International Accounting Standards Body Launches New Sustainability Standards Body
The international accounting standards body has announced the creation of a new global standards board dedicated to developing sustainability-related disclosure standards to be used by investors and capital market participants.
The new International Sustainability Standards Board (ISSB), created under the aegis of the International Accounting Standards Board (IASB), which develops and maintains the IFRS international accounting standards, will develop a single set of standards, drawing on work already underway.
The work already underway has been by undertaken by representatives of the Climate Disclosure Standards Board (CDSB, an initiative of Carbon Disclosure Project), IASB itself, the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD), the global non-profit organization Value Reporting Foundation, the World Economic Forum, and the International Organization of Securities Commissions (IOSCO) and its Technical Expert Group of securities regulators.
Even though the ISSB will be formed under the IASB, both bodies will be independent, with their standards designed to complement each other, a statement notes. The standards will be called the IFRS Sustainability Disclosure Standards and include standards around disclosure requirements that address companies’ impacts on sustainability matters.
However, the standards will effectively compete with those developed in the US; that is, those developed and maintained by the California-based Sustainability Accounting Standards Board (SASB). Its standards, which provide sector-specific guidance on ESG topics such as greenhouse emissions, energy and water management, data security among others, are widely used in the US by corporates, ESG ratings agencies and research providers.
The standards to be developed by the ISSB will be based on the TCFD framework which involves both general and sector-specific guidance, but only on climate-related topics. There are other standards widely used such as those developed by the Global Reporting Initiative.
The adoption of various standards will come down to global politics. While the new ISSB standards may become compulsory in the EU and other jurisdictions that use the IFRS standards, this may not be the case in the US, which is already using SASB and has for a long time preferred its own Generally Accepted Accounting Principles (GAAP) over IFRS.
The new ISSB will be based in Frankfurt, although the body notes that it will be represented in the Americas, Asia-Oceania and Europe/Middle East/Africa. The Swiss Government indicated in September that it wanted the body to be based in Geneva, but the IASB decided on Frankfurt.