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Erkki Liikanen, Chair of the IFRS Foundation Trustees, delivered his speech at the IFRS Foundation Trustees' stakeholder dinner in Madrid, Spain on 28 February 2024.

Introduction

It is a pleasure to be here in Madrid. Thank you to the Comisión Nacional del Mercado de Valores, or CNMV, for helping organise this event—and to IOSCO and the IFRS Foundation’s Monitoring Board for your continued support.

My name is Erkki Liikanen, and I serve as Chairman of the IFRS Foundation Trustees. The 22 Trustees are senior figures from around the world who bring expertise to the Foundation in key disciplines. Together, we are responsible for the governance, strategy, funding and oversight of our standard-setting boards. We ourselves are publicly accountable to a Monitoring Board of public authorities—many of whom are here with us this evening. The Trustees meet in person three times a year, and this week we are meeting here in Madrid. It is an honour to be with you this evening in this beautiful city.

The IASB story

The story of the Foundation is remarkable.

In the latter part of the 20th century, capital markets became globally interconnected. Investment flowed across borders, and multinational companies established operations and subsidiaries around the world. However, the global financial system was unable to cope. Most countries had their own accounting requirements—an international alphabet soup of standards that made it difficult to compare the financial performance of a Spanish company with that of its competitors in another country. 

Market regulators, led by IOSCO, decided to act—and in 2000 they endorsed a new set of international accounting standards for use around the world—IFRS Standards. The IFRS Foundation was born under the stewardship of the legendary US central banker Paul Volcker, who served as our first Chair of the Trustees. Within the Foundation, the International Accounting Standards Board (IASB) became responsible for developing and maintaining these global accounting standards.

Fast-forward 20 years and we now have more than 140 countries all speaking the same financial language with the remaining countries such as the United States are highly fluent in our Standards. In a world characterised by protectionism and geopolitical tension, the global collaboration enabled by the IFRS Foundation is remarkable. All geographies—Africa, Asia, Europe, the Americas are all represented and all decision-making is fully transparent—all meetings are held in public, with all board papers posted online. 

The ISSB story

The benefits of global accounting standards are now largely taken for granted. However, the information needs of investors have continued to evolve. Today, the focus is on climate and broader sustainability factors. Similar to 20 years ago, the market lacked widely accepted capital market standards—with an alphabet soup of voluntary sustainability reporting initiatives in its place.

Given the success of IFRS Standards, many asked the IFRS Foundation to step in. Encouraged by the G20, the Financial Stability Board, IOSCO and our own Monitoring Board, we organised a global consultation which started by two questions: 1. Do we need global sustainability standards? and 2. Should the IFRS Foundation play a role?

The response to both questions was an overwhelming yes. So, we started to work, on the basis of this strong demand.  

At the 2021 UN Climate Change Conference in Glasgow (COP26) in Glasgow, we announced the creation of the International Sustainability Standards Board (ISSB), a new board within the IFRS Foundation to develop global capital market standards for sustainability disclosures. We also announced that we would consolidate the Value Reporting Foundation, home of the SASB Standards and Integrated Reporting Framework, and the Climate Disclosure Standards Board into the Foundation, and we published prototype standards. We also announced that Frankfurt will become the home of the ISSB and the office of its Chair, with further key functions located in Montreal, Beijing and Tokyo.

Progress since then has been rapid. In June 2023, the ISSB published its inaugural Sustainability Disclosure Standards—a general sustainability disclosure Standard, and a climate Standard. Our history repeated itself when IOSCO endorsed these Standards in July last year. Many jurisdictions around the world have taken action to incorporate the ISSB’s global baseline into their local requirements.

Further consolidation of the sustainability disclosure landscape continues at pace. The Foundation is now responsible for monitoring of the TCFD recommendations which are embedded within the ISSB’s Standards. 

The ISSB has worked with EFRAG, the European Commission and others to achieve a high degree of alignment with European standards. We also work closely with the Global Reporting Initiative.

The ISSB has consulted on its work plan and will announce its future priorities in the first half of this year. We are also working with partners to roll out a global capacity-building programme, including supporting developing and emerging economies so they are able to adopt the ISSB Standards. We will seek to advance jurisdictions’ adoption by working with public authorities at an international and jurisdiction level—including with colleagues at both the FSB and IOSCO, as well as supporting companies that choose to adopt the Standards. 

When we took the responsibility for sustainability disclosure standards, we defined some success factors. We have achieved global support and worked intensively in cooperation with jurisdictions. Synergies with financial reporting are permanently on the agenda.

Meanwhile, the IASB will shortly issue an overhaul of Primary Financial Statements—with a focus on the statement of profit or loss and the notes—which for decades have served as the cornerstones of investment decision-making.  The new requirements will be published in 2024 and will be the first major new IFRS Accounting Standard since 2017. 

For the Trustees, we will continue to consider the strategic direction around corporate reporting by both boards.   

None of this work would be possible without a well-resourced organisation—another key Trustee responsibility. To support this growth and development, the financing of the Foundation will continue to be a priority for the Trustees. Your support in this work is greatly appreciated.