Mr Liikanen introduced the session and explained how, as a result of the IFRS Foundation's five-year strategy review, the establishment of the ISSB came about given the overwhelming response to the Foundation's consultation on whether an international standard-setting body on sustainability reporting was needed and whether it should be hosted within the governance structure of the IFRS Foundation. Therefore, the Foundation now has two standard-setting bodies: The International Accounting Standards Board (IASB) and the Internation Sustainability Standards Board (ISSB).

Mr Barckow then explained about the recent agenda consultation of the IASB, which, as one result, led to adding a project on climate related risks to the maintenance pipeline of the Board. He noted that while constituents might expect this to be a topic to be more within the remit of the ISSB, connectivity was highly important and the IASB was most interested in making sure that the information produced under ISSB standards ties in seamlessly with the information produced under IASB requirements.

Mr Faber then spoke about the global importance of climate matters and why a global baseline is so important. He noted the progress on sustainability reporting in many jurisdictions and especially the EU and admitted that this creates complexities when trying to develop global standards, but stressed that the ISSB is very active in engaging with and listening to jurisdictional initiatives and values their input and cooperation.

Questions then mostly focused on the newly established ISSB and its interaction with the EU developments. The following topics were discussed:

• Cooperation with the EU initiative. There clearly is cooperation and it has increased to at least weekly exchanges after the trilogue agreement on the  CSRD. The standards on climate are very close in substance, but "the worst is being close without being identical". ESRS might be included in the ISSB hierarchy as a source of guidance if a topic has not yet been covered by the ISSB. The lack of time is a problem when trying to to develop a global baseline while the building blocks are already being developed.
• Materiality. The discussion about single and double materiality is more in the narrative than in reality. The two concepts are not mutually exclusive, rather two pillars of of the same principle. There is an overlap between them and the larger the overlap, the easier the life for companies will be. Cooperations such as the one with GRI are aimed exactly at trying to ensure the concepts do not lead to conflicts.
• Will ISSB developments respect EU sovereignty and will they hamper EU progress? The EU is fully sovereign and the ISSB has no say in what the EU considers to be the best for the EU. However, global alignment is a prize worth waiting for a little (rather in terms of weeks than years). Also, the ISSB will follow a slightly different review process on its exposure drafts and will focus on the most critical issues while leaving others aside for the moment. Critical issues are considered those where other jurisdictions have already developed viable solutions. However, a global solution must be truly global - leaving important, but slower somewhat jurisdictions out would mean that "all is lost" on the idea of a global baseline.
• IFRS Foundation Governance and cooperation between IASB and ISSB. The ISSB was placed as a sister board to the IASB under the auspices of the IFRS Foundation exactly because of the transparent, trusted and well-established governance of the Foundation. And while the Boards will operate independently, they will make sure that parallel and connected reporting without conflict is possible. One move was to appoint an ISSB Chair with a business and strong sustainability background together with an ISSB Vice-Chair with a background in standard setting.
• Inclusiveness. The ISSB is almost gender-balanced and the IASB is also on a good way. Also, the background of people is diverse. This not only includes the Boards, but also the staff and the stakeholders contacted in outreach. One additional aspect the IFRS Foundation has to consider is geographical balance. In this context, today's appointment of the second Vice-Chair of the ISSB was pointed out who will have a special responsibility for emerging economies and the global South.
• Developments worldwide and especially the backlash against ESG matters in some states of the United States. Similar to the EU, the sovereignty of other areas of the world is fully respected. However, it was noted that most US companies are concerned about the fragmentation of the world they are operating in as many of the are globally active and, therefore, also need a global solution in sustainability reporting. The SEC proposals were considered as being very ambitious.

A recording of the one-hour session is available on the website of the European Parliament. Mr Liikanen's introduction begins at 14:35 hrs, Mr Barckow's at 14:42 hrs, Mr Faber's at 14:48 hrs. The question and answer sessions begins at 15:01 hrs. Please note that the audio options include translations into twelve languages.

Mr Hua is the former Vice President and Treasurer of the World Bank, where his responsibilities included green bond initiatives and sustainable finance capacity-building programmes. He has also previously served as Deputy Treasurer of the Asian Development Bank and has held positions at the United Nations Development Programme and the African Development Bank. In his role as Vice-Chair, Mr Hua will oversee the development and implementation of the ISSB’s strategies to support and include stakeholders in emerging and developing economies as well as small and medium-sized companies. 

The press release announcing the appointment is available on the IFRS Foundation website.

The statement notes that significant efforts by the International Sustainability Standards Board (ISSB), the US Securities and Exchange Commission (SEC), and the European Commission together with the European Financial Reporting Advisory Group (EFRAG) are underway, which all aim to address the need to enhance and evolve corporate reporting to include and consider sustainability information. However, current draft standards and initiatives are not technically compatible in terms of concepts, terminologies, and metrics. Therefore, leading financial market participants are asking financial market regulators to avoid regulatory and standard setting fragmentation by aligning on key concepts, terminologies, and metrics on which disclosure requirements are built.

Please click to access the full statement on the IFAC website.

Please click to access the updated alignment dashboard prepared for the September 2022 IPSASB meeting on the IPSASB website.

We agree with the IFRS Interpretations Committee’s decision not to add this item onto its agenda for the reasons set out in the tentative agenda decision. However, we question whether one statement in the tentative agenda decision is consistent with the requirements of IFRS 17.

Please click to download our full comment letter.

Ms Bofinger-Schuster joins the ISSB from Siemens, where she has served as Senior Vice President for sustainability and operational excellence, with responsibility for developing the company’s sustainability strategy and for implementing new disclosure requirements. She has been appointed for a five-year term beginning on 1 December 2022.

Mr Komori served as Senior Director and Head of the Stewardship and ESG Division at the Government Pension Investment Fund in Japan, where he developed the investor engagement and participation in international sustainability initiatives. He has been appointed for a three-year term beginning on 1 September 2022.

Ms Pountcheva joins the ISSB from METRO, where she served as Senior Vice President of corporate responsibility and Co-chief Executive Officer of NX Food, with responsibility for developing the company’s long-term sustainability strategy. She has been appointed for a five-year term beginning on 1 October 2022.

The press release announcing the appointments is available on the IFRS Foundation website.

During the meeting, par­tic­i­pants discussed the following:

• Feedback received on the ISSB’s Exposure Drafts on General Requirements and Climate-Related Disclosures.
• Update on the discussions between the United States, the European Union and the ISSB on achieving greater interoperability.
• Next steps for the working group.

The next meeting will be scheduled in September 2022. For more information, see the meeting summary on the IFRS Foundation website.

The topics covered during the meeting were the following (numbers in brackets are ref­er­ences to the cor­re­spond­ing para­graphs of the summary):

• Goodwill and impairment (1–15): The ASAF members discussed two alternatives related to stakeholders’ concerns on the IASB’s preliminary views in Discussion Paper Business Combinations — Disclosures, Goodwill and Impairment.
• Dynamic Risk Management (16–30): The ASAF members provided views on the recent refinements to the DRM model and whether equity should be eligible for designation in the DRM model.
• Post-implementation Review of IFRS 9 (31–43): The ASAF members were updated on feedback received on its post-implementation review of IFRS 9 (PIR) and provided views on contractual cash flow characteristics of financial assets and diversity in practice within certain jurisdictions related to application issues identified during the PIR.
• Financial Instruments With Characteristics of Equity (44–64): The ASAF members were provided an update on the project and expressed their views on the IASB’s tentative decisions on the classification of financial instruments with contingent settlement provisions and the effect of laws on the contractual terms.
• Disclosure Initiative: Targeted Standards-level Review of Disclosures (65–76): The ASAF members provided their views on possible courses of action for the project and discussed whether to suggest that the IASB proceeds with proposed amendments to IFRS 13 and IAS 19. In addition, they expressed the importance of digital reporting.
• Primary Financial Statements (77–102): The ASAF members were provided with an overview of the proposed topics and timing for targeted outreach; updated on the current status of the redeliberations relating to the disclosure of operating expenses by nature in the notes and seek advice on next steps being explored; and provided feedback on the IASB’s recent discussions on income and expenses with limited recurrence (unusual income and expenses).
• Disclosure Initiative — Subsidiaries Without Public Accountability: Disclosures (103–110): The ASAF members provided feedback on the interaction between local regulations and the IASB’s Exposure Draft Subsidiaries without Public Accountability: Disclosures.
• Second Comprehensive Review of the IFRS for SMEs Accounting Standards (111–115): The ASAF members were provided with an update on the IASB’s Second Comprehensive Review of the IFRS for SMEs Accounting Standard and exposure draft Third Edition of the IFRS for SMEs Accounting Standard.
• Agenda Planning and Feedback From Previous ASAF Meeting (116–118): The ASAF members agreed to discuss proposed topics at its next meeting on 29 September 2022.

A full summary of the meeting is available on the IASB's website.

Deloitte supports consistent reporting of high-quality, relevant, reliable and comparable information that will enable investors and other relevant stakeholders to make decisions that support the transition to a green and inclusive economy. The draft ESRS are comprehensive and generally have the potential to result in relevant information, but we have key concerns that they will create issues for the quality of the information provided, the effective implementation and enforceability of the standards, and consequently will not support the ultimate objective.

We believe that these issues need to be addressed before ESRS are finalised and issued and ask that EFRAG:

• continues to work closely with the International Sustainability Standards Board (ISSB) to drive convergence and achieve a global baseline of sustainability information, taking advantage of the current window of opportunity to align before the respective standards are finalised;
• addresses the overall volume of required disclosures in the proposed package of ESRS and ensures they are practical for companies to implement and relevant to users considering costs and benefits, particularly in the first years; and
• allows for a more reasonable timeline to finalise the standards and adhere to the due process.

Please click to download the full comment letter here.

ESMA highlights its support for a strong materiality assessment but expresses its concern with the suggested ‘rebuttable presumption’ approach. ESMA also encourages EFRAG to keep engaging with the International Sustainability Standards Board (ISSB) to ensure further alignment of the ESRS and the IFRS Sustainability Standards to benefit both users of sustainability reporting and the companies that prepare the reporting. The letter notes:

[W]hile both EFRAG and the ISSB built on the TCFD structure, EFRAG has decided to depart from it and develop a more complex architecture. If this architecture is retained, the reconciliation between ISSB standards and the ESRS will not be seamless which may be to the disadvantage of users and preparers. ESMA encourages EFRAG to undertake the necessary work to minimise the differences in architecture while recognising the fact that the TCFD structure was originally developed for financially material information on climate- related issues and that it may, therefore, need adaptations to reflect the European specificities.

Please click to access the full comment letter on the ESMA website.