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In early November of 2021, COP26 was held in Glasgow. At that time, The IFRS Foundation committed to consolidating staff and resources for leading global sustainability disclosure initiatives to support the IFRS Foundation’s new International Sustainability Standards Board’s (ISSB) work to develop a comprehensive global baseline of sustainability disclosures for the capital markets and driving the related disclosure from voluntary to compulsory. Specifically, the commitment is referred to the CDSB (Climate Disclosure Standards Board) and VRF (Value Reporting Foundation) consolidation with ISSB.
What is CDSB?
CDSB was created in 2007, offering companies a framework for reporting environment and social information with the same rigour as financial information. The CDSB Framework formed a foundation for the Task Force for Climate-Related Financial Disclosures (TCFD) recommendations and sets out an approach for reporting environmental and social information in mainstream reports.
The framework established by CDSB gives technical guidance on climate, water and biodiversity disclosures, as well as wider resources and also the guidance on social issues reporting, the related framework is firstly effective in 2010, and expand coverage in 2015.
What about VRF?
VRF is the organization that was originally consolidated between IIRC (International Integrated Reporting Council) and SASB (Sustainability Accounting Standards Board), formed in 2021. VRF govern the Integrated Reporting Framework and the SASB standards, while they are aiming to standardize and facilitate the reporting approach of ESG issues.
Integrated Reporting Framework was established and published by IIRC in 2013, the framework is used to accelerate the adoption of integrated reporting across the world to Improve the quality of information available to providers of financial capital to enable a more efficient and productive allocation of capital. Capital could refer to the following six aspects: Manufactured capital, Natural capital, Social & Relationship capital, Human capital, Intellectual capital, and Financial capital.
SASB standards launched in 2018, are used for identifying the subset of Environmental, Social, and Governance (ESG) issues that are likely to materially impact the financial performance of companies in an industry.
What is happening now?
On the 31st of January 2022, CDSB has been consolidated into the IFRS Foundation. CDSB staff is transferring to the IFRS Foundation, with core intellectual property and technical assets to support the work of the ISSB also being transferred. The framework and recent technical guidance on Water, Biodiversity, and Social disclosures, as well as wider resources, will remain relevant and applicable for companies until the ISSB publishes its IFRS Sustainability Disclosure Standards.
On the 1st of August 2022, The IFRS Foundation announced the completion of the consolidation of the VRF into the IFRS Foundation. As a key basis, the VRF’s SASB Standards would serve for the development of the IFRS Sustainability Disclosure Standards. Meantime, their Integrated Reporting Framework provides connectivity between financial statements and sustainability-related financial disclosures.
As a result of consolidation, the ISSB will now govern the SASB Standards. ISSB is embedding the industry-based approach of the SASB Standards into its standard-setting process, as well as addressing the international applicability of the SASB Standards as a priority. The ISSB encourages companies and investors to continue to provide full support for and use, the SASB Standards.
IFRS Sustainability Alliance
Our sister company of the same group and strategic partner – Masterpiece Valuation Advisory Limited is one of the members of the IFRS Sustainability Alliance.
Further Readings:
The News of consolidation of VRF and CDSB with ISSB