Notice

Initial response to IFRS Foundation Trustees consultation

Published 10 November 2020

We, the undersigned, welcome the consultation paper published by the Trustees of the International Financial Reporting Standards (IFRS) Foundation on 30 September 2020, which seeks to assess demand for international sustainability reporting standards and explores ways in which the Foundation might contribute to their development. The consultation seeks feedback on a number of matters, including the establishment of a new Sustainability Standards Board (SSB), to sit alongside the International Accounting Standards Board (IASB) within the IFRS Foundation structure.

Climate change and sustainability are challenges that extend beyond national borders. They therefore demand international solutions. Internationally agreed sustainability reporting standards will help to achieve consistent and comparable reporting on environmental, social and governance (ESG) matters. This in turn will help to inform international investment flows to support transitions to a net zero emission economy amongst other public policy goals. We support the approach set out in the consultation paper which seeks to build on the established work and accumulated knowledge of organisations already operating in this area. The proposed initial prioritisation of the risks from climate change, building on the principles of the Taskforce for Climate-related Financial Disclosures (TCFD), is an important and timely step as a contribution to addressing the climate emergency. The UK government and UK financial regulators remain committed to implementing the TCFD reporting recommendations in the UK as set out in the 2019 Green Finance Strategy, in anticipation of our G7 Presidency, and as part of the UK’s COP26 Co-Presidency and international leadership on green finance and climate change.

Government and regulators are running consultations to determine how best to introduce and mandate TCFD-aligned disclosures across the UK economy, which will promote more efficient market pricing and capital allocation to support economic recovery and the transition to net zero carbon emissions.

Alongside pursuing an ambitious domestic programme, the UK intends to play its part in actively supporting the development of global disclosure standards. We will look to take forward domestic proposals in a manner which will inform, and be consistent with, international standards as they develop and are in time agreed.

We believe that the creation of a new board, within the IFRS Foundation structure, would allow the effective exploration, reconciliation and resolution of ideas and challenges that are relevant to reporting of material sustainability factors (that are most relevant to investors and other market participants) in the first instance, and reporting of wider sustainability impacts in the longer term. We believe that establishing an SSB alongside the IASB will promote much-needed integration of financial and non-financial reporting, within a common architecture. A transparent and robust governance structure should, in our view, be a pre-requisite for establishing an independent and impartial sustainability reporting standard setter. For these reasons, the Foundation is very well-placed to lead this conversation and work, and we are grateful that it has done so.

We intend to respond more fully to the IFRS Foundation’s consultation paper in due course.

Department for Business, Energy and Industrial Strategy (BEIS)
Bank of England (BoE)
Department for Work and Pensions (DWP)
Financial Conduct Authority (FCA)
Financial Reporting Council (FRC)
HM Treasury (HMT)
The Pensions Regulator (TPR)