top of page
  • Writer's pictureDaniel Goelzer

IFRS Foundation Announces the International Sustainability Standards Board

On November 3, at COP 26, the UN global climate summit in Glasgow, the IFRS Foundation, the parent of the International Accounting Standards Board (IASB), announced the formation of a new International Sustainability Standards Board (ISSB). The ISSB will develop a comprehensive baseline of sustainability disclosure standards to meet investor information needs. The IFRS Foundation also announced that the ISSB will consolidate with two existing sustainability standard setting bodies. By June 2022, the Climate Disclosure Standards Board (CDSB) and the Value Reporting Foundation (VRF), which houses the Integrated Reporting Framework and the SASB Standards, will become part of the new ISSB.

According to the IFRS Foundation’s announcement, the ISSB will promulgate IFRS Sustainability Disclosure Standards, which will include disclosure requirements that address companies’ impacts on sustainability matters relevant to assessing enterprise value and making investment decisions. These standards will enable companies to provide comprehensive sustainability information for the global financial markets. The ISSB’s standards are intended to be compatible with requirements that are jurisdiction-specific (e.g., any ESG disclosure requirements the SEC may adopt) or that are aimed at non-investor stakeholders. The existing standards and frameworks of the CDSB and the VRF (which includes the SASB standards), along with those of the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD) and the Forum Stakeholder Capitalism Metrics, will provide a basis for the work of the ISSB.

In conjunction with announcing formation of the ISSB, the IFRS Foundation published prototype climate and general disclosure requirements. These protypes were developed by the Technical Readiness Working Group (TRWG), which was formed by the IFRS Foundation to undertake preparatory work for the ISSB. The climate prototype builds on the TCFD’s recommendations and includes industry-specific disclosures, while the general requirements prototype sets out overall requirements for disclosing sustainability-related financial information. The ISSB will consider the prototypes as part of its initial work.

The ISSB’s activities will commence as soon as a Chair and Vice-Chairs have been appointed. The new Boards’ first step will be public consultation to inform its work plan and to obtain views on proposals based on the TRWG’s prototype recommendations. The ISSB will follow the IFRS Foundation’s due process, including public discussions by the ISSB of feedback received through consultations and of possible improvements to the prototype proposals before they are finalized as ISSB standards.

Formation of the ISSB is a major step toward harmonizing and consolidating the various existing sustainability disclosure frameworks. Presumably, some jurisdictions will eventually require compliance with the ISSB’s standards. However, assuming investors view the new board’s work favorably, many companies are likely to feel compelled to follow the IFRS Sustainability Disclosure Standards, regardless of whether they are legally required to do so. For U.S. companies, it will, of course, be important to see what sustainability requirements the SEC promulgates (see The SEC’s Agenda – ESG Tops the List, July 2021 Update) and what the SEC’s attitude is toward the work of the ISSB. In any event, the ISSB’s standards may become de facto disclosure requirements, at least for large, multi-national public companies, and audit committees should follow the new board’s work.

19 views0 comments

Recent Posts

See All

PCAOB Reworks the Foundations of Auditing

The Public Company Accounting Oversight Board has adopted a new auditing standard, AS 1000, General Responsibilities of the Auditor in Conducting an Audit, and related amendments to other auditing sta


bottom of page