The Statement of Intent underscores the ‘groundswell of demand to understand the connection between sustainability topics and financial risk and opportunity’. Critical components of this groundswell of demand include a broadened perspective of the responsibility of business, along with intensified interest for more disclosure about risks and opportunities related to climate-change and other ESG components. Asset managers have become increasingly vocal on behalf of their investors about the need for increased disclosure.
The Statement also provides a timeline of activities and statements documenting the ‘growing appetite from regulators, policymakers and the accounting profession to respond to this demand’. Key among those include:
November 2019 — The International Federation of Accountants (IFAC) published a point of view that supported a global solution for standards to achieve relevant reliable and comparable narrative information and metrics.
December 2019 — Accountancy Europe set out an approach for a non-financial standards board (NFSB) under the International Financial Reporting Standards (IFRS) Foundation.
January 2020 — European Commission announced its proposal to develop non-financial reporting standards that consider internationally recognised standards and offer a model for what is ‘agreed at international level’.
April 2020 — The International Organisation of Securities Commissions (IOSCO) acknowledged the role that the driver of global capital markets regulation must play in this area: only by understanding financial and sustainability information together can investors and governments have the necessary insight into company performance.
June 2020 — IFRS Foundation Trustees agreed that their intention would be to conduct a public consultation about whether and how the Foundation should play a role in sustainability standard-setting.
July 2020 — Eumedion, an investor body, called for the IFRS Foundation to evolve to include a standard-setter for non-financial information.
On this front, the IFRS Foundation issued its IFRS Consultation Paper on Sustainability Reporting, also in September 2020. The Consultation Paper that was developed based on work by a Task Force the Foundation Trustees set up. It recommends creating a new Sustainability Standards Board (SSB) under the governance structure of the IFRS Foundation to develop global sustainability standards.
The IFRS Consultation Paper addresses a wide range of issues related to global reporting and the parties involved. Among the consultation questions posed was the task force’s recommendation that ‘the objective of the SSB 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 …’
Following on from the issuance of the IFRS Consultation paper, the parties to the Statement of Intent also issued an Open Letter to Erik Thedéen, Director General of Finansinspektionen, Sweden, Chair of the Sustainable Finance Task Force of the International Organization of Securities Commissions (IOSCO). In the letter, the Statement of Intent and the proposed formation of a Sustainability Standards Board by the IFRS Foundation are identified as steps leading to a global architecture for comprehensive corporate reporting.
A ‘key element of this architecture is a conceptual framework for connected reporting, which should facilitate the critical interconnections between financial and sustainability information that is material for enterprise value creation’. This notion of a separate conceptual framework for connected reporting, in addition to conceptual frameworks for both financial reporting and for non-financial reporting, was highlighted as part of the ‘ultimate vison for interconnected standard setting for corporate reporting’, in the Accountancy Europe approach highlighted above.
The Open Letter encourages IOSCO action on these initiatives, citing that ‘action by IOSCO would minimise the risk of global and regional fragmentation and support the information needs of global capital markets, in the public interest’. The letter concludes with a ‘commitment to work closely with IOSCO and the IFRS Foundation to drive towards the vision laid out in our joint statement of intent’.
