DPOC approves publication of ISSB exposure drafts

  • DPOC (Due Process Oversight Committee) (mid blue) Image
  • ISSB (International Sustainability Standards Board) (blue) Image

21 Mar 2022

In its additional meeting this morning, the Due Process Oversight Committee (DPOC) confirmed that it does not object to the ISSB Chair and Vice-Chair publishing the exposure drafts on 'General Requirements for Disclosure of Sustainability-Related Financial Information' and 'Climate-Related Disclosures' before the ISSB is quorate.

The IFRS Foundation Constitution provides the ISSB Chair and Vice-Chair with the option to publish exposure drafts before the ISSB is quorate. This is due to the fact that standard-setting in this areas is perceived as urgent and while the process for appointing ISSB members has started, it might yet take a while until the ISSB is quorate. The granting of the option was based on the premise that the exposure drafts build on the mature and high-quality preparatory work of the TRWG and generally build on established frameworks. Still, the publication of the exposure drafts requires oversight and permission of the DPOC.

During the meeting, the ISSB leadership explained that they think there are two key benefits of publishing the exposure drafts prior to the ISSB becoming quorate. Namely to:

  • advance standard-setting with urgency; and
  • clarify scope and demonstrate interoperability with jurisdictional requirements.

They explained delaying publication of the exposure drafts to allow for their deliberation by the ISSB would mean a delay of at least a quarter, given that the ISSB is expected to be quorate early in the third quarter of 2022. The delay may even be longer if the board were to actively debate the proposals prior to publishing an exposure draft. Given the current quality of the exposure drafts, the Chair and Vice-Chair of the ISSB do not believe that the benefits that might arise from deliberation by the ISSB would be substantial enough to justify missing the window of opportunity of a quarter two/three consultation. In order to minimise the risk of re-exposure, which would lengthen the overall timetable to finalisation, the questions included in the exposure drafts will be designed to elicit responses on a broad range of issues to maximise the opportunity to obtain stakeholder feedback to inform the quorate ISSB’s redeliberations.

Regarding clarifying the scope and demonstrating interoperability, the Chair and Vice-Chair think this clarification will be beneficial to demonstrate the significant overlap that exists between information that is to be provided to the capital markets and information to be required for multiple stakeholders. Current discussions with stakeholders and a select number of jurisdictions have highlighted that timing is critical to provide a draft of the ISSB’s intended global baseline, as several jurisdictions intend to expose their own draft jurisdictional specific requirements in the coming months (for example the European Union and the United States). The ISSB leadership believes that giving stakeholders the opportunity to review the ISSB’s exposure drafts alongside jurisdictional consultations will allow stakeholders to bring fully informed and coordinated comments to each, broadly supporting interoperability and will allow the ISSB to receive extremely valuable feedback to finalise its work.

Following this line of argument, the DPOC members unanimously gave the Chair and Vice-Chair of the ISSB the permission to publish the two exposure drafts before the ISSB is quorate as long as all subsequent due process steps are adhered to.

A summary of the meeting has been made available on the IFRS Foundation website.

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