THE International Financial Reporting Standards (IFRS) foundation was established to develop a single set of globally accepted accounting standards. It is the organisation behind the Islamic Financial Services Industry (IFSI), standards—financial reporting standards required for use by more than 140 jurisdictions.
In September, the Trustees of the IFRS Foundation published a consultation paper on “Sustainability Reporting” to assess demand for global sustainability standards and, if demand is strong, assess whether and to what extent the IFRS Foundation might contribute to the development of such standards.
The consultation paper is open for public consultation until 31st December 2020 as the Trustees are seeking stakeholder input on the need for global sustainability standards and gauging support for the IFRS Foundation to play a role in the development of such standards.
Aligned with its role as an advocate of the IFSI, the General Council for Islamic Banks and Financial Institutions (CIBAFI) – the global umbrella of Islamic financial institutions – has submitted its comments recently to the IFRS Foundation Trustees in regards to the consultation paper.
CIBAFI feedback comprised the following key points:
- In order to bring transparency, accountability, efficiency and consistency in the information shared about sustainability by the financial institutions, a global set of internationally recognised sustainability reporting standards is needed and the IFRS Foundation appears best equipped to do this in an authoritative and appropriately governed way. Subject to sufficiently wide acceptance of its role, the development of a sustainability standards board (SSB) to operate under the governance structure of the IFRS Foundation would be an appropriate approach to achieving further consistency and global comparability in sustainability reporting.
- It is recommended for the governance structure of the SSB to include people from organisations that issued reporting standards and work to identify the common elements among the most important existing standards and address their limitations in order to develop harmonised and global standards. In addition, it would be appropriate for the governance and operational structures to include people with some experience of Islamic finance to ensure that the particularities of Islamic finance are taken into consideration while developing the standards for wider implementation.
- It is recommended that SSB could first start preparing and issuing a framework that will guide and support its work in general. Once the guiding framework is established and adopted, SSB could start developing climate-related financial disclosures taking into consideration the convergence that exists particularly with that of the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD). However, SSB should, in parallel, begin the longer-term process of broadening its scope into other areas of sustainability reporting. SSB should adopt a gradualist approach taking into account a reporting that focuses not only on the effects of climate change on the organisation but also the impact of the organisation on the outside world.
“We will continue to support the IFSI through various activities and initiatives which include providing industry stakeholders with a platform to discuss emerging issues, representing the industry at major global financial events, and sharing knowledge through specialized publications and comprehensive training programmes,” CIBAFI added. – Dec 25, 2020