The IFRS Trustees have announced the strategic direction of an International Sustainability Standards Board.
- Investor focus for enterprise value: the new board would focus on information that is material to the decisions of investors, lenders and other creditors.
- Climate focus initially: due to the urgent need for better information about climate-related matters, the new board would initially focus its efforts on climate-related reporting, while also working towards meeting the information needs of investors on other ESG (environmental, social and governance) matters.
- Build on existing frameworks: the new board would build upon 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 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 Trustees are expected to announce final details about a new board in advance of the November 2021 United Nations COP26 conference.
We can also expect to see more formal discussions with key organisations that have been developing sustainability frameworks in the near future it seems, as the IFRS Foundation will initiate a process of structured engagement with the relevant organisations.
The IFRS Foundation appears well on track for establishing an International Sustainability Standards Board. There is certainly going to be disappointment for some quarters that the Trustees are taking the single materiality approach with a focus on financial stakeholders. But this plus the building blocks approach leaves the stage open for other players, both standard setters, like the GRI, and regulators, like the SEC, to create a “IFRS plus” reporting environment.