Thanks to IFRS Standards, global investors can compare the financial performance of companies in more than 140 countries.
Increasingly, investors are not only looking at the financial performance of companies, but also their performance across environmental, social and governance areas as well as seeking more information on related risks and opportunities. ESG investing has become an increasingly prevalent trend in global investment; however, there is no single, IFRS equivalent when it comes to sustainability reporting. Instead, there are multiple initiatives at international, regional and national levels – all high quality, but at different stages in their development and with varying levels of support.
Encouraged by various stakeholders, the IFRS Foundation Trustees have launched a public consultation to better understand demand for global sustainability reporting standards and if such demand exists, what, if any, role the IFRS Foundation might play.
One possible option outlined in our consultation paper is a proposal to establish a new sustainability standards board to build on the existing work and developments in the field of sustainability. This new board would operate alongside the existing International Accounting Standards Board (IASB), which sets IFRS Standards, and under the same three-tiered governance structure of the IFRS Foundation.
This proposed new sustainability standards board is not expected to compete with existing global, regional or national initiatives. The Trustees are very clear that building on and working with regional initiatives is a must to achieve global consistency, reduce complexity and hopefully cost too. This would help to harmonize, standardize and/or consolidate the proliferation of metrics, frameworks and disclosure requirements that exist today. The five main ESG international standard-setters have already responded positively to the publication of the consultation and committed to engage constructively should we decide to proceed in this endeavour.
I also note the very positive statement made by Blackrock in their Global Quarterly Stewardship Report on the importance for convergence of the different private sector reporting frameworks and standards to establish a globally recognized and adopted approach to sustainability reporting and how the Foundation could play a leading role in reaching a practicable solution.
This is very much a demand-led consultation. We have no desire to add to the confusion and complexity in current sustainability reporting and will only proceed if there is clear demand for us to do so. There are also various preconditions we’d have to meet to move forward which are set out in the paper, including being able to secure an appropriate level of resources such as separate funding.
Therefore, it is crucial that investors and other interested stakeholders respond to the consultation and the Trustees encourage you to let them know your views. The consultation period ends on 31 December 2020.
Larry Leva is the former Global Vice Chairman—Quality, Risk and Regulatory for KPMG International, and served as an executive member of KPMG’s senior leadership team. Mr Leva had global responsibility for KPMG’s system of quality controls, risk management and ethics and compliance programs.
Disclaimer: The views expressed in the blog are those of the author and do not necessarily represent the views of CRUF participants.
The views expressed in this article are those of the author as an individual and do not necessarily reflect the views of the International Accounting Standards Board (Board) or the IFRS Foundation (Foundation). The Board and the Foundation encourage members and staff to express their individual views. This article has not undergone the Foundation’s due process. The Board takes official positions only after extensive review, in accordance with the Foundation’s due process.