Securities regulator IOSCO endorses ISSB standards

A global market regulator has urged jurisdictions to adopt the new disclosure requirements produced by the International Sustainability Standards Board (ISSB).

The International Organisation of Securities Commissions (IOSCO), representing members overseeing 95% of the world’s financial markets, has lauded the ISSB’s standards – known as International Financial Reporting Standards (IFRS) S1 and S2 – as a comprehensive global framework for investors to evaluate sustainability risks and opportunities effectively.

IOSCO has encouraged its 130 member jurisdictions to explore ways to adopt, apply, or draw insights from the ISSB standards. Several countries, including Canada, the UK, Singapore, and Australia, have already initiated steps in this direction.

Erkki Liikanen, chair of the IFRS Foundation responsible for establishing the ISSB, emphasised the significance of IOSCO’s role in shaping global financial regulations.

“Securities regulators are central to setting corporate reporting and disclosure requirements in capital markets. IOSCO’s endorsement sends a powerful signal to jurisdictions worldwide, providing them with the confidence they need to implement the ISSB Standards in their regulatory frameworks,” he said.

IOSCO has determined the ISSB standards are appropriate to serve as a global framework for capital markets to develop the use of sustainability-related financial information in both capital raising and trading, in addition to contributing to the global integration of assessing sustainability risks and opportunities.

IFRS S1 provides a set of disclosure requirements designed to enable companies to communicate to investors about the sustainability-related risks and opportunities they face over the short, medium and long term. IFRS S2 sets out specific climate-related disclosures and is designed to be used with IFRS S1. Both reporting standards will come into effect on 1 January 2024.

Coinciding with the endorsement, the IFRS has released a roadmap which seeks to provide transparency around the IFRS and the ISSB’s strategy to support jurisdictional adoption.

The chair of IOSCO, Jean-Paul Servais, also welcomed last week’s news that ISSB standards are integrating into the European Sustainability Reporting Standards (ESRS),  which the European Commission has recently adopted.

“Coming just after the recent endorsement of the ISSB standards by IOSCO, this announcement by the European Commission means that the EU, which is such an important part of global financial markets, takes significant steps towards integrating ISSB disclosure requirements and adds the 27 member states of the European Union to the global wave of support for the ISSB standards around the world, and it does so at a crucial time”, said Servais.