UK Authorities Support IFRS Proposal on Sustainability Reporting
HM Treasury published a joint statement from the UK government and the UK financial regulators in response to the consultation of the IFRS Foundation on a global approach to sustainability reporting. The joint statement represents the views of Department for Business, Energy and Industrial Strategy (BEIS), BoE, Department for Work and Pensions (DWP), FCA, Financial Reporting Council (FRC), HM Treasury, and The Pensions Regulator (TPR). The UK authorities support the approach set out in the consultation paper, which seeks to build on the established work and accumulated knowledge of organizations already operating in this area. The statement recognizes that climate change and sustainability are challenges that extend beyond national borders and that the internationally agreed standards will be helpful.
This consultation, which closes on December 31, 2020, seeks feedback on a number of matters, including the establishment of a new Sustainability Standards Board (SSB), to sit alongside the IASB within the IFRS Foundation structure. UK authorities state that they believe that the creation of a new board, within the IFRS Foundation structure, would allow the effective exploration, reconciliation, and resolution of ideas and challenges that are relevant to reporting of material sustainability factors (that are most relevant to investors and other market participants) in the first instance and reporting of wider sustainability impact in the longer term. The authorities believe that establishing an SSB alongside the IASB will promote much-needed integration of financial and non-financial reporting, within a common architecture. A transparent and robust governance structure should, in their view, be a pre-requisite for establishing an independent and impartial sustainability reporting standard-setter. For these reasons, the Foundation is very well-placed to lead this conversation and work, and we are grateful that it has done so.
In the statement, the authorities recognize that climate change and sustainability are challenges that extend beyond national borders and, therefore, demand international solutions. Internationally agreed sustainability reporting standards will help to achieve consistent and comparable reporting on environmental, social, and governance (ESG matters). This, in turn, will help to inform international investment flows to support transitions to a net zero emission economy among other public policy goals. The UK government and UK financial regulators remain committed to implementing the Task Force on Climate-Related Financial Disclosures (TCFD) recommendations in the UK, as set out in the 2019 Green Finance Strategy, in anticipation of the G7 Presidency and as part of the UK’s COP26 Co-Presidency and international leadership on green finance and climate change. Alongside pursuing an ambitious domestic program, the UK intends to play its part in actively supporting the development of global disclosure standards and will look to take forward the domestic proposals in a manner that will inform, and be consistent with, the international standards as they develop and are in time agreed. The statement also mentions that the authorities intend to respond more fully to the IFRS consultation in due course.
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Keywords: Europe, UK, Banking, Insurance, Securities, Climate Change Risk, Reporting, TCFD, ESG, Sustainability Standards Board, IFRS, ESG, Sustainability Standards Board, IFRS, Sustainable Finance, BoE, HM Treasury, IASB
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