Quality and comparability: G20 backs FSB and IFRS Foundation on climate reporting standards
The G20 Finance Ministers and Central Bank Governors have given a ringing endorsement to sustainability disclosures and the development of international standards, particularly with regard to climate, following their meeting in Venice on 9-10 July 2021.
“Quality data and comparable frameworks of disclosure are crucial for addressing climate-related financial risks and mobilising sustainable finance,” states their communiqué, which also looks forward to a multi-year G20 Roadmap. The delegates pledged to work to promote implementation of disclosure requirements or guidance, building on the Task Force on Climate-related Financial Disclosures (TCFD) framework, to pave the way for future global coordination efforts while respecting individual jurisdictions. “To that aim, we welcome the work programme of the International Financial Reporting Standards [IFRS] Foundation to develop a baseline global reporting standard under robust governance and public oversight, building upon the TCFD framework and the work of sustainability standard-setters, involving them and consulting with a wide range of stakeholders to foster global best practices.”
This statement was positively received by the IFRS foundation; “This will provide the basis for development of a global baseline of investor-focused disclosure standards that jurisdictions can combine with their public policy requirements and use in their legal frameworks.”
The G20 communiqué further particularly welcomes a suite of recent climate-related reports from the Financial Stability Board (FSB) which will no doubt have an important influence on thinking in the months to come, including a detailed FSB roadmap for addressing climate-related financial risks. This is accompanied by reports on promoting climate-related disclosures and on availability of data with which to monitor climate-related financial stability risks – on this the G20 states “we will work to address data gaps and highlight the importance of financial authorities considering scenario analysis, including drawing on common scenarios as appropriate.”
Speaking on 12 July, FSB Chair Randal K Quarles, discussed the two foundational components of the FSB roadmap; disclosures and data: “Globally consistent, comparable, and reliable disclosures, as well as a broader set of high-quality, relevant data, together, can provide the basis to assess climate-related financial risks and the impact on financial stability.”
Interestingly, the G20 communiqué also says: “We reaffirm that harnessing the wealth of data produced by digitalisation is critical to better inform our decisions,” suggesting a vision in which structured, machine-readable data is an important aspect of decision-usefulness.