VICTORIA GEDDES, Executive Director.

The big news this month was the announcement by the Chair of the IFRS Foundation, timed for release at COP26 on 3 November, of another important step towards the realization of global sustainability disclosure standards.

At present there are a number of different frameworks that companies can use to guide how they report on climate and the effects of sustainability-related risks. With increasing recognition of the role that capital markets can play in reaching net zero, there have been mounting calls to ensure that sustainability information is produced with the same rigour, assurance of quality and global comparability as financial information.

Given that more than 140 countries require companies to report their financials using IFRS Accounting Standards it made sense for the same body to take the lead in managing the process of delivering the same outcome for sustainability disclosures.

New International Sustainability Standards Board to use existing frameworks

The first step down this path was the formation of the International Sustainability Standards Board (ISSB) that will develop a comprehensive global baseline of sustainability disclosures for the financial markets, the IFRS Sustainability Disclosure Standards. The ISSB will sit within the IFRS Foundation, alongside the IASB (International Accounting Standards Board) and they will work closely together.

The second and most important announcement was the IFRS Foundation’s selection of the two existing investor focused international sustainability reporting frameworks it intends to consolidate into the ISSB by June 2022. These are:

• The Value Reporting Foundation (VRF) which is home to the Sustainability Accounting Standards Board (SASB) and the International Integrated Reporting Council (IIRC) which merged in June 2021
• The Climate Disclosure Standards Board (CDSB)

Finally it was acknowledged that reporting on Climate Change and Sustainability are two separate types of disclosure. The ISSB will look to publish two separate frameworks to reflect that difference, based on the work done by the Taskforce for Climate-related Disclosures (TCFD), the VRF, the CDSB, the World Economic Forum and the IASB. These groups will consolidate key aspects of this content into a unified set of recommendations for consideration by the ISSB.

What does this mean for ESG Reporting today?

For companies embarking on their ESG and Climate Change reporting journey, it would be advisable to focus on the SASB framework for sustainability and either the TCFD or CDSB guidelines for reporting on climate change.

In 2020 we identified in our survey of ASX300 companies that undertake ESG reporting, that the majority reference the Global Reporting Initiative (GRI) as their framework of choice. In July 2020 SASB and GRI announced a collaborative workplan, A Practical Guide to Sustainability Reporting Using GRI and SASB, to show how companies can use both sets of standards together. Given the overlap between the two standards there is clearly room to modify existing reports to include areas covered by SASB.

FIRST Advisers is currently updating its annual survey of ESG Reporting in the ASX300 providing insights by market cap and sector as to how companies are approaching their ESG/Sustainability reporting. Our report will be published in the New Year.