A working group under the International Financial Reporting Standards (IFRS) Foundation is developing technical advice on industry-specific climate disclosures expected as part of new global standards for sustainability reporting.
The foundation appointed the Technical Readiness Working Group (TRWG) in March to provide expertise on current ESG reporting practices. It will also make recommendations on how to develop the relationship and split resources between the foundation’s existing International Accounting Standards Board (IASB), which writes accounting rules used in over 140 countries, and the soon-to-be-launched International Sustainability Standards Board (ISSB), a sustainability-focused equivalent.
The TRWG’s work will provide a “running start” for the ISSB, according to the foundation, by offering guidance on what the standards should eventually look like.
In its first update since its inception, the TRWG yesterday unveiled a work plan which will see it set out a “general approach to disclosure” for financially-material sustainability information. The approach will be based on the four pillars of the Taskforce on Climate-related Financial Disclosures’ framework: Governance, Strategy , Risk Management, and Metrics and Targets. The advice will include industry-specific disclosure topics and will initially focus on climate change, before being broadened out to other – so far unnamed – sustainability areas.
The TRWG will also refine the IFRS’ prototype for climate disclosures, published last year, and develop a framework for resource sharing – including staffing arrangements – between the IASB and ISSB, establishing “clear boundaries and expectations” between the two boards.
Finally, the TRWG will develop “conceptual guidelines” for sustainability reporting standard-setting – akin to accounting principles such as ‘materiality’ and ‘timeliness’ – although members noted that the concepts developed for sustainability reporting will “not have the status [to] override” mainstream accounting principles.
The presentation was made by representatives of the TRWG member groups, including Climate Disclosure Standards Board Managing Director Mardi McBrien, IASB Vice Chair Sue Lloyd, TCFD Secretariat Member Curtis Ravenel, Value Reporting Foundation CEO Janine Guillot and World Economic Forum Managing Director Olivier Schwab.
The group said it will provide a detailed update on each objective in “due course” and will present its recommendations once the IFRS confirms the creation of the ISSB – expected ahead of COP26 in November. One of the most keenly awaited aspects of the decision is the location of the ISSB headquarters. Currently, multiple jurisdictions are in the running to host the body, with Germany, Japan, Switzerland, Canada and the UK each submitting formal bids to the IFRS.
But despite the ISSB’s remit to develop a single global standard for sustainability reporting, there are concerns on how it will fit together with incoming EU corporate sustainability disclosure standards which have been under development since July. Analysis by the Institute of Chartered Accountants of Scotland has identified an “apparent misalignment” between the two approaches, describing the EU’s standards as having a broader stakeholder focus and incorporating a more comprehensive view of sustainability beyond climate, compared to the ISSB.