A London-based body overseeing the setting of accounting standards that are adopted in Australia has used the climate talks in Glasgow to announce the creation of a sustainability standards board.
The IFRS Foundation told the COP 26 conference in Glasgow that it had formally established the International Sustainability Standards Board, which has been created to meet the demand for global rules for non-financial reporting.
Sustainability standards will include detailed guidance on how climate reporting should be done by companies and other entities.
The announcement of the creation of the new board was also accompanied by news that two prototype standards covering climate-related disclosures and general sustainability disclosure rules that have been drawn from a range of different sources such as the Climate Disclosure Standards Board and the Value Reporting Foundation.
Australia already adopts the accounting standards issued by the International Accounting Standards Board, a body overseen by the IFRS Foundation, and the Australian Accounting Standards Board will look to incorporate the new standards in Australia.
Erkki Liikanen, chair of the IFRS Foundation Trustees, told COP 26 that the new body of guidance is a part of ensuring the quality of information to investors in capital markets on non-financial information is high in the same way as standards for financial reports.
“In financial reporting, this problem with data quality is largely solved. Twenty years ago, the International Organization of Securities Commissions (IOSCO) strongly supported the creation of the IFRS Foundation and the International Accounting Standards Board (IASB),” Likanen said.
“Now, more than 140 countries require companies to report using IFRS Accounting Standards. Investors get high-quality, assured and globally comparable financial information with which to make investment and capital-allocation decisions. Companies have to standardise their reporting to the markets.”
The chair of the IFRS Foundation trustees said that at the time of the signing of the Kyoto Protocol in 1999 there was no linkage established between the financial reporting standards and sustainability frameworks.
“Capital markets can have an essential role to play in reaching net zero. But that can only happen when sustainability information is produced with the same rigour, assurance of quality and global comparability as financial information,” Likanen said.
The announcement of the new global body occurred in the same week when the Australian Labor Party flagged it wants to see companies flag to investors in their market reports how changes in the climate would impact on their business models.
“We agree that regulators and government should provide clearer guidance on this and what companies should be reporting – and we’ll have more to say about it,” Shadow Treasurer Jim Chalmers said to an audience watching the ACTU Virtual Super Trustees Forum.
“We’d like to see disclosures that are usable, credible and comparable, so that there is a baseline, all around the world, that we can measure against.”