IFRS Foundation launches ISSB

Keywords: Mazars, Thailand, IFRS, ISSB, IASB, Sustainability, COP26, CSRD, EU, TCFD, VRF, World Economic Forum

25 February 2022

The announcement came as no surprise and was accompanied by the publication of a revised version of the Foundation’s Constitution, following a consultation launched last spring.

The role of the ISSB will be to develop IFRS Sustainability Disclosure Standards, with the same level of quality and rigour as the IASB has done for International Financial Reporting Standards, in order to meet the needs of investors and other stakeholders.

These standards will be developed in such a way as to facilitate compatibility with jurisdiction-specific requirements (alongside projects such as the EU’s Corporate Sustainability Reporting Directive or CSRD; see ‘European Highlights’, above, for the progress made in the development of European sustainability reporting standards).

The ISSB will follow a similar due process to that used by the IASB. Specifically, the ISSB is expected to launch public consultations in the near future, drawing on the work already carried out by the Technical Readiness Working Group (TRWG). The TRWG was formed in early March 2021 and comprises representatives from the IASB, the CDSB (Climate Disclosure Standards Board), the TCFD (Task Force on Climate-Related Financial Disclosures), the VRF (Value Reporting Foundation), and the World Economic Forum.

The TRWG has published a number of documents, also on 3 November, arising from its work so far:

• a summary of the TRWG’s programme of work (available here), which serves as recommendations for the ISSB;
• a prototype standard on climate-related disclosures (available here) and a supplement on technical protocols for disclosure requirements for different sectors (available here);
• a prototype standard on general requirements for disclosure of sustainability-related financial information (available here).

In addition to the creation of the ISSB, Mr Liikanen made the following announcements:

• two existing initiatives that are already well-established in the non-financial reporting sector will be consolidated with the ISSB: namely, the CDSB and the VRF (which was itself recently formed from the consolidation of the Sustainability Accounting Standards Board (SASB) and the International Integrated Reporting Council (IIRC));
• the work of the TCFD and the Forum Stakeholder Capitalism Metrics (an initiative of the World Economic Forum) will also be taken into account in the ISSB’s “building blocks” approach;
• a new Sustainability Consultative Committee has also been created, comprising representatives from the International Monetary Fund (IMF), the Organisation for Economic Co-operation and Development (OECD), the United Nations and the World Bank. This committee will provide technical advice to the ISSB. The remit and expertise of the IFRS Advisory Council will also be expanded to include sustainability-related issues;
• a working group has been formed to create a mechanism for formal engagement on standard-setting between the ISSB and representatives of individual jurisdictions, similar to the Accounting Standards Advisory Forum, which fulfils this role for the IASB.

The ISSB will be based in a number of different locations, giving it a global presence with a foothold in all major regions of the world. Its main offices will be in Frankfurt and Montreal.

The ISSB is expected to start work officially in early 2022, once the Trustees of the IFRS Foundation have appointed the 14 Board members (including the Chair and Vice-Chair).