The International Organization of Securities Commissions (IOSCO) has released a statement noting the urgent need for global sustainability standards and supporting a Sustainability Standards Board (SSB) under the IFRS Foundation.
The IOSCO Board has reviewed the progress made over the past year since the publication of its report Sustainable Finance and the Role of Securities Regulators and IOSCO in April 2020. IOSCO concludes that there is an urgent need to improve the consistency, comparability, and reliability of sustainability reporting, with an initial focus on climate change-related risks and opportunities, which would subsequently be broadened to other sustainability issues.
The IOSCO Board identified three priority areas for improvement in sustainability-related disclosures by companies and asset managers:
- Encouraging globally consistent standards;
- promoting comparable metrics and narratives; and
- coordinating across approaches.
The IOSCO Board expresses a clear commitment to work with the IFRS Foundation Trustees and other stakeholders to advance these priorities. IOSCO notes that its engagement with the Trustees will focus on the following objectives:
- Establishing an SSB with a strong governance foundation. IOSCO welcomes the announcement by the Trustees of the IFRS Foundation on 2 February 2021 signalling the next phase of their work towards establishing an SSB under the IFRS Foundation structure as they have received clear feedback on their September 2020 consultation that the IFRS Foundation should play a role in this area. IOSCO looks forward to assessing the final proposals by the Trustees of the IFRS Foundation and to consider the future endorsement of the proposed SSB and its standards similar to its role in the endorsement and oversight of international accounting standard-setting by the IASB.
- Building on existing efforts. IOSCO encourages the SSB to leverage the content of existing sustainability-related reporting frameworks. IOSCO welcomes the initiative of the alliance of leading sustainability reporting organisations and their prototype for an approach to climate-related disclosures published in December 2020; IOSCO encourages further consideration of this prototype as a potential basis for the SSB to develop climate-related reporting standards.
- Encouraging a “building blocks” approach. IOSCO encourages a “building blocks” approach to establishing a global sustainability reporting system. This would provide a consistent and comparable baseline of sustainability-related information that is material to enterprise value creation, while also providing flexibility for coordination on reporting requirements that capture wider sustainability impacts. IOSCO aims to support ongoing international coordination and to help encourage global consistency on wider sustainability disclosure requirements. To this end, IOSCO is ready to explore the establishment of a multi-stakeholder expert consultative committee within the IFRS Foundation structure.
In conclusion, IOSCO repeats the statement in its response to the Trustees’ consultation that together, the IFRS Foundation’s initiative and the parallel collaborative initiative of an alliance of sustainability reporting organisations can further efforts to facilitate comparable high-quality international standards that provide the content that capital markets need, within a transparent standard-setting architecture with a robust and inclusive governance structure.
Please click to access the full statement on the IOSCO website. The IOSCO work programme for 2021-2022 also notes IOSCO’s intention to play a leading role in addressing the urgent goal of improving the completeness, consistency, and comparability of sustainability reporting and to further explore the establishment of a global comprehensive corporate reporting system under the IFRS Foundation.