At the start of February this year, the IFRS Foundation announced that it was investigating the feasibility of creating a Sustainability Standards Board (SSB) to be launched at the next United Nations Climate Change Conference (COP26) in November 2021.
Keywords: Mazars, Thailand, IFRS, Sustainability Standards Board, COP26, EFRAG, ESG, IASB
13 May 2021
As European institutions, too, show their commitment to this issue (see below for our feature on the EFRAG Task Force report), the Trustees of the Foundation met at the beginning of March to determine the key strategic directions for the new Board:
- the SSB would concentrate, at least initially, on information that is important to investors, lenders and other creditors. At this stage, materiality would be viewed in financial terms, i.e. relating to the impact of climate change on enterprise value. This should facilitate interconnectivity with financial reporting, which is the purview of the IASB;
- the SSB would initially focus on climate-related reporting, while continuing to work on addressing investors’ information needs regarding other ESG (environmental, social and governance) matters;
- the SSB would build on the most widely-recognised existing frameworks, notably the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), an offshoot of the Financial Stability Board, as well as the work of a recently-formed alliance of organisations (CDP – Carbon Disclosure Project, CDSB – Climate Disclosure Standards Board, GRI – Global Reporting Initiative, IIRC – International Integrated Reporting Council and SASB – Sustainability Accounting Standards Board) that published a prototype climate-related financial reporting standard, based on the recommendations of the TCFD, in December 2020. The Foundation has stated that it wishes to establish a formal working relationship with these various organisations, and on 22 March it announced the creation of a working group in which the IASB will participate, with IOSCO (the International Organization of Securities Commissions) acting as an observer. As well as continuing to work on disclosures, the group will review how technical expertise and content on sustainability reporting could be transferred to the SSB in order to facilitate consolidation in this area;
- the SSB would take a building-blocks approach, developing a baseline that would ensure consistent and comparable information across different jurisdictions, while leaving the door open for requirements that would capture a broader range of information. The Trustees are keen to establish a framework that has flexibility built in, so that it can readily be adapted to suit different sustainability reporting requirements for different jurisdictions and stakeholders.
The next steps announced by the Trustees are as follows:
- publication of a feedback statement summarising the 576 responses to the consultation launched by the Trustees of the IFRS Foundation last September to assess whether there is a need for global sustainability reporting standards, and the role that the Foundation could play in developing such standards. The report will also explain how these comments were taken into account by the Trustees in their decision-making process;
- publication of the proposed changes to the Constitution of the IFRS Foundation necessary to establish a new Board and determine its composition. These changes will be subject to a consultation with a 90-day comment period.