Sue Lloyd delivers speech at World Standard-setters Conference 2024

Sue Lloyd, Vice-Chair of the International Sustainability Standards Board, delivered the speech at the World Standard-setters Conference in London on 23 September 2024. 

Welcome all. I’m Sue Lloyd and since March 2022 I have served as Vice-Chair of the ISSB. Before that, I was Vice-Chair of our sister board, the IASB, and going back even further I served on the IASB's technical staff. 

Over the years, I've worked closely with many of you in the audience. That's why this event feels more like a family gathering than a conference. It's great to be here. 

We've got a lot to get through today, so I'll keep my opening remarks short. 

Perhaps due to my IASB background, I'm often asked about the similarities and differences between the boards and how our respective standards are being adopted around the world. 

As is often said, history doesn't repeat itself, but it rhymes—and the same is true with our respective work. 

The IASB, supported by you, has been a great success. IFRS Accounting Standards are adopted on a widespread basis by jurisdictions around the world and trusted by companies and investors worldwide to make informed investment decisions. This is the ambition for our sustainability disclosure standards. 

Demand for global accounting standards came from a plethora of different national accounting standards, adding cost, risk and complexity to the investment process. That's not dissimilar to demand for the ISSB's own global baseline due to an alphabet soup of market-driven sustainability standards and frameworks. We've consolidated the work of the key investor-focused initiatives such as the TCFD, SASB, CDSB and elements of the Integrated Reporting Framework into a single, global baseline of sustainability-related financial disclosures. And we've been working with EFRAG and others to ensure interoperability between the global baseline and other requirements. This work successfully led to a very high degree of alignment on climate-related disclosure requirements, reduced complexity and reduced risk of duplication in reporting for companies looking to apply both the ISSB Standards and ESRS by utilising our joint guidance. 

Both the IASB and the ISSB have a clear investor focus. This is critical to ensure all information required by the standards is decision-useful, and both boards focus on ensuring that our requirements are proportional and cost-effective for those preparing the information. At the ISSB we appreciate the initial cost and effort of producing sustainability information designed to meet the needs of capital markets and want to ensure we are asking companies to produce information that is valued by investors. The ultimate test is that the information required is that which is material- so important it is reasonably expected to affect investment decisions.  And that, by the way, should be information strategically important to those governing and managing their businesses for long-term success.

Back in 2000, the international body for securities regulation, IOSCO played a key role in promoting the widespread jurisdictional adoption of the IASB's standards and endorsing them for international use. Once again, IOSCO has played a key role for the ISSB with its 2023 decision to endorse the ISSB Standards and encourage their use worldwide. In response to IOSCO’s call for action and reflecting the value proposition of ISSB Standards to strengthen capital markets by enhancing transparency—only one year after the issuance of our inaugural standards, over 25 jurisdictions are making progress towards the adoption or other use of the ISSB Standards. Jurisdictions from across the Americas, Asia Oceania and EMEA, encompassing developed as well as emerging markets and developing economies. In just the past few days, we’ve seen momentum continue to build with announcements from Australia, Singapore and Hong Kong and the international public sector accounting body, IPSASB voting on its climate exposure draft which builds on the ISSB’s climate standard.

In this audience you are used to hearing numbers of over 140 jurisdictions for the IFRS Accounting Standards—so perhaps 25 sounds low to you. So let’s dig into this a bit more. Firstly, we have counted the European Union as one jurisdiction rather than 27. And to give you a sense of the reach of the jurisdictions covered they represent—more than 40 percent of global market capitalisation and more than 50 percent of global GHG emissions.

In the early days, the IASB worked with jurisdictional regulators, policymakers and global bodies, including IOSCO, the World Bank, the IMF and countless other multilateral institutions to help build capacity in support of adoption of its standards. The ISSB is looking to follow a similar but even more ambitious path, given that financial reporting was well developed then and sustainability reporting is just now flourishing as increasing numbers of jurisdictions and companies advance in the process. 

So, there are significant similarities and we are applying the lessons we learnt then—but there are also some differences. 

For a start, in the 2000s capital market globalisation was very much building up, highlighting the need for a suitable global cross-border regime. Today, the market is more global with capital raising taking place without domestic boundaries heightening the need for suitable cross-border regimes. However, we need to continue to work hard to demonstrate the benefits of global solutions within jurisdictional considerations and domestic policymaking.  Thankfully, there remains very strong support from investors in particular, but also from companies, regulators and other stakeholders for a global approach.  We have seen this in action during several recent jurisdictional consultations on ISSB Standards, where market feedback encouraged greater alignment with our global baseline - which led to those jurisdictions deciding to align more closely with our requirements.  In particular, I'd like to recognise Australia for its openness to stakeholder feedback which has resulted in Australian standards moving closer to the ISSB’s, as seen in the Australian Accounting Standards Board’s vote to approve their standards last week. 

Another important difference is in the ambition of developing and emerging economies looking to take a leadership role in areas such as sustainable finance. These markets are truly showing leadership in this area, reflecting the need for finance to support important transition in their markets, and also the important role these jurisdictions play in global supply chains. There are competitive benefits for companies in these markets if they are able to supply information to customers and suppliers to assist those counterparties in their own reporting.  I mentioned earlier that global markets are now more established than in the early 2000s but there is more to be done here.  Providing transparency throughout global value chains to reveal risks, and opportunities to investors, is critical to the mission of the ISSB to support informed capital allocation and global capital flows.

When the establishment of the ISSB was announced at COP26, our IFRS Foundation Trustee chair Erkki Liikanen made specific reference to meeting the needs of developing and emerging economies.  That's a key reason why we have Jingdong Hua as my fellow Vice-Chair.  We've seen tremendous support for our work across these economies, from large regional economies such as Brazil and Nigeria—with their vocalisation of the perceived benefits in adoption, such as access to capital and greater transparency and competitive advantages of reporting as major players in global supply chains. This support and swift action towards adoption is providing a catalyst effect, where we are now seeing emerging interest week on week, most recently from jurisdictions such as El Salvador and Ghana.  Having such widespread adoption across developing and emerging economies also helps companies located in advanced economies, because the Scope 3 information they require for value chain reporting is already there. 

And I welcome recent decisions from jurisdictions that were considering whether to require material information about Scope 3 GHG emissions in line with ISSB Standards, such as Australia in their recently finalised standards and Hong Kong in their proposals. Our research indicates this information is crucial to building investor understanding of where transition risks and opportunities occur and how they might affect a company’s prospects. 

The final difference I point to is the ongoing discussion in some jurisdictions about the value of sustainability reporting, that is often caught up in pro and anti-ESG discussions. The good news here is that we see a constant despite the noise. Investors need robust information about an entity’s prospects including in the long term to make informed investment decisions. Our Standards, building on concepts from our Integrated Reporting Framework which we built into the heart of IFRS S1 are about communicating to investors about an entity’s prospects. Investors need to understand this to make informed investment decisions. They can’t and won’t invest blind. They need to understand the risks they are exposed to such as how physical climate risks might affect a company’s business and performance. They also need to be able to find opportunities to decide where to allocate their capital. This is a key reason why, like IFRS Accounting Standards, the ISSB Standards must and will always remain market-driven and policy-neutral—we are here to ensure robust decision-useful information is provided to investors rather than advocating any particular policy position.

Thank you once again for your continued support and active engagement.  Our success is very much your success.