IFRS Consults on Global Approach to Sustainability Reporting
IFRS launched a consultation to assess the demand for global sustainability standards. If demand is found to be strong, the aim is also to assess whether and to what extent IFRS might contribute to the development of such standards. The consultation paper sets out possible ways through which IFRS might contribute to the development of global sustainability standards by broadening its remit beyond the development of financial reporting standards and using its experience in international standard-setting. One possible option outlined in the paper is for IFRS to establish a new Sustainability Standards Board. The consultation is open for comments until December 31, 2020.
Out of the possible options set out in the consultation paper, IFRS considers that the best option would be to create a Sustainability Standards Board and become a standard-setter working with existing initiatives and building on them. Such an action by the IFRS Foundation could lead to an approach that seeks to harmonize and streamline sustainability reporting, which could benefit stakeholders of the IFRS Foundation and benefit sustainability reporting. The consultation paper also 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 that the current mission of the IFRS is not compromised.
The objective of Sustainability Standards Board would be to develop and maintain a global set of sustainability reporting standards, initially focused on climate-related risks. Such standard-setting would make use of existing sustainability frameworks and standards. The new board could leverage and adapt the standard-setting process, due process procedures, and network of IFRS. The board could promote the consistent use and application of the new sustainability reporting standards and contribute to international collaboration, cooperation, and coordination among sustainability reporting bodies, governments, regulators, and other stakeholders to achieve further convergence. The new board could operate alongside IASB 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 proposed establishment of the Sustainability Standards Board within the institutional and governance structure of the IFRS Foundation could achieve the objectives of developing a framework for sustainability reporting that is coherent with, and connected to, financial reporting.
Comment Due Date: December 31, 2020
Keywords: International, Banking, Securities, Insurance, ESG, Sustainability Standards Board, Reporting, Climate Change Risk, IFRS, IASB
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