The International Sustainability Standards Board is setting up a new working group of representatives from various jurisdictions around the world, including the Securities and Exchange Commission in the U.S., to coordinate between the ISSB’s climate disclosure proposals and those under development in different countries.
The board plans to create a new advisory body, the Sustainability Standards Advisory Forum, during the next quarter, to facilitate regular dialogue with, and high-level advice from, a broad set of jurisdictions. In addition to the SEC, other members of the working group include the Chinese Ministry of Finance, the European Commission, the European Financial Reporting Advisory Group, the Japanese Financial Services Authority, the Sustainability Standards Board of Japan Preparation Committee and the U.K. Financial Conduct Authority.
The ISSB was launched last fall by the International Financial Reporting Standards Foundation, which also oversees the International Accounting Standards Board, as a way to unite the sometimes conflicting sustainability accounting standards and frameworks into one common set of environmental, social and governance standards. At the end of June, the Value Reporting Foundation (the group overseeing the recently merged Sustainability Accounting Standards Board and the International Integrated Reporting Council) and the Climate Disclosure Standards Board are scheduled to be consolidated within the ISSB. Last month, the ISSB unveiled two exposure drafts of general sustainability and specific climate-related disclosure requirements (
The week before that, the SEC unveiled its own long-awaited proposals for climate-related disclosures by U.S. public companies (
The ISSB noted that jurisdictional standard-setting in the field of sustainability-related financial disclosures is a relatively new area, and many countries are participating in such a process for the first time. Meanwhile many of the developments and public consultations are happening simultaneously, as both the ISSB and the SEC are both taking comments on their proposals.
The board hopes to align, as much as possible, the requirements at both the jurisdictional and the international level to deliver the global baseline that has been welcomed by public authorities and market participants, including the G20, the G7, the International Organization of Securities Commissions and the Financial Stability Board, which have all called for a global set of standards to make the disclosures by companies more comparable and avoid the temptation for “greenwashing” by companies touting their environmental accomplishments.
“There is strong public interest in seeking to align, where possible, the international and jurisdictional requirements for sustainability disclosures,” said ISSB chair Emmanuel Faber in a statement. “We have a window of opportunity to do just that, given that the ISSB’s proposals are out for comment at the same time as several major jurisdictions are also seeking public input on their proposals. I look forward to a fruitful exchange of ideas.”
The working group will discuss the compatibility of their sustainability initiatives to establish a global baseline fully responding to the needs of global market participants, how to contribute to optimizing reporting efficiency for companies in their jurisdictions, and how those jurisdictions can build upon the global baseline according to their needs.
Working group meetings will take place in May and July, and the meeting summaries will be posted on the IFRS Foundation website. Input from the working group will also be considered by the ISSB in public meetings, as part of its deliberation of all feedback received during the consultation period.
The ISSB is trying to bring together not only the various standard-setting groups and frameworks, but various jurisdictions as well.
“I am reassured that the ISSB will move forward with the same ideology as SASB standards and the IIRC, which is looking at how industry by industry is impacted, and that value creation process, which is part of [integrated reporting],” said Barbara Porco, Associate Dean of Graduate Students at Fordham University’s Gabelli School of Business in New York. “I also feel that the ISSB will continue to look at the dimensions that are articulated through SASB sustainability metrics. It’s not just environmental, but you look at the governance piece and the innovation piece. You’re looking at both social capital and human capital. I really like the way that they break out the social and human capital piece, the internal employee lens."
I feel that with the ISSB expanding the leadership and working group forum in this more formalized way, I have a comfort level that these principles and standard-setting ideologies from the organizations like SASB standards and IIRC integrated reporting will continue evolving, and I think that is very promising,” she added.
