The decision by the International Organisation of Securities Commissions (IOSCO) to endorse the International Financial Reporting Standards (IFRS) S1 and S2 sustainability-related financial disclosure standards is being hailed by many as a major step forward in bringing sustainability into the investment mainstream, and vice versa. The new standards were published by the International Sustainability Standards Board (ISSB) in June.
IOSCO called them a major move towards its goal of creating a “comprehensive toolkit for both sustainability-related disclosure and related assurance standards that should be available to jurisdictions and ready for use by issuers for the end-2024 accounts”.
Needless to say, there are still question marks over how much influence the recommendation will have. IOSCO represents 130 member jurisdictions, regulating more than 95% of the world’s financial markets, so its influence is considerable. That’s assuming the members do heed its recommendation “to consider ways in which they might adopt, apply or otherwise be informed by the ISSB Standards”.
That’s hardly a categorical demand. Furthermore, the IFRS describes the whole process of adoption of the standards as a “journey”.
All the same, there seems more than enough momentum behind the decision to start driving the adoption, The current IFRS rules are already used in over 100 countries. And the IFRS has already issued an adoption guide outline for jurisdictions wishing to act on the new standards.
Canada’s securities regulators have already announced that they are evaluating ways to implement the standards. And UK Treasury Minister Joanna Penn has said the UK is committed to including reporting in line with the standards.
The ISSB and the European Union have committed to making each other’s standards interoperable, meaning that the entire European Union is likely to at least shadow the same regulations. According to ISSB Chair Emmanuel Faber, widespread adoption will ensure “the consistency and comparability of information that capital markets demand.”
Above all, with effective endorsement from 95% of the world’s bourses, businesses, governments, regulators and investors can no longer claim there is too much disagreement on sustainability standards for these to be incorporated in investment practice.
The IFRS standards may not be the only standards that the world needs for a move towards greater sustainability, but they certainly validate the whole proposition. That in itself should be a powerful lever for change.
