The Trustees of the IFRS Foundation have published a Consultation Paper to assess demand for global sustainability standards and, if demand is strong, assess whether and to what extent the Foundation might contribute to the development of such standards.
Amid heightened focus on environmental, social and governance (ESG) matters, developments in sustainability reporting and increased calls for standardisation of such reporting, the Trustees are now seeking stakeholder input on the need for global sustainability standards and gauging support for the Foundation to play a role in the development of such standards.
The Consultation Paper sets out possible ways the Foundation might contribute to the development of global sustainability standards by broadening its current remit beyond the development of financial reporting standards and using its experience in international standard-setting, its well-established and supported standard-setting processes and its governance structure.
One possible option outlined in the paper is for the Foundation to establish a new sustainability standards board. The new board could operate alongside the International Accounting Standards Board under the same three-tier governance structure, build on existing developments and collaborate with other bodies and initiatives in sustainability, focusing initially on climate-related matters.
The Consultation Paper sets out critical success factors for the creation of a new board, including achieving sufficient support from public authorities and market participants; working with regional initiatives to achieve global consistency and reduce complexity in the reporting landscape; achieving the appropriate level of funding; and ensuring the current mission of the IFRS Foundation is not compromised.
The consultation is open for comment until 31 December 2020.
The Trustees are required to consult on the Foundation’s strategy every five years and this Consultation Paper, based on work by a smaller Trustee Task Force, feeds into their current assessment of future strategy. Any changes to the Foundation’s remit would be subject to further public consultation.
ESAs letter to the IFRS Foundation regarding the consultation on Sustainability Reporting
The Chairs of the three ESAs, EBA, EIOPA and ESMA, have issued a comment letter to the IFRS Foundation’s consultation.
The joint the letter emphasises the following aspects:
- the global challenges posed by sustainability for investors and other stakeholders and their call for a common set of standards
- importance of building on existing initiatives and to take key notions such as ‘double materiality’ into account;
- addressing environmental, social and governance aspects beyond climate.