The Sustainable Finance Taskforce of IOSCO held two roundtables, with global stakeholders, on the IOSCO priorities to enhance the reliability, comparability, and consistency of sustainability-related disclosures and to collect views on the practical implementation of a global system architecture for these disclosures. Across the two sessions, there was strong support for the key elements of IOSCO’s vision for an International Sustainability Standards Board (ISSB) under the IFRS Foundation and a clear willingness among participants from all stakeholder constituencies to work collaboratively with IOSCO and the IFRS Foundation to deliver this vision. There was also broad-based agreement that, building on existing initiatives, the ISSB would be able to deliver high-quality international sustainability-related reporting standards to address the priority needs of capital market participants on a reasonable timeframe. The insights from these roundtables will be incorporated into IOSCO´s upcoming report on issuers´ sustainability disclosures, which is expected to be published in June 2021.
The following are the key highlights from the roundtables:
- Roundtable participants were united in their support for globally aligned reporting standards to promote comparability of sustainability-related disclosures across jurisdictions and to avoid market fragmentation. Many participants stressed that voluntary disclosure would not be enough and hence supported clear pathways toward mandatory reporting requirements aligned across jurisdictions, along with robust frameworks for audit and assurance.
- There was good support for taking as a starting point the climate-related financial disclosure prototype developed by the "group of five" leading sustainability reporting organizations, published in December 2020. This prototype builds from the Task Force on Climate-related Financial Disclosures (TCFD) recommendations and other existing content.
- Participants noted the importance of the work of the newly formed IOSCO Technical Expert Group, in close cooperation with the IFRS Foundation Technical Working Group, to assess the key features of the prototype. Priority areas of focus suggested by participants included emphasis on quantitative metrics and standardization to promote consistency and comparability; clarity on how to report forward-looking metrics and on methodologies for scenario analysis; encouragement of a strong linkage between sustainability reporting and financial statements, including disclosure of key assumptions; a need for industry-specific standards and metrics to accommodate the different dependencies on natural, social, and human capital across different sectors of the economy; and promotion of digitization by developing a taxonomy for sustainability-related reporting in a structured electronic, machine-readable format.
- Feedback from participants underscored the need for a global architecture that is sufficiently flexible to accommodate a building blocks approach. There was support for IOSCO’s vision of a multi-stakeholder consultative committee under the IFRS Foundation to advise the ISSB and to promote interoperability with any sustainability reporting standards that extend beyond the common baseline of enterprise value oriented standards. However, participants stressed the importance of clearly articulating the purpose of such a committee as an advisory body to the ISSB and developing a structure and membership under the IFRS Foundation consistent with that purpose.
- The IFRS Foundation was encouraged to leverage existing advisory groups within its architecture that provide input to the standard setting process. In this way, the ISSB would benefit from the existing inclusive and multi-stakeholder due process already in place, including channels for consultation with stakeholders across regions. The proposed consultative committee should complement (not supersede) the existing advisory groups and outreach arrangements.
- Discussions noted that the design of ISSB standards should allow for interoperability, not only with jurisdiction-specific requirements that go beyond enterprise value creation, but also for the expansion of scope to other sustainability topics beyond climate and ongoing standards evolution to accommodate the dynamic materiality of sustainability topics over time.
Related Link: Press Release (PDF)
Keywords: International, Securities, International Sustainability Standards Board, Climate Change Risk, TCFD, Sustainable Finance, ESG, ISS, IOSCO
Previous ArticleSNB Publishes Reporting Forms on NSFR and Counterparty Solvency Risk
PRA proposed rules (in CP12/21) for the application of existing consolidated prudential requirements to financial holding companies and mixed financial holding companies that have been approved or designated in accordance with Part 12B of the Financial Services and Markets Act 2000 (FSMA).
ECB Banking Supervision announced that euro area banks it directly supervises may continue to exclude certain central bank exposures from the leverage ratio until March 2022.
OSFI decided to increase the Domestic Stability Buffer from 1.00% to 2.50% of total risk-weighted assets, with effect from October 31, 2021.
HKMA is requesting banks to participate in a tech baseline assessment, which forms part of the HKMA Fintech 2025 strategy.
OSFI published two documents to consult on the management of operational risk capital data for institutions required, or for those applying, to use the Basel III standardized approach for operational risk capital in Canada.
The NGFS Study Group on Biodiversity and Financial Stability published a Vision paper exploring the case for action in addressing the financial stability concerns arising from biodiversity loss.
ACPR published the final version of CREDITIMMO 2.3.0 taxonomy for the decree of October 31, 2021.
EC, has approved, under the EU State Aid rules, the fourth prolongation of the Italian guarantee scheme to facilitate the securitization of non-performing loans.
ECB published Guideline 2021/975, which amends Guideline ECB/2014/31, on the additional temporary measures relating to Eurosystem refinancing operations and eligibility of collateral.
EIOPA published a report, from the Consultative Expert Group on Digital Ethics, that sets out artificial intelligence governance principles for an ethical and trustworthy artificial intelligence in the insurance sector in EU.