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environment | IST

Climate Clock: Here's what International Sustainability Standards Board means for investors

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The IFRS Foundation, which oversees accounting standards in more than 140 nations, mostly in Europe & Asia, announced the creation of the International Sustainability Standards Board (ISSB) at COP26. Sonal Bhutra tells us what it would mean for the investors and if companies worldwide are prepared for them.

The development of a common language for ESG disclosures, was an area of progress that investors were watching for and just last month, the IFRS foundation announced the creation of the ISSB or the International Sustainability Standards Board.
The International Sustainability Standards Board was created as one of two standard-setting bodies by the IFRS Foundation to address the demand for global sustainability reporting standards. The ISSB will develop the set of sustainability disclosure standards. It is important to note the ISSB will be developing the standard set of disclosures, not the actual metrics. The other arm of the standard-setting body, the International Accounting Standards Board (IASB), will develop the set of accounting standards.
The IFRS hopes for both sets of disclosures to become enforceable globally with adoption on a voluntary basis for companies, likely not before H2 FY22.
There is a lot more to the standards, however, based on commentary in the Constitution Document, Jefferies believes, standards will vary based on the size of entities and the economic setting, It will take into consideration regional and national differences. However, similar to GAAP and IFRS today, there will be comparability across these variations and they expect incremental quantitative data points and information.
The ISSB will compromise 14 members, with a minimum requirement of eight members to function. The board will consist of three members from the Asia Pacific region, three from Europe, three from the Americas, one from Africa, and four members from any region, with the exception not to over-balance any region.
Hence, the analysts are watching for potential re-ratings but see minimal market impact near term.
But considering the big push on ESG reporting, investor community will be watching out for this.