The foundation that oversees the International Accounting Standards Board said it has created a new body to craft climate-disclosure rules for companies as investors push for more standardized information.
The new International Sustainability Standards Board is expected to issue its first set of standards in the second half of 2022, which will serve as the starting point for requirements on climate-related disclosure that jurisdictions could then choose to implement, the IFRS Foundation said Wednesday at the COP26 summit in Glasgow.
The nonprofit accounting organization said it aims to appoint a chair and vice chair by the end of the year, after which the ISSB will start consulting with companies, shareholders and other stakeholders. The foundation said its trustees will search for as many as 12 additional board members.
Erkki Liikanen, chair of the IFRS Foundation’s trustees, said that by June 2022 the ISSB will fold in the Value Reporting Foundation and the Climate Disclosure Standards Board, two international groups that work to promote development of sustainability standards, a move to consolidate resources around standard-setting on this issue. The new organization will be based in Frankfurt and Montreal, IFRS said.
The ISSB’s formation comes as companies increasingly strive to report on sustainability efforts and as climate risk has become a bigger focus for investors.
The IASB sets international financial reporting standards that apply in more than 140 jurisdictions, albeit not in the U.S. It is unclear how many countries will adopt the ISSB’s standards. The ISSB and the IASB will work together to make sure their standards complement each other, Mr. Liikanen said.
Like the IASB, the ISSB would set standards that jurisdictions can adopt on a voluntary basis. Jurisdictions have their own legal frameworks for implementing and making use of the rules. Enforcement of the standards would therefore vary by country.
“We have a comprehensive global baseline for the areas that investors have demanded, which serves on a stand-alone basis but also so that jurisdictions can build upon it,” Mr. Liikanen said on a call Monday with reporters.
A working group of standard setters on Wednesday released recommendations for the ISSB. One suggestion is that it should require companies to disclose all sustainability-related information they consider significant to investors. The group also advised the ISSB to allow companies to use materials from other standard-setting bodies in the absence of specific rules.
The European Union in March required banks, private-equity firms and asset managers to meet new disclosure requirements on environmental, social and governance issues. In the U.S., Securities and Exchange Commission Chairman Gary Gensler in recent weeks asked his staff to prepare a rule proposal by year-end that would make businesses’ climate-related risk disclosures comparable and useful to investors’ decision-making.
This story has been published from a wire agency feed without modifications to the text
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