Securities regulators’ body publishes adoption timeline, sets sights on ESG data and ratings providers.
The global climate reporting standard currently being developed by the IFRS Foundation’s new International Sustainability Standards Board (ISSB) could be finalised within 12 months.
An indicative timeline published today by the International Organisation of Securities Commissions (IOSCO) suggests that the standard could complete its consultation and approval processes by June 2022. This would be followed by an official endorsement of the ISSB climate standard by IOSCO, clearing the way for cross-border and domestic adoption by member securities regulators.
The timeline is predicated on a prototype standard for climate disclosures being refined by global accounting standards-setter IFRS Foundation’s Technical Readiness Working Group (TWG) by November, then assessed by IOSCO’s Technical Expert Group (TEG), allowing for an exposure draft of the standard to be issued in Q1 2022.
The IOSCO timeline also envisages amendments to the IFRS Foundation’s constitution in time for establishment of the ISSB by November, as well as progress being made toward a multi-stakeholder consultative committee. Applications for the roles of ISSB chair and vice-chair close at the end of June.
Earlier this year, IOSCO CEO Ashley Alder told ESG Investor that meaningful progress was needed on the proposed global climate reporting standard by COP26 to enable its completion and adoption by securities regulators in the first half of 2022.
Securities regulators are expected to require listed companies within their jurisdictions to comply with the new standard, albeit in accordance with existing local legal and regulatory frameworks. “It will be important for individual jurisdictions to consider how the common global baseline of standards might be adopted, applied, or otherwise utilised,” said IOSCO.
IOSCO members supervise securities markets in around 130 jurisdictions.
A communique issued earlier this month by Group of Seven central banks and finance ministers backed mandatory climate-related disclosures based on TCFD recommendations and declared support for the IFRS Foundation’s efforts to “develop this baseline standard under robust governance and public oversight, built from the TCFD framework and the work of sustainability standard-setters”.
Last December, five sustainability reporting standards organisations issued a prototype climate reporting standard for use by the IFRS Foundation, in order to encourage and support its decision to create the ISSB, which was confirmed in March.
“Full, timely and comprehensive corporate level reporting, including sustainability-related information, is absolutely foundational for the proper functioning of markets and for investor protection,” said Alder. “The ISSB’s planned ‘climate first’ approach is a sensible one, and I look forward to seeing the ISSB move quickly to meet investors’ needs for information about other ESG topics.”
The new timeline was published in a report on sustainability-related issuer disclosures, which details work by IOSCO’s Sustainable Finance Taskforce on making corporate issuers’ sustainability-related disclosures more decision-useful to investors and other stakeholders.
Last week, Alder said IOSCO intends to publish in July guidance to ESG data and ratings providers to improve transparency as well as recommendations for regulators to address potential conflicts of interest.
In a speech at City Week 2021, Alder acknowledged the regulation of ESG data and ratings was a growing issue because most existing regulatory frameworks do not explicitly cover the services.
“Many on the buy and sell sides have signalled how confusing the multiplicity of different ESG ratings choices can be, once again raising serious questions about relevance, reliability and greenwashing,” he said.