation and the institutional arrangements for the ISSB.
The consultation is open for comment for 90 days and closes on 29 July 2021.
The trustees have also published a comprehensive feedback statement that summarises responses to their September 2020 consultation on sustainability reporting. The consultation sought feedback on demand for global standards and whether the Foundation should play a role. A total of 577 responses were submitted from organisations and individuals from around the world, with feedback indicating growing demand for specific sustainability reporting standards.