IOSCO Publishes Report on Sustainability-Related Issuer Disclosures
IOSCO published a report on the sustainability-related disclosures of corporate issuers. The report, which is prepared by the Sustainable Finance Taskforce, focuses on three priority improvement areas in corporates’ sustainability-related disclosures and presents the IOSCO vision for how these priorities could be delivered by the International Sustainability Standards Board. The priority areas encompass encouraging globally consistent standards, promoting comparable metrics and narratives, and coordinating across approaches. The report also sets out the vision of IOSCO for a global corporate reporting architecture to deliver on these priority improvements. The report presents an indicative timeline for delivering the priority improvements, which span until June 2022.
Among others, the report summarizes the work that IOSCO has done to develop its vision for an International Sustainability Standards Board under the IFRS Foundation. It considers the materiality lens for sustainability-related reporting standards, which has been an important topic of discussion in the context of ongoing sustainability reporting initiatives. It demonstrates investor demand for sustainability-related information and evidence that this demand is not being properly met. It also demonstrates the need for improvements in the current landscape of sustainability standard-setting. The report identifies core elements of standard-setting that could help meet investor needs and provides input to the IFRS Foundation on governance features and mechanisms for stakeholder engagement, which will be essential to making the International Sustainability Standards Board initiative successful. This report is a crucial part of the IOSCO engagement with the IFRS Foundation. IOSCO looks forward to further collaboration with the IFRS Foundation Trustees as they continue their technical preparations and assess possible constitutional changes toward establishing an International Sustainability Standards Board by November 2021. The report also discusses the Taskforce's next steps on sustainability-related financial disclosures of corporate issuers and these steps comprise the following key strands of work:
- Monitoring the IFRS Foundation Trustees’ plans for the design and establishment of the International Sustainability Standards Board, including playing a leading role in the Monitoring Board of the IFRS Foundation.
- Provided IOSCO’s expectations are satisfied, considering market acceptance of the International Sustainability Standards Board’s future standards and setting a pathway for the International Sustainability Standards Board’s sustainability reporting standards to serve as the baseline for consistent and comparable approaches to mandatory sustainability-related disclosures across jurisdictions, in light of domestic legal frameworks.
- Supporting the practical implementation of the building blocks approach, including working with the IFRS Foundation on the design of a multi-stakeholder consultative committee as well as with key jurisdictions and other stakeholders across the official and private sectors.
- Developing approaches to support securities regulators’ supervision of sustainability-related disclosures once the ISSB’s reporting standards are in place.
- Influencing the development of an audit and assurance framework and related standards for corporate sustainability-related disclosures.
- Overseeing the transition to the "steady state" for IFRS sustainability-related financial reporting standards, including expansion of the scope of the International Sustainability Standards Board standards beyond climate change.
- Contributing securities regulators’ perspectives as part of the ongoing development of sustainability-related reporting standards, including input to post implementation reviews of the International Sustainability Standards Board’s governance structure and standards.
IOSCO anticipates significant progress in delivering the key elements of its vision over the coming months to help address the priorities for improvement identified by IOSCO.
Related Links
Keywords: International, Banking, Securities, Disclosures, Climate Change Risk, ESG, Sustainability Standards Board, Sustainable Finance, Reporting, IFRS, IOSCO
Featured Experts
Laurent Birade
Advises U.S. and Canadian financial institutions on risk and finance integration, CCAR/DFAST stress testing, IFRS9 and CECL credit loss reserving, and credit risk practices.
Michael Denton, PhD, PE
Dr. Denton provides industry leadership in the quantification of sustainability issues, climate risk, trade credit and emerging lending risks. His deep foundations in market and credit risk provide critical perspectives on how climate/sustainability risks can be measured, communicated and used to drive commercial opportunities, policy, strategy, and compliance. He supports corporate clients and financial institutions in leveraging Moody’s tools and capabilities to improve decision-making and compliance capabilities, with particular focus on the energy, agriculture and physical commodities industries.
Dr. Douglas W. Dwyer
Douglas W. Dwyer leads Corporate Credit Research in Predictive Analytics. This group produces credit risk metrics of small businesses, medium sized enterprises, large corporations, financial institutions, and sovereigns worldwide. The group’s models are used by banks, asset managers, insurance companies, accounting firms and corporations to measure name specific credit risk for a wide variety of purposes. We measure credit risk using information drawn from financial statements, regulatory filings, security prices, derivative contracts, behavioral and payment information. For each asset class, the methodology is developed based on the available information for each obligor. <br><br> Current projects include developing a climate adjusted probability of default and incorporating ESG factors into credit analytics. We also are developing an approach to produces comparable PDs across asset classes that opportunistically uses whatever information is available. <br><br> Prior to working at Moody’s Analytics, Dr. Dwyer was a Principal at William M. Mercer, Inc., in their Human Capital Strategy practice. Dr. Dwyer earned a Ph.D. in Economics at Columbia University and a B.A. in Economics from Oberlin College.
Previous Article
HMT Proposes Rule Changes Resulting from New Investment Firms RegimeRelated Articles
EBA Clarifies Use of COVID-19-Impacted Data for IRB Credit Risk Models
The European Banking Authority (EBA) published four draft principles to support supervisory efforts in assessing the representativeness of COVID-19-impacted data for banks using the internal ratings based (IRB) credit risk models.
EP Reaches Agreement on Corporate Sustainability Reporting Directive
The European Council and the European Parliament (EP) reached a provisional political agreement on the Corporate Sustainability Reporting Directive (CSRD).
PRA Consults on Model Risk Management Principles for Banks
The Prudential Regulation Authority (PRA) launched a consultation (CP6/22) that sets out proposal for a new Supervisory Statement on expectations for management of model risk by banks.
EC Regulation Amends Standards for Calculating Credit Risk Adjustments
The European Commission (EC) published the Delegated Regulation 2022/954, which amends regulatory technical standards on specification of the calculation of specific and general credit risk adjustments.
BIS Hub Updates Work Program for 2022, Announces New Projects
The Bank for International Settlements (BIS) Innovation Hub updated its work program, announcing a set of projects across various centers.
EIOPA Issues Cyber Underwriting Proposal, Statement on Open Insurance
The European Insurance and Occupational Pensions Authority (EIOPA) published two consultation papers—one on the supervisory statement on exclusions related to systemic events and the other on the supervisory statement on the management of non-affirmative cyber exposures.
US Senate Members Seek Details on SEC Proposed Climate Disclosure Rule
Certain members of the U.S. Senate Committee on Banking, Housing, and Urban Affairs issued a letter to the Securities and Exchange Commission (SEC)
EIOPA Consults on Review of Securitization Framework in Solvency II
The European Insurance and Occupational Pensions Authority (EIOPA) published a consultation paper on the advice on the review of the securitization prudential framework in Solvency II.
UK Authorities Issue Regulatory and Reporting Updates for Banks
The Prudential Regulation Authority (PRA) issued a statement on PRA buffer adjustment while the Bank of England (BoE) published a notice on the statistical reporting requirements for banks.
BCBS Issues Climate Risk Principles while HKMA Expresses Its Support
The Basel Committee on Banking Supervision (BCBS) issued principles for the effective management and supervision of climate-related financial risks.
