EU Financial Regulators Back IFRS Foundation on Sustainability

European Supervisory Authorities support Sustainability Standards Board, but warn against climate-dominated focus. 

The European Banking Authority (EBA), European Insurance and Occupational Pension Authority (EIOPA) and the European Securities and Markets Authority (ESMA) have backed International Financial Reporting Standards (IFRS) proposals on sustainability reporting, released in September 2020. 

In an open letter to Erkki Liikanen, the Chair of the Trustees for the IFRS Foundation, the three European Supervisory Authorities (ESAs) recognised the importance of globally accepted sustainable reporting standards to promote internationally consistent and comparable non-financial reporting”. 

Their support follows previous respondents to the consultation, including other disclosure organisations such as the Climate Disclosure Standards Board (CDSB) and the Global Reporting Initiative (GRI). 

“We support the ambition of the IFRS Foundation to take advantage of existing jurisdictional and international initiatives to build a high-quality set of internally recognised non-financial reporting standards,” the ESAs noted. 

From a European perspective, the ESAs urged the IFRS to place emphasis on double materiality in order to “enhance the relevance of [non-financial] disclosure” 

The IFRS proposals include the implementation of the Sustainability Standards Board (SSB), which would introduce global dimensions to regional non-financial reporting already in place.  

The ESAs warned the IFRS to ensure that the SSB “does not solely focus on climate”, although acknowledged the importance of taking a ‘climate-first’ approach.  

Next steps for the IFRS Foundation 

The consultation period for the IFRS Sustainability Reporting proposals ends December 31. The IFRS will then assess “whether and to what extent the Foundation might contribute to the development of [sustainability reporting] standards”.  

The reporting body has said it will continue to collaborate with other reporting standards organisations to further improve the transparency and quality of non-financial disclosures.  

At the Sustainability Accounting Standards Board’s (SASB) 2020 Symposium, Liikanen reiterated the importance that “global and regional initiatives in non-financial reporting could and should be complimentary”, adding that the IFRS will be taking a “gradualist approach” towards implementing a more global set of guidelines. 

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