The much-anticipated development of an international board that will develop global sustainability standards has been announced at the COP26 summit. The International Sustainability Standards Board (ISSB) will develop ‘a comprehensive global baseline of high-quality sustainability disclosure standards to meet investors information needs.’
The ISSB will work under the governance of the IFRS Foundation Trustees. The staff, technical expertise, content and other resources of the two leading investor-focused sustainability disclosure organisations, the Climate Disclosure Standards Board (CDSB) and the Value Reporting Foundation (VRF, formed through a merger of the International Integrated Reporting Foundation and the Sustainability Accounting Standards Board earlier this year), will consolidate into the new board by June 2022.
'We have a once-in-a-lifetime opportunity to help shape global reporting standards for the benefit of investors, economies and the public'
The consolidated ISSB will initially focus on climate-related reporting but will also work towards meeting the needs of investors on other ESG issues, and will develop both sector-based and thematic requirements. The trustees said the new board will ‘work at pace to meet the urgent demand for transparent and comparable reporting on climate matters’ and is expected to consult on its work plan and first proposed standards next year.
‘This development means we now have a once in a lifetime opportunity to help shape global reporting standards for the benefit of investors, economies and the public good,’ said Helen Brand, ACCA chief executive.
‘The ISSB is needed to address the scale of global environmental and social challenges today, accelerate the necessary reallocation of capital, and drive positive changes in corporate decision-making.’
The ISSB will work with the IASB to ensure that their standards are compatible
Years in the making
The formation of the ISSB is the culmination of years of work and a concerted drive to consolidate the work of various bodies on sustainability reporting. In September 2020 five bodies – CDP, CDSB, the Global Reporting Initiative, International Integrated Reporting Council and the Sustainability Accounting Standards Board, issued a joint statement of intent, outlining a vision for a comprehensive corporate reporting system together with a commitment to work together to achieve it. In December 2020 the group produce a report, Reporting on enterprise value.
In March 2021 the IFRS Foundation trustees formed a Technical Readiness Working Group (TRWG), whose members include the CDSB, IASB, TCFD, VRF and World Economic Forum, to undertake technical preparations to pave the way for an international sustainability reporting standards board. Since then, the TRWG has built on the work of its members, consolidating content into a unified set of recommendations.
The result is prototype climate and general disclosure requirements, which were published at the COP26 summit. The ISSB will now consider these recommendations, working in close cooperation with the IASB to ensure that IFRS and the ISSB’s standards (which will be known as IFRS Sustainability Disclosure Standards) are compatible. As with IFRS, individual jurisdictions will decide whether to mandate use of the ISSB’s standards.
The ISSB is expected to have 14 members and its new chair and vice chair will be named in the next few weeks. It will be a truly international organisation, with offices in Frankfurt (where the chairman and Board will be based) and key functions in Montreal. Offices in San Francisco and London will provide technical support and platforms for market engagement. Discussions are also underway to establish further offices in the Asia Oceania region.
Read an interview with the CFO of the Global Reporting Initiative Dani Marunović FCCA