The schedule for the new organization for sustainability ISSB is set

The schedule for the project is already in place: “The ISSB will be operational in the first quarter of next year,” announced the former Finnish finance minister and ex-central banker Erkki Liikanen in an interview with the Handelsblatt.

The next step will be the appointment of the ISSB chairman and his deputy. Liikanen expects the decision on the top positions around the turn of the year. As soon as the two top personalities have been determined, the board of directors will be filled with up to 14 people. The majority of the members will work full-time for the new organization according to the plan.

Liikanen heads the IFRS Foundation, under whose roof the ISSB is located. The organization is to develop internationally recognized standards for how companies report on sustainability. It is not about traditional financial indicators such as sales and profit, but about ethical criteria such as the environment, society and transparent management, abbreviated internationally as ESG.

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The IFRS Foundation is best known for setting internationally binding accounting standards and is financed by large companies, the financial sector and the auditing industry.

For banks, sustainability is seen as an opportunity for growth

Sustainable investments are seen as a global growth business. Supervisors and politicians have discovered the financial markets as a central control element for combating climate change, at the same time banks and asset managers have identified the ESG trend as a lucrative business area.

This mixing of business interests and social engagement has recently caught critics who accuse the industry of using sustainability only as a cover to maximize its profits. One reason for the criticism: there is no uniform definition of what exactly is “sustainable”. There is a lack of globally applicable criteria, for example for so-called green investments. The ISSB is intended to help fill this gap.

Liikanen is convinced that the capital markets can make a significant contribution to the fight against climate change. However, only if investors have access to sustainability data with the same accuracy, quality and global comparability as they are used to with financial indicators today.

Wind farm in the North Sea

There is still no uniform definition of what exactly is sustainable.

(Photo: Reuters)

But there is still a long way to go. Today, the requirements would resemble a “soup of letters” with the “selective and inconsistent application of voluntary standards”, according to an IFRS presentation available to the Handelsblatt. The consequence is a lack of trust in the information published by companies on the subject of sustainability.

“It is extremely important that we develop guidelines that really apply globally,” emphasizes Liikanen. The aim of the ISSB must be to develop a “comprehensive basic set of standards that work for the large economies, but also for the emerging countries”. Individual countries or national communities would then “perhaps go beyond these rules”, explains the Finn.

The ISSB has already taken the first steps. With the Climate Dis‧closure Standards Board and the Value Reporting Organization, two committees that also deal with sustainability reporting are consolidated under the umbrella of the IFRS Foundation. In addition, the ISSB has already developed the first prototypes for the requirements for reporting on sustainability, which the new standard-setter intends to put up for discussion soon.

In December, the ISFR management committee will meet for a virtual meeting, at which the next steps in setting up the ISSB will be decided. A physical meeting is planned for the beginning of March, then for the first time in Frankfurt. The metropolis on the Main had prevailed in the competition for the headquarters of the international sustainability committee.

Frankfurt is to become the seat of the ISSB’s board of directors and house the chairman’s office. But the new standard-setter also wants to establish key functions in Montreal, Canada. In addition, offices in San Francisco and London are planned. Beijing and Tokyo are also being discussed as locations in Asia.

Scholz got involved in the application of Frankfurt

Switzerland, Canada and Japan had also tried to get the headquarters of the ISSB. After Germany suffered a few years ago when it came to the decision about the seat of the European Banking Authority (Eba), more than 180 associations, companies and institutions campaigned for Frankfurt. The then Federal Finance Minister Olaf Scholz (SPD) and his State Secretary Jörg Kukies were also involved in the application. Additional support came from Brussels from the EU Commission.

“The broad support from all levels of government, from the financial sector, but also from companies, were one of the main reasons for locating the ISSB’s executive committee in Frankfurt,” says Liikanen. Around the globe, virtually all of the major financial centers want to benefit from the “sustainable finance” growth trend.

In a survey by the British consultancy Z Yen among capital market and banking professionals on the quality of financial centers in terms of sustainability, European cities dominate. In the latest ranking, London tops the list worldwide, followed by Amsterdam. In total, Western European financial centers achieved eight places in the top ten. So far, Frankfurt has not been represented among the 20 most important cities for sustainable banking and green investments.

More: Financial sector promises to use up to 130 trillion dollars in a climate-neutral way

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