While global policymakers scramble to craft sustainability reporting standards, securities regulators are calling for high-quality oversight of those kinds of disclosures.
In a new report, the International Organization of Securities Commissions (IOSCO) indicated that other international standards setters — namely, the International Auditing and Assurance Standards Board (IAASB) and the International Ethics Standards Board for Accountants (IESBA) — are working to develop oversight and ethics standards for sustainability-related reporting, which investors are demanding.
As it stands, assurance over sustainability-related information primarily relies on voluntary measures.
For instance, some issuers voluntarily seek independent assurance over certain information, such as greenhouse gas emissions, or reporting made in compliance with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD).
However, these practices “vary widely,” IOSCO said, and it indicated that there’s a need for greater consistency in this work.
“Investors emphasized the importance of globally consistent and comparable assurance and ethics (including independence) standards,” it noted.
The report followed IOSCO’s two public roundtables on the topic, along with its additional fact-finding efforts and consultations.
Both the IAASB and the IESBA are planning to issue draft assurance standards in the second half of 2023, IOSCO said, noting that this should enable adoption of these standards for reporting by the end of 2024.
In the meantime, the group called for “continued strong system-wide engagement” on the development of the standards.
It also encouraged enhanced “connectivity between sustainability-related information and the financial statements and ensuring that the global assurance framework promotes a high degree of transparency.”
IOSCO also called on issuers and assurance providers (including both traditional audit firms and others, such as climate consultants) to build their capacity to deliver sustainability-related reporting.
“The global community is looking for timely actions to put in place standards for independent assurance of sustainability-related disclosures,” IOSCO chairman Jean-Paul Servais said in a release.
“Momentum has been building for decisive actions. We are pleased that the IAASB and the IESBA intend to have their framework ready for end-2024 disclosures and encourage them to deliver on this timeline,” he added.
Earlier this year, the International Sustainability Standards Board (ISSB) said that it intends to release its final reporting standards by the middle of this year, with the expectation that they will be adopted in 2024.
“The finalization of these [assurance] standards will be an important milestone. But the standards can only deliver on their promise if they are applicable for all assurance providers, irrespective of their profession, and subject to established robust due processes ensuring the development of high-quality standards,” said Rodrigo Buenaventura, chair of IOSCO’s sustainable finance task force, in a release.
“We call on issuers, assurance providers and others across the sustainability reporting ecosystem to engage as early as possible with the standards setters’ initiatives to ensure there is a robust process and that they are ready to apply the final standards soon after they are available, including on a voluntary basis,” Buenaventura added.