Erkki Liikanen comments on IOSCO endorsement of ISSB Standards

Today marks a pivotal moment in advancing the sustainability disclosure landscape.

This journey began in November 2021 at COP26 in Glasgow. The IFRS Foundation Trustees announced the decision to establish the International Sustainability Standards Board (ISSB).

There, we committed to deliver a global baseline of sustainability-related financial disclosures for capital markets.

To achieve this, we also promised to consolidate the sustainability disclosure landscape. This consolidation was made possible by a commitment of important standard-setting organisations and by support of many institutions in the field, including philanthropies.

The IFRS Foundation Trustees took the initiative to create the ISSB only after a broad international consultation which gave a strong support for global sustainability standards. The consultation also emphasised the vital connections to financial statements through establishing the ISSB within the IFRS Foundation.

Last month—on 26 June—the ISSB delivered on these commitments and issued its inaugural Standards, IFRS S1 and IFRS S2.

Today’s endorsement of those Standards by IOSCO is a landmark and a historical achievement.

Varying voluntary standards and frameworks have caused fragmentation and even confusion to investors and companies. It has meant companies were not able to communicate effectively and have struggled with having to apply multiple reporting frameworks.

Investors were not receiving the information they needed to price in sustainability risks and opportunities. Markets were not able to play their important role in the struggle against climate change.

These were important drivers that led to the establishment of the ISSB. By endorsing the ISSB Standards securities regulators around the world are working to achieve the consistency and comparability of information that capital markets demand.

IOSCO's endorsement is a resounding validation of the ISSB's work to develop robust, proportionate sustainability disclosure standards fit for capital market use at global level.

IOSCO has a crucial role in shaping global financial regulation. 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.

We owe a debt of gratitude to IOSCO, and to its Chair Jean-Paul Servais, for recognising the importance of unifying behind these Standards. They will enable investors to factor sustainability-related risks and opportunities into their decision making.

The endorsement echoes IOSCO's important role in the widespread and comprehensive adoption of the IFRS Accounting Standards over two decades ago.

The issue of data quality in financial reporting was addressed when IOSCO supported the creation of the IFRS Foundation and the IASB. Today, more than 140 countries require all or most domestic publicly accountable companies to report using IFRS Accounting Standards, which ensures investors have access to high-quality and globally comparable financial information.

Those Standards have become the universally accepted language of accounting, trusted by investors and companies worldwide. Similarly, today's endorsement by IOSCO sets the stage for the ISSB Standards to become the common language for sustainability disclosures globally.

Now, as we confront the risks and opportunities posed by sustainability, it is important to apply the same rigor to achieve the same consistency in sustainability information as was done to the accounting.

Climate change is a tragedy on the horizon. For effective climate transition we require policy measures and we need private capital. But to attract private capital, we need better disclosures. The IFRS Foundation established the ISSB to address the need for better disclosure. The ISSB Standards will empower asset managers to manage the carbon footprint in their portfolios and enable banks to assess their exposure to transition risks.

Jean-Paul Servais’ words resonate with the urgency and importance of incorporating sustainability considerations into capital market operations through regulatory frameworks.

Financial statements and sustainability disclosures were once separate entities. Today, they are two sides of the same coin.

However, the road to securing consistent high-quality and globally comparable sustainability-related disclosures does not end today.

The IFRS Foundation is committed to supporting regulators around the world in adopting the Standards in a timely and consistent manner. Much of this work will be done in partnership with IOSCO.

I would like to underscore Jean-Paul Servais' comment on the relevance of developing a high-quality sustainability assurance framework, which is an important component that contributes to underpinning high-quality, consistent and reliable sustainability-related information.

Assurance gives confidence to investors in the information provided using ISSB Standards.

This work is a vital component of our collaborative efforts and I would like to underscore our dialogue with the IAASB, The International Auditing and Assurance Standards Board, and IESBA, The International Ethics Standards Board for Accountants, as they are progressing in their work.

The road to raising sustainability disclosure to the same rigour of financial statements is not an easy one. But with the support of global bodies like the G20, G7, the Financial Stability Board and IOSCO, we are on the right path. Throughout, Jean-Paul Servais—first as Chair of the IFRS Foundation Monitoring Board and now as Chair of IOSCO—has provided vision and leadership and I pay tribute to him today.

I will now hand over to Emmanuel Faber to provide further context on the inaugural ISSB Standards and to share our thinking around adoption as set out in our roadmap.

Thank you.