(Francesca Costantino and Fabio Resnati)
Last November 2020 we highlighted how the trustees of the IFRS Foundation published a consultation document to assess the market’s request for ESG reporting standards (sustainability reporting).
The trustees of the IFRS Foundation asked the various potentially interested stakeholders what their opinion was on the need for global sustainability standards to evaluate the possible contribution of the Foundation in the development of these standards.
The consultation document defined the possible options for the IFRS Foundation, namely:
- maintain the status quo;
- facilitate existing initiatives;
- create a Sustainability Standards Board (SSB) and become a standard-setter who works with existing initiatives and builds on their work.
Well, on November 3, 2021, the IFRS Foundation announced the creation of a new committee for defining ESG standards, the ISSB (International Sustainable Standard Board). The intention of the ISSB is to produce a full set of ESG information standards.
The aim is to provide the capital market with information on the risks and opportunities associated with the sustainable development of the economic world. In this way, financial operators will be able to make informed decisions also on the sustainability of companies. The ISSB will develop ESG principles related to the IFRS accounting principles.
What was not suspected is how strong the departure would be. Indeed, the ISSB will consolidate three previous initiatives: SASB (Sustainability Accounting Standards Board), IIRC (International Integrated Reporting Council) and CDSB (Climate Disclosure Standard Board). This means that the ISSB can count on an important heritage of work and people from the start.
In particular, it will immediately use the industry-specific ESG standards created by the SASB. The ISSB will develop IFRS Sustainability Disclosure Standards, including disclosure requirements that address the impacts of companies on sustainability issues relevant to assessing corporate value and making investment decisions.
ISSB will support IASB (International Accounting Standard Board) with the body responsible for issuing international accounting standards, IFRS (International Financial Reporting Standard). The two “Boards” will be independent but will be connected and collaborate in order to ensure the complementarity of accounting standards and information standards.
Companies that, for the purposes of preparing the financial statements and the sustainability report, adopt international accounting and information standards will be able to be fully evaluated by investors and capital providers.