Starting next year, the International Sustainability Standards Board (ISSB) of the IFRS Foundation will assume the responsibility of monitoring companies’ climate-related disclosures, taking over from the Financial Stability Board’s (FSB) Task Force on Climate-related Financial Disclosures (TCFD). This transfer of responsibilities reflects the ongoing consolidation of sustainability reporting standards, following the recent release of global standards for sustainability and climate reporting by the ISSB.
The TCFD, established by the FSB in 2015, aimed to develop consistent disclosure standards for companies, enabling stakeholders to assess their climate-related financial risk. The TCFD recommendations, published in June 2017, have been widely adopted as the industry standard for climate-related disclosure and were incorporated into the ISSB’s climate-related disclosure standard.
Launched at the COP26 climate conference in November 2021, the ISSB’s objective is to develop IFRS Sustainability Disclosure Standards, driven by the demand from investors, companies, governments, and regulators for globally recognized disclosure requirements that provide a consistent understanding of sustainability risks and opportunities.
During its recent plenary meeting, the FSB acknowledged the ISSB’s new standards as the culmination of the TCFD’s work. They expressed gratitude to the TCFD for its significant contribution to improving climate-related financial disclosures worldwide and requested the ISSB to take over the monitoring and reporting of progress in companies’ climate-related disclosures after the TCFD delivers its 2023 annual status report.
Commenting, ISSB Chair Emmanuel Faber said:
The TCFD has been a trailblazer in raising the practice and quality of climate-related disclosures, providing much-needed information to investors about climate-related risks and opportunities.
The ISSB has built from and consolidated the market-leading investor-focused sustainability-reporting initiatives to deliver the ISSB Standards, with the TCFD recommendations at the heart of this. As such, the ISSB welcomes the FSB’s request to transfer the TCFD’s monitoring responsibilities to the ISSB from 2024 and the opportunity to build on TCFD’s legacy. This announcement provides yet further clarification of the so-called ‘alphabet soup’ of ESG initiatives for companies and investors.