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Mr Hoogervorst also notes that financial reporting and the work of the IASB will need to evolve, to ensure that IFRS Standards continue to meet the needs of market participants.
A number of organisations, notably the Sustainability Accounting Standards Board and the Climate Disclosure Standards Board, develop their standards specifically to address investors’ needs. Due to growing investor sensitivity around social responsibility and environmental sustainability, these issues have a growing impact on the future profitability and valuation of a company. To the extent that this is the case, management commentary or an integrated report should take these factors into account. This is something the IASB could take on board in updating its MCPS.
The IASB is a member of the Corporate Reporting Dialogue (CRD), which seeks to improve cooperation and harmonisation between its members. A concrete and very promising initiative of the CRD is a project to align the climate-related metrics of its member organisations: CDP, the Sustainability Accounting Standards Board (SASB), the Global Reporting Initiative (GRI) and the Climate Disclosure Standards Board (CDSB).
Nevertheless, Mr Hoogervorst does not think the IASB is equipped to enter the field of sustainability reporting directly. The IASB´s focus on financial reporting for capital market participants is deeply embedded in its DNA. Moreover, the IASB´s main area of competence is economics. ESG reporting to wider stakeholder groups requires expertise that the IASB simply does not have.
If not primarily the IASB, who then should take responsibility for harmonisation of ESG requirements and try to prevent overload?
Since so much of ESG reporting is closely intertwined with public policy goals, Mr Hoogervorst believes that public authorities would be best equipped to pursue harmonisation. It took bold action by the EU to make IFRS into an international standard; given the even bigger political sensitivity of sustainability reporting, determined political action in this field is even more important.