What is the International Sustainability Standards Board?

In November 2021, at COP26, the International Financial Reporting Standards (IFRS) Foundation announced the creation of the International Sustainability Standards Board (ISSB).

As calls for greater transparency around environmental, social and governance (ESG) issues have grown in a world often reliant on self-reporting, so too has the need for an ESG reporting framework. The purpose of the ISSB is to meet this need.

Accounting and financial actors operating at an international level will be familiar with IFRS standards, designed to standardise the presentation of accounting data exchanged at the international level. The ISSB’s role is to create an ESG benchmark to measure the sustainability of this data.

The ISSB brings together the joint forces of the CDSB (Climate Disclosure Standards Board) and the VRF (Value Reporting Foundation).

CDSB is a coalition of organisations aiming to standardise information integration concerning climate issues in financial reporting.

VRF is an alliance of the IIRC (International Integrated Reporting Council) and SASB (Sustainability Accounting Standards Board):

• The IIRC has worked on harmonising non-financial information and explored integrating ESG data into financial reporting.
• SASB (Sustainability Accounting Standards Board) have provided ESG information to financial and accounting actors in the United States.

This new board provides the potential foundation for integrating accounting and financial standardisation with ESG information.

The IFRS states that “the intention is for the ISSB to deliver a comprehensive global baseline of sustainability-related disclosure standards that provide investors and other capital market participants with information about companies’ sustainability-related risks and opportunities to help them make informed decisions.”

Now approaching the first anniversary of its creation, the ISSB is establishing itself with a growing team headed by Emmanuel Faber, former CEO of Danone. In May, it set out a series of actions required to deliver a global baseline of sustainability disclosures. These included international collaboration and protecting the heritage of the existing investor-focused sustainability disclosure standards. It has also carried out consultations on general sustainability-related disclosure requirements and climate-related disclosure requirements.

Once this initial work is complete and the baseline is established, the standards the ISSB sets will be voluntary, and with it, the responsibility of governments to implement them. This approach is also the case for IFRS Accounting Standards, which lists 159 jurisdictions as committing to them, suggesting the potential for widespread take-up.

Coriolis Technologies expects to include these standards in its ESG Ratings as the standards grow and become adopted. The ESG Rating system is nonpunitive, unbiased, and scaleable, offering a framework whereby new regulations such as those from ISSB can easily factor into the overall ratings. This would allow US Accountants and financial actors to understand their sustainability efforts.

On July 29^th, 2022, the public consultation and comment period of the first drafts of the General Sustainability-Related Disclosure and Climate-Related Disclosure Standards ended. The IFRS Foundation’s first two proposed standards are expected to be finalised by the end of 2022, from which we will better understand how ISSB plan to create their ESG benchmark.