“A global baseline needs a global effort”—Insights from the Korean Stakeholders Dinner with the IFRS Foundation

On 25–27 October 2022, the Trustees of the IFRS Foundation gathered in Seoul, South Korea, for their quarterly meeting to discuss the ongoing strategy of the IFRS Foundation.

The meeting concluded with a dinner hosted by the Korea Accounting Institute and the IFRS Foundation and sponsored by the Financial Services Commission of South Korea. Stakeholders from the South Korean government, and from organisations including the International Federation of Accountants (IFAC), KPMG Korea and the Korean Accounting Association, attended the event alongside Erkki Liikanen (Chair, IFRS Foundation Trustees), Andreas Barckow (Chair, International Accounting Standards Board) and Emmanuel Faber (Chair, International Sustainability Standards Board (ISSB)).

Su-Keun Kwak, an IFRS Foundation Trustee from South Korea, opened proceedings with by introducing IFRS Sustainability Disclosure Standards and why they are needed.

A feature of the event was a panel discussion on the theme: ‘A Year after Glasgow, and the Future—Global Adoption of the IFRS Sustainability Disclosure Standards’. Moderator Teresa Ko (Vice-Chair, IFRS Foundation Trustees) was joined by expert panellists including Jean-Paul Servais (Chair, IFRS Foundation Monitoring Board and Chair, International Organization of Securities Commissions (IOSCO)), Jeong-Kag Kim (Standing Commissioner, Financial Services Commission, South Korea), Takashi Nagaoka (Deputy Commissioner, Financial Services Agency, Japan) and Wang Dong (Deputy Director-General, Ministry of Finance, China).

Ms Ko posed two questions to the panel. The first question was about how each panellist’s jurisdiction reacted to the establishment of the ISSB and the adoption of the Standards. The second question was about the most significant challenges in adopting the Standards in their respective jurisdictions and suggestions on how to overcome these challenges. Though the panellists universally welcomed the ISSB, they raised concerns about adopting the Standards in developing and emerging countries. The panellists agreed, however, that including sufficient transition arrangements for implementing the Standards would enhance the operability of the Standards across the world.

Erkki Liikanen gave the welcome address and reflected on the significant milestones the IFRS Foundation has reached in establishing the ISSB, including the publication of the draft Standards. He also reflected on how much he had learned in Seoul when meeting business leaders and preparers of sustainability reports from South Korea.

Jean-Paul Servais delivered the keynote speech in which he prefaced the panel discussion by providing commentary on the global adoption of the ISSB Standards. In his capacity as the new Chair of IOSCO, Mr Servais spoke of the pathway to potential IOSCO endorsement of the finalised Standards and added that assessment would begin as soon as the first two final Standards were issued.

Mr Servais discussed the importance of the final ISSB Standards' global inclusivity, delivered through jurisdictional outreach and effective stakeholder engagement, for ensuring worldwide adoption of the Standards. He also stressed that capacity building would be essential for helping jurisdictions and entities become familiar with the substance of the Standards. Mr Servais suggested that sharing information about current initiatives by regulators with plans to implement sustainability standards could be useful in capacity building. He applauded the IFRS Foundation’s strategies to support and include stakeholders from developing economies and smaller entities. He also noted the increasing receptiveness of jurisdictions to adopting sustainability standards.

Mr Servais reiterated that, to achieve global inclusivity, the Standards would need to provide an effective global baseline of sustainability disclosures for capital markets. He spoke positively of the IFRS Foundation’s work to address global entities’ diverse levels of ability and preparedness to implement the final Standards. He noted that non-mandatory implementation guidelines would result in more consistent disclosures for entities over time and would help to avoid greenwashing.

Mr Servais stressed that jurisdictions do not need to implement the Standards at the same speed but should focus on progressing towards implementation and embracing implementation as a positive challenge.

Insights from panellists

Teresa Ko, Vice-Chair, IFRS Foundation Trustees, said:

A global baseline needs a global effort from everyone. At this juncture I don’t think anyone can emphasise more how IFRS S1 and IFRS S2 will be critical to bring about global comparability, global consistency and further transparency on the financial impact of climate change to investors and capital market participants. This is all necessary to help the world transition to net zero and most importantly to reduce greenwashing.

Jeong-Kag Kim, Standing Commissioner, Financial Services Commission, South Korea, said:

One of the prominent features of the current capital market is that investors are asking for more information for investment decision-making. In addition to financial information, they are calling for reliable, comparable, and high-quality sustainability-related information (non-financial indicators).
[…] In this respect, I believe the recent establishment of the ISSB within the IFRS Foundation and the attempt to establish a global baseline for sustainability disclosure standards are truly meaningful. However, it is necessary to discuss in-depth ways to establish comparable and transparent disclosure standards without giving rise to unnecessary burdens to companies, considering the overall circumstances and capacity in each jurisdiction.

Takashi Nagaoka, Deputy Commissioner, Financial Services Agency, Japan, said:

As a member of the G7 and G20, Japan truly welcomes the establishment of the ISSB. It is quite natural, as we have been consistently a strong advocate and supporter for having a baseline for sustainability standards.
The ISSB carries an important role in the environment where the importance of sustainability information both for investor decisions and business management around the world is rapidly increasing. It is essential to have something of an anchor to ensure consistency, comparability and transparency across borders. And that is what is entrusted to the ISSB to deliver.

Wang Dong, Director-General, Ministry of Finance, China, said:

The establishment of the ISSB and the development of international sustainability disclosure standards have shaped the pattern of sustainable information disclosure and have far-reaching impacts on global sustainable development.

Jean-Paul Servais, Chair, IFRS Foundation Monitoring Board and Chair, IOSCO, said:

Given the global demand on the part of market participants and investors, there is a momentum to achieve high quality standards. I would welcome that both the sustainability related disclosure standards and related assurance standards be ready for use by corporates for their end of 2024 accounts.
 

Chair of the IFRS Foundation Trustees Erkki Liikanen.

From left to right: Su-Keun Kwak (IFRS Foundation Trustee), Seung-Weon Yoo (President, Korean Accounting Association), Nili Shah (IASB Executive Technical Director), Jong Dae Kim (Professor, Inha University), Woung Hee Lee (Head of Sustainability Reporting Center, KAI), Hyo Ik Lee (Professor, Sungkyunkwan University), Larry Leva (IFRS Foundation Trustee), Kyo-tae Kim (CEO, KPMG Samjong).

Emmanuel Faber (ISSB Chair) with Jong Dae Kim (Professor, Inha University).

Janine Guillot (Special Adviser to the Chair of the ISSB) with Dong Seok Lee (Partner, KPMG Samjung).

From left to right: Chungwoo Suh (Professor, Kookmin University), Andreas Barckow (Chair, IASB), Byungrhae Lee (Vice President, KICPA), Kwangil Kim (Director, Financial Services Commission), Jeong-Kag Kim (Standing Commissioner, Financial Services Commission), Suk Sig Lim (Emeritus Professor, University of Seoul), Sue Lloyd (Vice-Chair, ISSB), Myung Soo Kang (Chairman and CEO, Korean Standards Association).