Following the publication of the ISSB Standards, the IFRS Foundation will take over monitoring of companies’ climate progress from 2024.
By Paul A. Davies, Michael D. Green, and James Bee
On 10 July 2023, the International Sustainability Standards Board (ISSB) and Financial Stability Board (FSB) announced that the IFRS Foundation (the organisation that founded the ISSB) would take over the monitoring of the progress on companies’ climate-related disclosures relating to the Task Force on Climate-related Financial Disclosures (TCFD). This announcement follows the ISSB’s publication of its inaugural sustainability standards IFRS S1 and IFRS S2.
The transfer in monitoring activities marks the latest development in the ISSB’s ambition to consolidate the sustainability reporting landscape internationally, with the TCFD joining other standards (such as the SASB Standards) in the list of frameworks that were previously independently managed but are now under the consolidated auspices of the ISSB.
Richard Monks, Director of Strategy at the UK Financial Conduct Authority (FCA), recently delivered a speech on the environmental, social, and governance (ESG) reporting regime and how it can be improved as part of SRI Services and Partners’ Good Money Week, held in October. The speech draws particular attention to the increasing use and relevance of ESG ratings.
In January 2020, BlackRock CEO Larry Fink circulated his annual letter to CEOs in which he noted, “I believe we are on the edge of a fundamental reshaping of finance”. His letter put companies on notice that climate risk and improved ESG disclosures were of fundamental importance to whether companies were “properly managing and overseeing these risks within their business and adequately planning for the future”. Further, where companies do not report such issues robustly, “BlackRock will increasingly conclude that companies are not adequately managing risk”. This message has now been reinforced by a statement issued by three asset owners — the Japanese Government Pension Investment Fund, the California State Teachers’ Retirement System, and the UK Universities Superannuation Scheme (together, the Asset Owners) — in which they noted that companies that seek to maximise revenue without consideration of other stakeholders (e.g., the environment, workers, and communities) will no longer be considered attractive investment targets.