The International Financial Reporting Standards (IFRS) Foundation Trust told attendees of the COP26 climate summit it intends to launch a new board to tackle greenwashing in financial products. 

The new body, called the International Sustainability Standards Board (ISSB), comes in response to mounting calls for higher quality and universal disclosure on environmental, social and governance (ESG) performance indicators, including a recent consultation with the market launched by the International Organization of Securities Commissions (IOSCO) to promote more transparent and consistent data reporting.

In a statement, the IFRS Foundation said: “The intention is for the ISSB to deliver a comprehensive global baseline of sustainability-related disclosure standards that provide investors and other capital market participants with information about companies’ sustainability-related risks and opportunities to help them make informed decisions.

Headquartered in Frankfurt and with offices in London, Montreal and San Francisco, the new board will work closely with the International Accounting Standards Board (IASB) to ensure compatibility between IFRS Accounting Standard and IFRS Sustainability Disclosure Standards.

Also, based on feedback from preliminary market consultations launched by the IFRS Foundation, the ISSB will build on existing reporting initiatives, with the technical standards and frameworks of the Climate Disclosure Standards Board (CDSB), Value Reporting Foundation (VRP), Task Force on Climate-related Financial Disclosures (TCFD) and Forum Stakeholder Capitalism Metrics (FSCM) being used a foundation for the technical work done by the board.

To speed up the ISSB’s work, the IFRS Foundation has created the Technical Readiness Working Group (TRWG) with representatives from the World Economic Forum (WEF), CDSB, TCFD, IASB, VRF and FSCM, with support from IOSCO. The group has produced two prototype documents, with one focusing on climate-related disclosures and the other on sustainability more broadly.

As it begins its work in earnest, the ISSB will take technical advice on sustainability matters from a new Sustainability Consultive Committee, whose members include the International Monetary Fund (IMF), the Organisation for Economic Co-operation and Development (OECD), the United Nations (UN) and the World Bank.

Commenting on the launch of the ISSB, Erkki Liikanen, chair of the IFRS Foundation Trustees, said: “Sustainability, and particularly climate change, is the defining issue of our time. To properly assess related opportunities and risks, investors require high-quality, transparent and globally comparable sustainability disclosures that are compatible with the financial statements.

“Establishing the ISSB and building on the innovation and expertise of the CDSB, the Value Reporting Foundation and others will provide the foundations to achieve this goal.”

Erik Thedéen, head of the Swedish Financial Supervisory Authority and chair of the ISSB task force set up by IOSCO, added: “Climate change is global in nature, and this calls for global action. To have a global baseline for corporate disclosure will be key to enable the necessary transition.

“A global baseline for sustainability disclosures is a prerequisite to enable investors to correctly evaluate the risk and opportunities in investments, regardless of where they are in the world. This will enable the financial sector to better allocate capital towards sustainable investments. We want to get the future risk and opportunities that comes with the transition to a carbon net zero world, into the pricing of investments today.”

The IFRS Foundation is hoping to begin the ISSB’s work in early 2022, with discussions being had around the possibility of setting up offices in Beijing and Tokyo to establish an Asia Oceania footprint.

The standard-setter added it is in “advanced stages” in appointing a chair and vice-chair to the ISSB, which will be followed by a total of 14 board positions to be filled.