The international accounting standards body has announced the creation of the International Sustainability Standards Board (ISSB), which will be tasked with developing global standards for sustainable reporting.
Set to begin work in 2022, ISSB will be in charge of developing a single set of standards to meet investors’ information needs.
Endorsed by the International Organisation of Securities Commissions, the ISSB is also expected to become the global benchmark for securities regulators worldwide.
In a statement issued on Wednesday, the International Financial Reporting Standards’ Foundation Trustees said there is proven demand for high-quality information. IFRS noted that while voluntary reporting frameworks and guidance have prompted innovation and action, fragmentation has increased cost and complexity for investors, companies and regulators.
It confirmed that the ISSB would sit alongside and work closely with the International Accounting Standards Board (IASB) to ensure “connectivity and compatibility” between existing accounting standards and the new sustainability disclosure standards.
“Sustainability, and particularly climate change, is the defining issue of our time,” said Erkki Liikanen, the chair of the IFRS Foundation Trustees.
“To properly assess related opportunities and risks, investors require high-quality, transparent and globally comparable sustainability disclosures that are compatible with the financial statements.”
The existing Climate Disclosure Standards Board (CDSB) and Value Reporting Foundation (VRF) are also set to be consolidated into the ISSB by next year.
Responding to the launch of the ISSB, Chartered Accountants ANZ said it would provide “much-needed harmonisation in what was a complex and fragmented reporting landscape”.
“Climate and sustainability disclosures have become key requirements for most organisations – they’re no longer a nice-to-have,” said business reform leader Karen McWilliams.
“But the lack of a robust, globally accepted reporting framework has given rise to confusion and a lack of comparability.”
CPA Australia, which participated in the consultation process for the ISSB, said the new body finally “globalises the international sustainability reporting infrastructure”.
“This news will be manna from heaven for investors, for whom sustainability data – particularly climate-related information – has long been a blind spot,” said Dr Jane Rennie, general manager for external affairs at CPA Australia.
She stressed the need for the Australian government to get onboard and fast.
“If Australia doesn’t get on board, the reputation of our financial markets may be damaged, Australian companies may find their share price impacted and capital raising in international markets could become harder,” Dr Rennie said.
Mandatory climate risk disclosure was a key focus of the 2021 Global Investor Statement to Governments on the Climate Crisis signed by 733 institutional investors managing US$52 trillion in assets ahead of COP26.
The statement called for “consistent, comparable and decision-useful” disclosure requirements to be introduced by governments.
“As owners of (or those representing owners of) companies, we need access to adequate information on how these companies are assessing and managing the risks and opportunities presented by climate change,” the group said.
