IOSCO appoints US, Singapore to lead expert group on sustainability reporting

The group will decide whether IOSCO endorses upcoming sustainability reporting standards from the IFRS Foundation

The International Organization of Securities Commissions (IOSCO) has named the US Securities and Exchange Commission (SEC) and Singapore central bank the Monetary Authority of Singapore (MAS) as co-leads of a new Technical Expert Group (TEG) on sustainability reporting standards.

The TEG has been created to provide an independent review of a prototype climate-related disclosure framework that is expected to underpin new international reporting standards by accounting standard-setter the IFRS Foundation.

IOSCO, whose members include key securities and futures regulators from 130 jurisdictions, said the TEG will consider further refinements to the prototype – including industry-specific metrics – and decide whether “the refined prototype could be a sound basis for the development of an international reporting standard”.

The TEG will become an official observer of the IFRS Foundation’s working group, which is overseeing the development of the prototype and the creation of a Sustainability Standards Board (SSB) to issue the final reporting standards.

The TEG’s membership has not been announced, but IOSCO said it will comprise sustainability reporting technical specialists and the leadership of IOSCO´s policy committee on issuer accounting, auditing and disclosures.

It is expected to complete its initial phase of assessment before COP26, which is currently planned for November 2021 – although recent media reports have suggested that the summit could be postponed for a second time.

The TEG will sit under IOSCO’s recently established Sustainable Finance Task Force, chaired by Erik Thedéen, Director General of Sweden’s securities regulator, Finansinspektionen. Its findings will determine whether IOSCO endorses the IFRS SSB as the global standard-setter for sustainability-related corporate reporting. 

However IOSCO said that, subject to the outcome of the TEG’s assessment, it views the initiative as “as a promising solution for achieving consistent, comparable, and reliable cross-border sustainability-related reporting requirements and would encourage IOSCO members and relevant authorities to consider the standards”.

As the issuer of globally accepted accounting rules, any future sustainability reporting standards issued by the IFRS Foundation will be expected to carry significant clout in the market. Since 2019, the Foundation has faced calls from its own International Accounting Standards Board and Dutch governance body Eumedion to unify the ‘alphabet soup’ of existing ESG disclosure frameworks under its roof.

With this appointment, the US is now leading two global initiatives related to sustainable finance – the other being the G20’s Sustainable Finance Study Group which it co-chairs with China. Although the US was widely seen as a laggard on ESG issues under the previous Trump administration, recent moves by the SEC and Federal Reserve to address climate risks, sustainability disclosures and “ESG-related misconduct” suggest that the US will take a more constructive position on sustainable finance under President Biden.

Singapore, the other TEG co-lead, also has ambitions to become a regional leader on green finance, having recently proposed a national green taxonomy identifying eligible environmentally sustainable and climate transition activities for investments.