The Board of the International Organization of Securities Commissions (IOSCO) has yesterday published a report on issuers’ sustainability-related disclosures. The report, developed by IOSCO’s Sustainable Finance Taskforce (STF), reiterates the urgent need to improve the consistency, comparability and reliability of sustainability reporting for investors. Over the year since the STF was established, global momentum has been building in both public and private sector initiatives on sustainability-related disclosures. IOSCO´s work aims to support investors’ evolving informational needs and the ability of markets to price sustainability-related risks and opportunities and support capital allocation.
An important aspect of IOSCO’s work has been engagement with the International Financial Reporting Standards (IFRS) Foundation’s efforts to develop a common set of global sustainability standards to help meet investor needs and to set a sound baseline for jurisdictions to consider when setting or implementing their sustainability-related disclosure requirements. The IFRS is seeking to establish an International Sustainability Standards Board (ISSB) to sit alongside the International Accounting Standards Board (IASB), and the Report elaborates on IOSCO’s vision and expectations for an ISSB. The G7 Finance Ministers and Central Bank Governors recently welcomed the IFRS Foundation’s programme of work to develop a “baseline standard under robust governance and public oversight, built from the TCFD framework and the work of sustainability standard-setters”.
IOSCO plans to consider potential endorsement of future standards issued by the ISSB to use for cross-border – and potentially also domestic – purposes to guide issuers’ sustainability related reporting in their jurisdictions. Potential endorsement will require that IOSCO’s expectations regarding strong governance and decision-useful content are satisfied.
IOSCO recognises that individual jurisdictions have different domestic arrangements for adopting, applying or otherwise availing of international standards. It will be important for individual jurisdictions to consider how the common global baseline of standards might be adopted, applied or otherwise utilized within the context of these arrangements and wider legal and regulatory frameworks, in a way that promotes consistent, comparable and reliable sustainability disclosures across jurisdictions. It will also be important for any international standards to be applied in a flexible and scalable way that recognises the different needs, profiles and resources of different jurisdictions and issuer communities.
Ashley Alder, IOSCO Chair and Chief Executive Officer of the Securities and Futures Commission (SFC) of Hong Kong, said: “Full, timely and comprehensive corporate level reporting, including of sustainability-related information, is absolutely foundational for the proper functioning of markets and for investor protection. This report sets out IOSCO´s vision for a global baseline of investor-focussed sustainability standards under the IFRS Foundation to improve the global consistency, comparability and reliability of sustainability reporting. It is imperative that the ISSB establish strong governance, proven independence and rigorous due process. The ISSB’s planned ‘climate first’ approach is a sensible one, and I look forward to seeing the ISSB move quickly to meet investors’ needs for information about other ESG topics.”
Erik Thedéen, Chair of the IOSCO Sustainable Finance Task Force and Director General of Finansinspektionen of Sweden, said: “IOSCO is engaging closely with and monitoring the IFRS Foundation Trustees´ technical preparatory work on the design and establishment of the ISSB by November 2021. Provided that IOSCO´s expectations are satisfied, we will consider setting a pathway for the ISSB’s sustainability standards to serve as the global baseline for consistent, comparable, and reliable sustainability reporting and encouraging relevant authorities to consider those standards in their approaches to mandatory sustainability-related disclosures. I look forward to the work of the Technical Expert Group over the coming months to help IOSCO form its views on the potential endorsement of the ISSB and to the upcoming complementary IOSCO consultation reports on asset managers’ sustainability-related disclosures and on ESG data and rating providers.”