Global body sets new standards for green accounting at COP26
IFRS, a global accounting body, has today announced a new set of “baseline” standards for companies to keep their investors informed about the impact of climate change to their business, amid increasing calls for climate risk to be considered.
The news coincides with COP26, the global climate summit hosted in Glasgow this year.
The newly formed International Sustainability Standards Board (ISSB) will develop global disclosure standards to meet investor and global financial market demand for more information when it comes to the risks to companies from environmental, social and governance (ESG) issues.
They are also aimed at making it easier for investors to accurately and fairly compare climate risks between companies.
The standards will replace a number of voluntary reporting frameworks, and varied guidance, which the IFRS said led to “fragmentation” and “increased cost and complexity for investors, companies and regulators,” as a result.
Two other bodies have also committed to consolidate with the new ISSB, bringing together the Climate Disclosure Standards Board and the Value Reporting Foundation, by next summer.
“The announcement of the commitment by CDSB and VRF to merge with the new board sends a clear signal to the market that ISSB is emerging as the global sustainability standard-setter,” said Veronica Poole, Deloitte’s global IFRS leader.
“Worldwide adoption of the ISSB standards is needed to achieve true harmonisation, to replace the alphabet soup of voluntary standards and frameworks,” she added.
The first set of global baseline standards for climate risk disclosures by companies will be published by the ISSB next year.
The news by the IFRS Foundation, whose standards are used in over 140 jurisdictions globally, has been welcomed by finance ministers and central bank governors from 36 jurisdictions and the UK, according to a government statement.
The IFRS also announced the publication of prototype climate and general disclosure requirements which, the foundation said, was the result of six months of collaboration with a number of other accounting and climate bodies including the World Economic Forum and the International Accounting Standards Board (IASB).
The newly announced developments together will form the “necessary institutional arrangements” and “lay the technical groundwork” for a global standard of sustainability-related disclosures, said the IFRS in a statement.
The news comes of the heels of a letter issued to the Big Four auditing companies by a group of investors managing around $4.5tn worth of assets earlier this week, in which they warned the auditors to start including climate risk into their audits, or risk rebellions at AGMs.