In connection with the United Nations Conference of the Parties on climate change in Glasgow, Scotland, an international organization announced its formation via the merger of several smaller groups to create standardized global ESG metrics and reporting frameworks.
Acronyms abound, but here are a couple of the highlights, according to VRF spokesperson Amanda Medress:
- The International Financial Reporting Standards Foundation (IFRS), Climate Disclosure Standards Board and Value Reporting Foundation (VRF) will merge to form the International Sustainability Standards Board (ISSB). (The VRF was created this summer in a merger of the Sustainability Accounting Standards Board and the International Reporting Council this summer.)
- The ISSB will develop standards that provide a comprehensive global baseline of sustainability disclosures and develop the standards in such a way that they can be mandated and combined with jurisdiction-specific requirements. Consistent with the approach taken for the IASB’s Accounting Standards, it is for jurisdictional authorities to decide whether to mandate use of the ISSB’s standards.
Additionally, the IFRS has published draft climate and general disclosure requirements from its Technical Readiness Working Group. The draft is a result of joint work of the VF, the International Accounting Standards Board, the Financial Stability Board’s Task Force on Climate-related Financial Disclosures, and the World Economic Forum. This is the most collaborative project in the effort to set ESG standards.
As representatives of the VRF told Directors & Boards in September, climate standards are at the forefront, but the group will work on metrics and reporting frameworks for social and governance issues simultaneously.
The ISSB will have regional representation around the world and the intention is to “provide a comprehensive global baseline of sustainability disclosures and develop the standards in such a way that they can be mandated and combined with jurisdiction-specific requirements,” according to a press release.
“It is also the intention that the ISSB will develop both thematic and industry-based requirement,” Medress said. “The ISSB will build on the work of existing investor-focused reporting initiatives, including the Value Reporting Foundation’s Integrated Reporting Framework and SASB Standards.”
Shortly after the announcement, organizations including the Global Reporting Initiative (GRI) and The Institute of Internal Auditors released statements in support of the ISSB and its mission.
“GRI is pleased that the IFRS Foundation has recognized the merits of incorporating sustainability considerations into financial disclosures, through the creation of a sustainability standards board," Eric Hespenheide, GRI's interim CEO, said in a statement. "We also welcome that the reporting organizations with a core focus on investors needs are to come together under one house.”