Though it still only has two members, the International Sustainability Standards Board (ISSB) on May 18, 2022, said it is on track to deliver what could be a global baseline of ESG disclosure rules by the end of this year.
The board stressed, however, that implementation success of the disclosures hinge largely on the efforts of others.
After meeting its ambitious timeline by year -end “to establish the core elements of the global baseline,” implementation of it “will then require action by others, including public authorities and market participants, to contribute towards the development of the global baseline and to require or encourage its widespread use,” according to the announcement.
A global baseline will reduce the further fragmentation of sustainability disclosure requirements and potentially “reduce the costs for data preparers and improve information usability for data users.”
The ISSB was established in November 2021 by the IFRS Foundation to develop environmental, social, and governance (ESG) disclosure rules for the more than 140 jurisdictions that use IFRS standards. Currently, it seats only Chair Emmanuel Faber and Vice Chair Sue Lloyd. Janine Guillot serves as special adviser. The full board is expected to comprise up to 14 members and be seated by this year’s third quarter – the latest.
In March, the ISSB published for public comment its first two proposed standards – a draft climate standard and a general requirements standard, complete with industry-based requirements. Both proposed standards are open for public comment until July 29.
To finalize those proposals the board will need to vet comment letter responses, hope that no operational issues crop up, then deliver a final package that is also user friendly to the IFRS Taxonomy. Little hurdles are expected since the proposed disclosures were built from input by various other groups, including the Task Force on Climate-related Financial Disclosures (TCFD), the Climate Disclosure Standards Board (CDSB), SASB Standards, Integrated Reporting, and the World Economic Forum’s metrics.
Work to establish the global baseline is being encouraged by the G7, G20, the International Organization of Securities Commissions (IOSCO), the Financial Stability Board (FSB), and by companies and investors from around the world, the announcement signals.
The ISSB said it is poised to work in close cooperation with jurisdictions that are consulting, or plan to consult, on their capital market requirements for sustainability disclosures via a dedicated inclusive working group.
As this work develops, the board will “pay special attention to the needs of emerging and developing economies, as well as smaller- and medium-sized companies and others within global supply chains,” recognizing the additional challenges faced by such companies in applying sustainability disclosure requirements.
Consistent with requests by the G7 and the G20, the board also plans to intensify its engagement with jurisdictional authorities and market participants to facilitate participation in the ISSB’s standard-setting. This “includes working with IOSCO as it evaluates whether to endorse standards issued by the ISSB for use by its members, and with organizations responsible for considering the assurance of sustainability -related financial disclosures.”
This article originally appeared in the May 19, 2022 edition of Accounting & Compliance Alert, available on Checkpoint.
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