Criteria for assessing the priority of new research and standard-setting projects to be added to the work plan (Agenda Paper 2)

Background

One of the objectives of the ISSB’s request for information (RFI) Consultation on Agenda Priorities was to gather stakeholders’ view on the criteria for assessing the priority of potential projects that could be added to the ISSB’s workplan. Within the RFI, the ISSB’s proposed seven criteria to help shape decision making when determining how to prioritise new activities and projects within the ISSB’s next two-year work plan.

The staff summarised comments and provided responses to support their recommendations as follows:

Criterion 1: The importance of the matter to investors

Many respondents suggested that the ISSB consider the importance of stakeholders other than investors. Respondents questioned whether ‘investors’ is the most appropriate term and suggested expanding this criterion to consider lenders and creditors as well. The staff clarified that the term ‘investors’ was used throughout the RFI to refer to ‘primary users of general-purpose financial statements.’

Criterion 2: Whether there are any deficiencies in the way companies disclose information on the matter

Some respondents requested additional context for the word deficiencies within this context. The staff indicated that a lack of disclosures and the quality of disclosures would be taken into consideration for this criterion, however, the staff did not recommend an amendment to the criterion to specify this.  

Criterion 3: The types of companies that the matter is likely to affect, including whether the matter is more prevalent in some industries and jurisdictions than others

The staff clarified that applying this criterion will not result in a prioritisation of one type of entity, industry, or jurisdiction over another. They indicated that it is necessary to understand whether a sustainability issue affects specific groups for the ISSB to make appropriate decisions. 

Criterion 4: How pervasive or acute the matter is likely to be for companies

Some respondents questioned the use of the terms ‘pervasive’ and ‘acute’. The staff indicated that the term ‘acute’ does not apply a short-term focus but considers the degree of severity and urgency of the matter. Further, how pervasive and acute a matter is depends on a variety of factors such as financial implications and the related risks and opportunities.

Criterion 5: The potential project’s interaction with other projects in the work plan

Many respondents commenting on this criterion suggested the consideration of connectivity with the IASB. The staff responded that no change to this criterion is necessary to address respondents’ suggestion.

Criterion 6: The complexity and feasibility of the potential project and its solutions

Some respondents indicated that this criterion suggested the ISSB has no appetite for complex projects. However, the staff clarified that this criterion would be used in combination with the others and ensured respondents that a project might be prioritised when considering the criteria as a whole, despite it being a complex project.

Criterion 7: The capacity of the ISSB and its stakeholders to make timely progress on the potential project.

There were no responses that suggested this criterion was not appropriate.

RFI respondents suggested additional criteria including interoperability with other standards, global relevance of the matter and entities’ ability to produce information. The staff does not recommend that the ISSB make these additions as they are implicit in the work of the ISSB and already captured within the above criteria. Some respondents also suggested adding a criterion on double or impact materiality. However, the staff responded that ISSB standards are designed to meet the information needs of primary users of general-purpose financial reports. While impacts are not excluded, the information about impact-related risks and opportunities need to be relevant to meet investors’ needs as set out in IFRS S1.

Staff recommendation

The staff recommended to proceed with the list of criteria outlined above without substantive amendments or additions.

ISSB discussion

One of the Vice-Chairs suggested that the concept of interoperability should be explicitly mentioned in the criteria. She indicated that it will be important for the ISSB to be able to clearly articulate how they have considered interoperability when explaining their decision-making process to stakeholders. Many ISSB members, including the Chair, agreed with this perspective, suggesting that Criterion 5 or Criterion 3 should be amended to include direct mention of interoperability. However, other ISSB members agreed with the staff’s comments that this addition would be redundant. They argued that the ISSB’s evaluation would not change as interoperability will be considered regardless of its explicit inclusion in the criteria.

ISSB members also commented on the importance of understanding the cost benefit relationship of proposed potential activities and projects. Most ISSB members agreed with the staff that the proposed criteria allow for this balances analysis.

ISSB members emphasised that these criteria will be used to perform a wholistic analysis and do not represent a prioritised list. Multiple ISSB members suggested that the ISSB provide additional subtext to help respondents better understand the criteria and address any gaps in comprehension.

The staff responded that in developing their recommendation there was a tension between the desire to use clear language and to create a framework that allows the ISSB to apply judgement. The staff reminded ISSB members that these criteria are not part of a standard; ISSB members will be able to apply their own decision making when leveraging the criteria to assess proposed activities and projects.

ISSB decision

ISSB members first voted on whether to modify the criterion on how a potential project would relate to other projects in the work plan to incorporate the concept of interoperability (i.e. consider the work of other standard-setters). The majority (8 out of 13 ISSB members present) voted in favour of incorporating interoperability explicitly into the criterion.

ISSB members then voted to support the staff’s recommendations to proceed with the list of criteria, with the amendment to Criterion 5 to be: “The potential project’s interaction with other projects on the ISSB’s own work plan, the work plan of the IASB or the work of other relevant standard-setters”. The majority (8 of 13 ISSB members present) voted in favour.