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Erkki Liikanen, Chair of the IFRS Foundation Trustees, delivered a keynote speech at CFA Institute’s Global Financial Regulatory Symposium on 29 June 2021. He talked about the Foundation’s work to meet the information needs of investors and other capital market participants by creating a proposed new board that would develop a global baseline of sustainability-related disclosures focused on enterprise value.


It is a pleasure to be with you today. We both serve investors—you, as the voice of Chartered Financial Analysts around the world, and the IFRS Foundation, responsible for high-quality, global standards that help investors make informed investment decisions.

Today, we are here to talk about sustainability standards, in particular to ask whether there is a path to global standards. Answering this question has occupied much of our time as Trustees of the IFRS Foundation.

Sustainability reporting is a very broad discipline, ranging from jurisdictional requirements for companies to report against specific public policy objectives to investors’ need for global comparability of sustainability-related financial disclosures.

These all are important. The focus of IFRS is to meet the information needs of investors. There is a path to global sustainability standards if we, on the one hand, can create a global baseline of sustainability-related disclosures to facilitate comparability for investment decision making and, on the other, work with jurisdictions to ensure compatibility between this global baseline and their own initiatives.

The global baseline approach has been welcomed and has received broad support from the G7 Finance Ministers, from global regulators in the form of IOSCO, from investors and corporates around the world, and from other standard-setting organisations. That said, there remains much work ahead of us.

Coordinated action

Climate change and sustainability matters are global challenges. They pose particular difficulties for our societies because of different incentives between individuals and society at large. Reversing this dilemma requires global cooperation. One famous effort was the Kyoto Protocol in 1997. The last global accord was the Paris Agreement signed in 2015. The US rejoined the Agreement in February. Now, the world is preparing for the November COP26 meeting in Glasgow. 

With climate issues, this dilemma is further complicated by what Mark Carney refers to as the tragedy of the horizon―where actions required today have a payback well beyond the normal time horizon. In his recent book, he defines three pillars for the solution: 1) public policies, 2) company transition plans and 3) disclosures of climate-related risks and opportunities.

Achieving goals set out by successive climate summits will require coordinated action by multiple actors, where each one has a distinct role to play. 

Governments are required to establish clear policy frameworks. Investors price investment capital based on how those policies will impact companies in the long term. This in turn provides companies with an incentive to embrace sustainable business models. The efficiency of this supply chain is dependent on high-quality, globally comparable information on which investors can assess sustainability risks and make informed decisions. This is the role of investor-focused international standard-setters such as the IFRS Foundation. The role is to enable the achievement of policy objectives determined by jurisdictions and international agreements by developing standards that bring consistency and transparency for the global capital markets.

This separation of roles and responsibilities is made clear in the book by Nobel Laureate Jean Tirole, who emphasises that economics is a science of means, not of aims. Common objectives of society largely rely on values. Governments determine the objectives. Economics and the market in turn can provide means to meet the objectives at the lowest possible cost. Tirole continues that the market is an instrument, not an aim itself. Similarly, disclosure standards do not set the policy objectives, but they can be a valuable instrument to support the delivery of those policy objectives.

Demand-driven consultation

There is a broad interest in ESG, and ESG-related investments have grown substantially.

However, research also shows that capital flows to sustainable investments are impeded by poor data quality. The data lacks rigour and cannot easily be compared. Many initiatives attempt to improve comparability, but their numbers have led to greater diversity.

When sustainability reporting can be asked to promote broad public policy objectives, the responsibility belongs to elected bodies and institutions and rightfully so.

An additional question has been raised: whether global standards would be needed in the more limited task of providing sustainability-related disclosure for investors. This question was often put in front of the IFRS Foundation due to its experience in financial reporting. IFRS standards are required for use by more than 140 countries. 

When the IFRS Foundation and International Accounting Standards Board were founded with IOSCO’s strong support 20 years ago, financial reporting and climate change did not meet. Now, in 2021, it has all changed.

To prepare our reply to the questions raised, the Trustees started a strategy review, where the focus was on sustainability reporting. The first two questions of the consultation paper in September 2020 were: is there demand for global standards? If so, should the IFRS Foundation play a role in developing such standards?

We made it very clear that this is a demand-driven exercise. We are ready to serve only if needed.

We received a great number of comment letters to the consultation. They are all on our website. Overwhelmingly, responses to our initial consultation show a growing and urgent demand for a single set of global sustainability-related disclosure standards. A great number of commentators also wrote that the IFRS Foundation should play a role in developing these standards.

Reconciling jurisdictional and international requirements

After the consultation, the IFRS Foundation reiterated that is does not play a role in determining sustainability reporting requirements required for broader public policy objectives.

At a jurisdictional level, public policy determines sustainability-related priorities, and they drive what information companies within each jurisdiction are required to report. For example, the EU’s proposed Corporate Sustainability Reporting Directive is a key element of the EU’s Green Deal policy framework. It seems likely that different jurisdictions—the United States and in Asia―will each establish different policy approaches, and therefore their sustainability reporting requirements will also be different.

Internationally, there are multi-stakeholder standards, with the GRI Standards being the most well-known voluntary standard, and various sustainability initiatives focused on investors and the capital markets. These investor-focused initiatives include the work of the Task Force on Climate-related Financial Disclosures, the Value Reporting Foundation (incorporating the SASB and the IIRC), and the Climate Disclosure Board.

The organisations behind these initiatives affirm that consolidation is required. They have welcomed the IFRS Foundation's proposals to establish a new International Sustainability Standards Board within the governance structure of the IFRS Foundation. They are also involved in the preparations.  

Our shared ambition is to introduce a global baseline of standards for sustainability-related disclosures which are focused on meeting the information needs of investors globally when assessing enterprise value. Enterprise value is a key concept, designed to capture expected value creation for investors in the short, medium and long term, and is interdependent with value creation for society and the environment. 

For example, the global baseline might describe how companies should disclose the impact of climate-related risks and opportunities, and, for each identified risk and opportunity, the impact on its financial performance. This could include capital allocation plans, supply chain innovation or investments in technology or new business areas. 

The new board would begin with climate. Its work would be expected to move with pace to consider other sustainability-related issues important for enterprise value.

This investor focus on enterprise value is where the IFRS Foundation can contribute most. While the proposed board would work on sustainability-related disclosure standards, its work would be complementary to the work of the IASB. Sustainability-related factors are already connected in the financial statements. Investors are interested in information about sustainability irrespective of its location within the financial statements or in broader reporting. 

Our approach to global standards is market and demand led. The Foundation provides a setting where investors, regulators, companies, academics and standard-setters from around the world can work and problem solve together. 

This work follows a transparent and inclusive due process that is used as a benchmark for other standard-setting organisations. The process is overseen by the Trustees, who are in turn accountable to a Monitoring Board of public authorities. Its membership includes IOSCO, the European Commission, the US Securities and Exchange Commission and others. 

The Monitoring Board fulfils a key role in our governance arrangements, as it provides important linkage to many of the key public authorities around the world. Moreover, whilst the Foundation is responsible for the production of IFRS Standards, individual jurisdictions retain the right to choose whether and how to incorporate the new standard into their own requirements.

These governance arrangements have evolved over time. The trustees are currently consulting on further amendments to the governance and constitutional arrangements to accommodate the new board. We welcome feedback and suggestions for further enhancements. The comment period is open until 29 July 2021.

If the future is jurisdictional and international standards, the key question is how this can be reconciled.

The approach advocated by IOSCO and others is to establish a global baseline of sustainability-related disclosure standards to meet investor needs, which would be made available for use by jurisdictions as a base for public policy needs. We've established a working group to map out how this could work in practice. 


This approach would provide global comparability for investors in a way that allows jurisdictions to combine the global standards with their own additional requirements.

To make this work will require political will, compromise and flexibility from all parties—including the IFRS Foundation. Success is by no means certain, but if you want global sustainability-related disclosures for investors, this offers a path.

Followable tags

IFRS Sustainability Standards development
IFRS Foundation strategy and governance