IFRS And IDB Partner To Boost Sustainability Reporting

In a major move towards enhancing sustainability practices in the Latin America and Caribbean region, the IFRS Foundation has entered into a strategic partnership with the Inter-American Development Bank (IDB) and IDB Invest, the Group's private sector institution. The partnership is intended to speed up the take-up and implementation of the IFRS Sustainability Disclosure Standards throughout the region, promoting transparency and facilitating long-term sustainable development.

This partnership has been viewed as a significant boon to the region's initiatives for harmonizing corporate reporting with global sustainability standards. The IFRS Foundation, which is famous for its financial reporting efforts, established the International Sustainability Standards Board (ISSB) in November 2021 at the COP26 climate conference. The board was established to create internationally consistent and comparable sustainability disclosure standards that give investors vital information on companies' sustainability-related risks and opportunities. In June 2023, the ISSB published its first standards—IFRS S1, which provides general sustainability disclosure requirements, and IFRS S2, which deals with climate-related disclosures in particular.

Their release was a watershed moment for global efforts towards mainstreaming sustainability into financial reporting. Shortly after their issuance, the International Organization of Securities Commissions (IOSCO), a leading global securities regulator, urged regulators globally to integrate the IFRS Sustainability Disclosure Standards into their own sustainability reporting regimes. To date, over 35 jurisdictions have begun the process of adopting these standards, reflecting an increasing global consensus on the need for uniform and transparent sustainability disclosures.

With the new alliance, the IFRS Foundation and the IDB seek to capitalize on this momentum and enable the widespread adoption of the standards throughout Latin America and the Caribbean. In the view of the IFRS Foundation, the alliance will deliver much-needed support to public and private stakeholders in the region to help them realize the full potential of effective sustainability-related disclosure.

Michel Madelain, Managing Director of the IFRS Foundation, also welcomed the new interest from public authorities in the region. "Public authorities throughout Latin America and the Caribbean have indicated their view that IFRS Sustainability Disclosure Standards can contribute to building stronger capital markets with increased transparency and insight into sustainability-related risks and opportunities," he said. Our collaboration with the Inter-American Development Bank Group will bring to these markets essential support to derive the maximum benefit from the full potential of effective sustainability-related disclosure in the region.

The cooperation will start with an integrated action plan comprising knowledge sharing, capacity development, and policy interaction. One of the major goals is to assist regulators and private institutions in applying the standards efficiently. IDB will cooperate with national governments and public institutions, whereas IDB Invest will interact with private sector players to encourage the uptake of the standards.

Under the partnership, the partners will offer specific technical assistance, convene policy dialogues, and provide hands-on capacity-building to assist countries to adopt and implement the standards. The partnership will also compile a policy document explaining the advantages of adopting sustainability reporting and provide a self-assessment guide for private banks. The partnership will also craft a regional case study to pull out best practices and outstanding examples from early adopters.

Importantly, the collaboration also hopes to meet the needs of local communities and strengthen long-term capability in the area. Through public and private sector stakeholders, stakeholder consultations, technical workshops, and training courses, the IFRS Foundation and the IDB Group hope to ensure uniform application and efficacy of the standards. The aim is not only to encourage regulatory convergence but also to provide organizations with the instruments and expertise required to report on sustainability and climate-related risks in a credible and meaningful way.

In its own commitment to the partnership, the IDB also committed to aligning its own sustainability disclosures with the IFRS standards through a multi-year plan. This action is part of the institution's larger initiative to lead by example and advance transparency and accountability in development finance.

Speaking on the importance of the alliance, IDB President Ilan Goldfajn reaffirmed the benefits of regular and transparent sustainability disclosure. "The IFRS standards facilitate issuers, investors, and regulators to make well-informed decisions and align incentives," he asserted. "Transparency fosters trust. The alliance is all about speeding up the adoption process throughout the region and assisting with its implementation."

Through this effort, the Caribbean and Latin America stand to make significant strides toward integrating sustainability into financial systems, establishing a more resilient and transparent economic climate. The collaboration between the IDB and the IFRS Foundation is anticipated to be a model for other regions that aim to adopt global standards of sustainability and initiate real change in public and corporate sector reporting.