Future economic stability and shared prosperity rely on a common language – and a global baseline for financial sustainability reporting will help to build the trust and transparency at the heart of it
The International Sustainability Standards Board was announced by the International Financial Reporting Standards Foundation at the 26th Conference of the Parties to the United Nations Framework Convention on Climate Change in Glasgow in November 2021, in response to the demand from market participants and requests from the G7 and G20. Finance ministers and central bank governors from over 40 jurisdictions on six continents officially welcomed our goal to create a comprehensive global baseline of sustainability disclosures focused on the capital markets.
In the past six months since COP26, a lot has been achieved. Following my appointment as chair and that of Sue Lloyd as vice-chair, we have established the board’s primary locations in Frankfurt and Montreal. We are nearing the completion of the consolidation of the Value Reporting Foundation (home of Standards and Integrated Reporting for the Sustainable Accounting Standards Board) and have already completed the consolidation of the Climate Disclosure Standards Board. We have also published our first two proposed standards – a draft climate standard and a general requirements standard, complete with industry-based requirements, fully embedding the TCFD framework.
We published our proposals for consultation at the end of March for a 120-day period, ending 29 July. I urge readers to review these and provide us with your thoughts.
I firmly believe that our proposed global baseline of sustainability disclosures will reduce the existing and further fragmentation of sustainability disclosure requirements. By the end of the year, our ambition is to have completed the necessary institutional and technical standard-setting work to establish the core elements of the global baseline, subject to feedback received from our ongoing consultation.
In the end, the success of the ISSB can only be the success of the global community of capital market regulators, companies and investors, in coming together to meet this challenge. It is this continued collaboration that will drive us forward, in the right direction.
Reduced reporting burden
As an additional step, the IFRS Foundation has entered into a cooperation agreement with the Global Reporting Initiative to reduce the reporting burden for jurisdictions and companies when combining our two standards. We will also look to cooperate with other initiatives, where our work can be made complementary, and where there is a clear market need.
It is clear, though, that cooperation to fully establish and implement the global baseline will require action from public authorities and market participants.
As countries around the world look to make the ambitious and rapid changes needed to transform their economies and the financial system that backs them, we intend to intensify our engagement with jurisdictional authorities and market participants. This engagement includes working with the International Organization of Securities Commissions as it evaluates whether to endorse standards issued by the ISSB for use by its members.
Furthermore, we are currently establishing the necessary advisory and consultative bodies that will serve as a platform for enhanced collaboration with other international organisations, jurisdictional authorities and representatives of other stakeholders. These arrangements provide an essential mechanism to allow stakeholders to help shape IFRS Sustainability Disclosure Standards and to ensure compatibility with broader jurisdictional requirements.
Global capital markets have shaped a period of unprecedented change, widening supply chains, opening economies and integrating international cooperation into the fabric of the financial system. The alignment of financial information, achieved over decades in part through the work of the IFRS Foundation and the International Accounting Standards Board, helped to foster this change.
The global baseline of sustainability standards will play an equally vital role in building the trust and transparency needed to foster economic stability and contribute to the transformation of sustainable economic, social and environmental systems. It is an essential piece of language to restore a common narrative of shared prosperity, powered by truly global and resilient financial markets, resolving the tragedy of horizons.