ESMA REGULAR USE
The Interim Chair
21 July 2021
Mr Erkki Liikanen Chair of the Trustees IFRS
Foundation Columbus Building 7 Westferry Circus Canary Wharf
London E14 4HD United Kingdom
Ref: Response to Exposure
Draft on Targeted Amendments to the IFRS Foundation Constitution to
accommodate an International Sustainability Standards Board to set
IFRS Sustainability Standards
Dear Mr Liikanen, dear Erkki,
The European Securities and Markets Authority (ESMA) thanks
you for the opportunity to provide input on the IFRS Foundation’s
consultation on Targeted Amendments to the IFRS Foundation
Constitution to accommodate an International Sustainability Standards
Board (ISSB) to set IFRS Sustainability Standards.
pleased to provide our views on this consultation in light of ESMA’s
mandate to consider sustainable business models and the integration
of ESG factors across the multiple areas of sectorial legislation
that fall within our remit with the objective of promoting high-
quality, comparable and reliable sustainability reporting.
we indicated in our December 2020 response to the Foundation’s
Consultation Paper on Sustainability Reporting, ESMA welcomes the
initiative of the IFRS Foundation to consider establishing an ISSB to
develop high-quality standards building on the best practices arising
from the existing reporting frameworks and standards.
generally support the direction of the proposed amendments to the
Constitution to give effect to the establishment of the new Board.
Please note below a few considerations for further improvement of
Firstly, we suggest that the IFRS Foundation
establishes a roadmap to move from the constitutional arrangements
that are applicable to the inception phase of the new Board, to those
that will be effective once this initial phase has been successfully
completed. In that respect, we would expect that the proposed ability
of the ISSB to comprise an unspecified ‘minority’ of part-time board
members to be time-limited (for example, no later than two years
after the inception of the new Board or in any case as soon as it is
practicable to ensure
ESMA • 201-203 rue de Bercy • CS 80910
• 75589 Paris Cedex 12 • France • Tel. +33 (0) 1 58 36 43 21 • www.
esma. europa. eu
ESMA REGULAR USE
this period, the ISSB would have the same maximum number of part- time
board members as for the IASB (currently, maximum three members). This
would grant the ISSB the necessary flexibility in its first years of
operation, while ensuring that in due time the same governance rules
apply to both the ISSB and the IASB. Similarly, we understand that in
the initial phase of the establishment of the new Board, its Chair and
Vice-Chair will have a more proactive role in initiating the workplan
of the ISSB and launching a public consultation.
transitory nature of these assignments, it can be considered to
include all provisions relating to the inception of the ISSB in a
separate sub-section of the Constitution. These transitional
provisions could also include the composition of the Board with the
proposed initial larger number of part-time members in the first
years of operation, as suggested earlier. The roadmap could envisage
the timely establishment of an interpretations committee on matters
relating to the application of the sustainability reporting standards
after a certain period following the publication of the first
Secondly, the proposed rules of procedure
for the publication of an Exposure Draft by the ISSB differ from
those that are applicable to the IASB. It would be important to
maintain alignment with the well-tested due process adopted by the
IASB unless there are specific reasons for diverging from it.
Following the same due process will afford the new Sustainability
Standards the same legitimacy as the IFRS.
Thirdly, we have
considered the matters on which no substantive amendments are
proposed, most notably in relation to the role of the Monitoring
Board and the creation of a multi- stakeholder expert consultative
committee. ESMA concurs with the Trustees’ assessment that the
Monitoring Board will have the appropriate expertise given its
existing members extending their work to ESG-related matters and that
the continued focus of the IFRS Foundation on investors’ needs
confirms the relevance of the current composition of the Monitoring
ESMA emphasises the importance for the IFRS Foundation
to establish the multi-stakeholder expert consultative committee as
soon as possible as this would permit it to contribute to setting up
the initial workplan of the new Board from an early stage and promote
interoperability with regional standard setting initiatives as soon
as possible. In this respect, we note that the European Commission
proposal on the Corporate Sustainability Reporting Directive (CSRD)
issued on 21 April sets a higher level of ambition for sustainability
reporting standards with a double materiality reporting perspective.
Furthermore, ESMA supports the efforts already envisaged by
the Trustees to secure proper funding to the ISSB while preserving
its independence and it emphasises the importance of ensuring
continuous interaction between the EU initiatives for standardisation
of sustainability reporting and the future work of the ISSB.
Finally, ESMA suggests revisiting the current proposal for the
naming convention of the future sustainability standards which
currently are referred to as ‘IFRS Sustainability Standards’. The
‘IFRS’ acronym in fact refers to ‘financial reporting’ and, as such,
it may be misleading when used in relation to international
sustainability reporting standards.
ESMA REGULAR USE
In case you have any questions on these comments, please do
not hesitate to contact me or Evert Issuers Department (Evert.
[email protected] europa. eu).
van Walsum, Head Investors and
the of Yours sincerely, Anneli Tuominen 3
Disclaimer: RegRadar is not endorsed nor affiliated with the source authority. This material does not constitute any advice. This material is machine translated and does not constitute an official translation by the source authority. Please note that the information can be obtained free of charge through the source website.