The vice chair of the International Sustainability Standards Board (ISSB), Sue Lloyd, has offered a public assurance that time pressure on the board to finalise its first two sustainability reporting standards does not mean it will compromise on due process.
Her comments came as board members unanimously approved a staff project plan to finalise discussions on – but not issue– its two draft sustainability standards by the end of the year.
She said: “[F]or those listening, I think we need to be careful to be very clear that this isn’t because we are not worrying about the comments that we received and the feedback that we’ve got.
“We’re taking that all very, very seriously. But we are trying to […] get as much direction as quickly as possible to really build on [existing] momentum.”
The ISSB published International Financial Reporting Standard S1, General Requirements for Disclosure of Sustainability-related Financial Information, and IFRS S2, Climate-related disclosures, in March for public comment.
S1 sets out the broad requirements for disclosing sustainability-related financial information to primary users of financial statements, while S2 describes the requirements for identifying, measuring, and disclosing climate-related risks and opportunities.
The ISSB is now locked in a race to issue the standards against the backdrop of a rapidly evolving marketplace for sustainability reporting as jurisdictions such as the European Union issue local requirements.
The ISSB and its parent body, the International Financial Reporting Standards Foundation believe they are best placed to define the global baseline or gold standard in sustainability reporting.
Also to emerge during the 21 September meeting was the extent of the pressure on the board to finalise S1 and S2 to meet the demands of securities regulators and to avoid further fragmentation in sustainability reporting.
Nonetheless, as Lloyd emphasised, the board was keen to strike a balance between running a “thoughtful” redeliberation process and maintaining momentum to get the job done.
Meanwhile, the board’s staff has identified two topics cutting across both S1 and S2 for joint redeliberation, and a further 11 issues affecting each standard individually for stand-alone discussion.
The staff meeting paper also contains an early hint that the board will fail to meet its original aim of publishing the finalised standards by the end of the year.
Instead, Agenda Paper 3B/4B reveals in paragraph 85 that the board will “publish IFRS S1 and IFRS S2 as early as possible in 2023.”
In a workplan briefing fronted by the ISSB chair, Emmanuel Faber, at the end of March, the board said it “aim[ed] to issue the new Standards by the end of the year, subject to the feedback.”
However, alongside the pressure on the board to consider constituent feedback carefully, the ISSB is also under pressure from securities regulators to finalise the S2 on climate change.
Back in November, IOSCO chair Ashley Alder set out a 5-point roadmap detailing the steps the IFRS Foundation needed to take to get its climate-reporting initiative off the ground.
He said: “IOSCO’s aim is to endorse the standard before the end of 2022 if it is satisfied that the standard sets a practical and effective global baseline for climate disclosures to financial markets across the globe.”
Alder also described setting up “the ISSB and the issuance of the international climate disclosure standard are key pillars of IOSCO’s overall sustainable finance strategy.”
The ISSB’s ultimate goal is for IOSCO to endorse its proposed global sustainability-reporting baseline as fit for mandatory use across multiple jurisdictions.