IFRS Should Incorporate Double Materiality Within Global ESG Reporting Standard 

Disclosures need to go beyond climate-related data, outlining impact on society and environment, says DWS in response to IFRS 

A global sustainability reporting standard should be based on double materiality, asset manager DWS has said. The Frankfurt-based firm responded with an open letter to the ‘Consultation Paper on Sustainability Reporting’ issued last September by the International Financial Reporting Standards (IFRS) Foundation.  

Building a global sustainability reporting standard based on double materiality will mean disclosures don’t just outline how sustainability issues impact companies internally, but also how companies affect wider society and the environment 

DWS noted that the current ESG reporting framework “is failing at a time when investors are increasingly interested in how their capital is being used and impact the world”.  

The asset manager suggested that non-financial reporting should be “fully auditable with management made accountable” as the boundary between financial and non-financial reporting is already blurred. Failing to do this would mean the Foundation is “not delivering on the objectives defined by IASB in Article 2 of its constitution,” DWS added. 

“Reporting is where all company performance and activities come together. It is becoming consensus that non-financial reporting is as important as financial reporting, and as a result, also needs to be fully auditable with management made accountable,” said Marco Ferber, Head of Integrated Reporting at DWS.  

The IFRS Foundation’s proposed global sustainability reporting standard aims to provide further clarity around non-financial sustainable disclosures. For example, through the implementation of a Sustainability Standards Board (SSB), which would oversee the wide-scale implementation. The proposal has been backed by other sustainability reporting standards-setters such as Global Reporting Initiative (GRI) and Climate Disclosure Standards Board (CDSB). 

The consultation period ended December 31 2020, with the Foundation’s response to feedback scheduled early 2021. 

Full feedback submitted by DWS can be found here 

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