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SASB Standards Board prepares for transition to ISSB

The Sustainability Accounting Standards Board held its final public meeting Wednesday ahead of the consolidation of its parent organization, the Value Reporting Foundation, into the International Sustainability Standards Board by the end of June.

During the meeting, members of the SASB Standards Board discussed the remaining projects on their agenda and the recommendations they will be passing on to the ISSB, and they also met with some members of the ISSB and SASB’s original board members. The ISSB was established last November by the International Financial Reporting Standards Foundation in response to calls from financial regulators to align the sometimes competing sets of standards from SASB and other standard-setters in the environmental, social and governance space as the ESG funds grow in popularity with investors who may fall prey to exaggerated claims by companies.

At the time, the ISSB announced that the Value Reporting Foundation, which had already merged together SASB and the International Integrated Reporting Council last year, would be consolidated into the ISSB along with the Climate Disclosure Standards Board by the end of June.

The ISSB plans to leverage the work of the SASB Standards Board and the IIRC as it works to develop future standards, starting with recently issued exposure drafts on climate and sustainability disclosures. 

“What else can we do but just take the work you shared and carry it judiciously forward as the living legacy that you’re leaving us with,” said ISSB chair Emmanuel Faber. “It is with a huge sense of gratefulness that I’ve gotten to know each of you over the past six months. With my partner and special advisor, I’ve been discovering the whole community and the people behind the scenes, the names and governance structures, and my IFRS Foundation colleagues here. The mainstream is going to be what you have built.”

During the meeting, the SASB Standards Board discussed the changes in its recent projects that it is recommending to the ISSB to consider (see story). Those include projects on content governance in the internet media and services industry, plastics risks and opportunities in the chemicals industry, and alternative products in the food and beverage sector. For its part, the IFRS Foundation recently clarified its plans for how the ISSB will be making use of SASB standards, as well as the integrated reporting framework and integrated thinking principles that the ISSB will be inheriting from the IIRC (see story).

“This was the last meeting of the SASB Standards Board,” said SASB Standards Board chair Jeffrey Hales during a press conference following the meeting. “There are a few more meetings to finalize the logistics and the decision making around the to make official the consolidation of the Value Reporting Foundation into the ISSB and the IFRS Foundation to help support the formation of the ISSB. As that’s been happening, we’ve been working with the ISSB and have tried as much as we can to create the groundwork for transitioning the work that we are currently engaged in as seamless away as possible for the ISSB to be able to continue on with that work and to really take the SASB standards and help to incorporate them into the future work of the ISSB and to help achieve the mission of providing decision useful information on sustainability-related financial information to the capital markets.”

SASB Chair Jeffrey Hales (center) at the opening bell of the London Stock Exchange

He noted that the ISSB has already incorporated SASB standards into the requirements for the climate disclosure prototype it issued, as well as the proposed general requirements standard that the ISSB put out as well. 

“We’ve seen some clarity around the plan of the ISSB to continue to use the industry-based approach that the SASB Standards Board has been using, and also to continue to work on the projects that are already ongoing,” said Hales. “In a number of ways, we’re very excited about seeing the ISSB positioned to continue and really evolve and enhance the work that we’ve already been doing with sustainability standards.”

The SASB Standards Board also plans to transition its outside advisory groups to the ISSB and the IFRS Foundation. The ISSB may also take up the ongoing projects that the SASB Standards Board has been working to complete.

“They’ve signaled that they plan to continue those efforts,” said Hales. “What we were trying to do in publishing the recommended changes was find the best way to summarize what is far along as we were able to get to this point in time with our due process. Now, of course, what that exactly looks like going forward will be subject to their due process and agenda prioritization. They’re getting to the point where they’re preparing to do outreach on agenda prioritization and think about how they would manage and prioritize projects going forward. But they have clearly signaled that they plan to take those projects and incorporate that work into their workstreams.”

Value Reporting Foundation CEO Janine Guillot, who was formerly CEO of SASB, will be starting a role as a special advisor to ISSB chair Emmanuel Faber for two years to help with the transition of the Value Reporting Foundation into the work of the IFRS Foundation and the IASB.

Verity Chegar, co-vice chair of the SASB Standards Board, was also named last week to a role as a board member on the ISSB. Three other new board members were also appointed: Richard Barker of Oxford University, who chairs the expert panel of Accounting for Sustainability, a project long championed by Prince Charles; Bing Leng, a director in the Accounting Regulatory Department of the Chinese Ministry of Finance, and Ndidi Nnoli-Edozien, who was group chief sustainability and governance officer of Dangote Industries, one of Africa’s largest manufacturing businesses, based in Nigeria.

One of the first priorities for the ISSB after taking in feedback on the exposure drafts for the climate and sustainability standards will be doing an agenda consultation to solicit advice on which other projects should be prioritized. The G-7 finance ministers and central bankers recently recommended the ISSB work on other social and nature-related issues (see story).

In the U.S. the Securities and Exchange Commission has also asked for feedback on its climate disclosure rule, and the comment period is closing on Friday after being extended. The European Commission has been developing with its own requirements as well.

“One of the exciting things is to see some of the commonalities among the different proposals that are out right now,” said Hales. “We’ve been quite vocal over the years that we see the work of the Taskforce on Climate-related Financial Disclosures, the TCFD, being very important and complementary to the industry-specific work that we’ve been doing on disclosures related to climate issues. When I see the major initiatives that are out there, the SEC rule, which while not specifically referencing the TCFD in a formal way, does acknowledge that the principles are related to the work of the TCFD. The work that we see from the European Union is also incorporating the similar elements of the TCFD and and we saw with the ISSB’s proposed standard on climate, it builds quite directly off of the work that had been done previously as part of the Group of Five,” he added, referring to a group of standard-setters that committed last year to harmonizing their ESG frameworks: the Sustainability Accounting Standards Board, the International Integrated Reporting Council, the Climate Disclosure Standards Board, the Global Reporting Initiative and the Carbon Disclosure Project.

“We continue to see an opportunity for the industry-specific components and SASB standards to be relevant to the pillars that relate to governance, strategy, risk management and metrics that are to one degree or another built into all of these other major initiatives, with the ISSB climate standards specifically required as part of that proposal as well,” said Hales.

He hopes to see such standards widely applied in the future. “We’ve known for a long time that the standards need to be usable by companies around the world because companies can operate in any jurisdiction,” said Hales. “Sustainability issues don’t tend to stop at borders and investors form global portfolios. We’ve been working on that even since we went through the process of codification a few years ago. It’s been an ongoing effort. As we think about what the opportunities would be for the ISSB to enhance and evolve the SASB standards going forward, I think internationalization will be a key part of that, having a board that is globally representative. By working with jurisdictions around the world, that will bring new opportunities to get insight and feedback into the whole usefulness of the standards. That’s a big part of where some opportunities going forward would be. The extent to which there’s this engagement with jurisdictions around the world, with markets around the world, to continue this process of incorporating standards into different markets around the world that will that increased usage is just another opportunity for us to really understand where there are frictions and challenges, and where there are real opportunities to improve the standards. That will be really helpful for the ISSB to think about where the key opportunities are for them to enhance the standards as they incorporate them into their own work and directly take them to the extent that’s appropriate.”