The non-profit accounting organisation International Financial Reporting Standards Foundation (IFRS) is to establish an International Sustainability Standards Board (ISSB) to develop comprehensive global baseline sustainability reporting standards under robust governance and public oversight.
The announcement, made at the 2021 United Nations Climate Change Conference (more commonly known as COP26), will see the consolidation of two sustainability reporting organisations, the Value Reporting Foundation and the Climate Disclosure Standards Board, to create a global standard-setter for sustainability disclosures for the capital markets.
The IFRS has also published two prototype standards to enable the ISSB to rapidly build on existing frameworks, including the Task Force on Climate-Related Financial Disclosures (TCFD), when developing its standards.
Standards will be subject to full public consultation and can be considered for adoption by jurisdictions on a voluntary basis. Jurisdictions will have their own legal frameworks for adopting, applying or otherwise making use of international standards.
Finance ministers and central bank governors from 36 jurisdictions joined the UK in publicly welcoming the announcement of the establishment of the ISSB and its work programme to develop a set of internationally consistent and reliable baseline standards for disclosure of sustainability-related information on enterprise value creation.
The list of jurisdictions involved includes Australia, Brazil, Canada, Chile, China, Egypt, Ethiopia, European Commission, Fiji, France, Germany, Greece, Guatemala, India, Indonesia, Italy, Jamaica, Japan, Kenya, Korea, Luxembourg, Mexico, Morocco, Netherlands, New Zealand, Nigeria, Philippines, Saudi Arabia, Seychelles, Singapore, Spain, Switzerland, Tonga, Turkey, UK, Uruguay and the US.
Commenting on the IFRS announcement on the ISSB, Chris Cummings, CEO of the Investment Association, says: "Investment managers need high quality and comparable data on the risks that companies face from climate change, and these measures will be pivotal for investors and companies to work together to achieve the Paris Agreement targets.
He adds: "This is why we also welcome the UK chancellor’s announcement that UK listed companies will be required to produce transition plans by 2023 as part of the UK becoming the first net zero financial centre.”
“Investors want to understand the steps which companies are taking now to transition their businesses to net zero, so these new disclosure requirements will give investors more visibility on the immediate actions their investee companies are taking."
Elsewhere, the Hong Kong Exchanges and Clearing Limited (HKEX) has joined the Glasgow Financial Alliance for Net Zero (GFANZ) and the Net Zero Financial Service Providers Alliance (NZFSPA), part of its ongoing commitment to the long-term sustainable development of global financial markets.
HKEX is joining financial institutions around the world to support global efforts to meet the goals of the Paris Agreement on climate change.
In addition, Nomura Asset Management, part of Nomura Group, has joined the Net Zero Asset Managers initiative (NZAMI) as part of its efforts to help achieve net zero greenhouse gas emissions from their investment portfolios, also in alignment with the Paris Agreement.
NZAMI was launched in December 2020 with the aim of promoting investment in companies working to achieve net zero by 2050.
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