The International Sustainability Standards Board has announced a partnership framework to support preparers, investors, and other capital market stakeholders in developing and emerging economies to implement the board’s standards.
The news came as the board’s chair, Emmanuel Faber, reminded the COP27 of its main conference message that “the need for climate-related financial disclosures is increasingly urgent.”
Faber added: “We are working collaboratively towards the implementation of effective sustainability disclosures for capital markets, which will empower market participants with the right information to support better economic and investment decision making.”
The so-called partnership framework forms part of the ISSB’s bid to secure global adoption of its proposed global baseline in sustainability reporting.
Additionally, the board also confirmed it will issue final versions of International Financial Reporting Standard S1, General Requirements for Disclosure of Sustainability-related Financial Information, and IFRS S2, Climate-related disclosures next year.
Five-year partnership
The partnership is intended to operate over a five-year period in three phases.
The first phase will run until April 2023 and focus on building relationships, establishing priorities, and securing funding.
The second phase, between April and November 2023, will focus on “producing resources available to all” to coincide with the release of the ISSB’s first two standards, IFRS S1 and IFRS S2.
Finally, in a third phase focused on delivery and running through until 2027, the IFRS Foundation and its partners will “respond to the Partnership Framework focus areas to secure high-quality adoption of the ISSB global baseline.”
The framework partnership also emphasises the importance of scalability in achieving the global baseline in sustainability reporting.
Implementation concerns and scalability
Scalability has emerged as a key issue since the issue of IFRS S1 and IFRS S2 in March of this year. It concerns the challenge of implementing the global baseline set by the two standards by businesses that vary in terms of scale and capacity.
Solutions to the challenge include measures such as phasing in requirements so that businesses can build capacity, developing guidance, or permitting preparers to make alternative disclosures.
The ISSB explored a number of issues related to scalability and implementation at its September meeting.
CDP to incorporate new ISSB standards
In a further announcement to coincide with COP27, the ISSB also unveiled a partnership with CDP to incorporate International Financial Reporting Standard S2 into its disclosure questionnaires.
CDP is a not-for-profit entity that is responsible for maintaining a global disclosure system for investors, companies, cities, states, and regions to manage their environmental impacts.
Additionally, the board also confirmed it is to work with the European Financial Reporting Advisory Group (EFRAG) and the European Commission to agree “a framework for maximising interoperability of their standards and aligning on key climate disclosures.”
EFRAG is currently working to develop a rival set of sustainability reporting standards that go further than the ISSB’s model by requiring impact reporting or so-called double materiality.
Finally, the board confirmed that it hopes to issue IFRS S1 and S2 “as early as possible in 2023”.
IFRS Foundation chair Erkki Liikanen said: “One year on from the announced establishment of the ISSB at COP26, the board is now fully operational and committed to issuing its first two standards for adoption in 2023 following extensive global consultation this year.
“This suite of announcements at COP27 enables us to deliver on our commitment, made in Glasgow, to provide the global financial markets with high-quality disclosures starting with climate.”
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