Great progress is being made in establishing the IFRS Foundation’s Sustainability Standards Board (SSB) and events are moving quickly. Here I would like to give my personal views on what I think some of the key issues are that will determine the ultimate success of the SSB. Because solid work is proceeding on the technical issues, I will focus on the organization and political dynamics that must be addressed.

Organizationally, the critical issues are raising the necessary funds to support the work of the SSB, selecting a Chair and other board members, and hiring the staff. Richard Barker and I addressed the funding issue in our comment letter. Assuming a budget about the same as the IASB, a conversative assumption, we do not believe that funding will prove to be a major obstacle. While not in our letter, we also personally discussed some more creative ways of funding, such as a small fee from investors, like 0.01 basis points (0.0001 percent) of assets under management. Run the numbers on global equity AUM (around $80 trillion) and you get $80 million or around £57 million compared to the IASB budget of around £31 million, of which about one-third comes from publications.

More strategically important is the initial staffing, starting with the Chair. While this person should certainly be knowledgeable about sustainability reporting, deep technical expertise should not be the main criterion. This can come from other board members, such as someone with a deep academic background in the topic. What is needed for the first Chair is someone who has the stature that Paul Volcker brought as the inaugural Chair of the IFRS Foundation. There are three potential profiles for the first Chair: (1) someone from the public sector who has strong credibility in the markets, such as a former chair of a securities commission or central bank, (2) an investor who worked to integrate sustainability into the investment decision making process, such as the CEO of CIO of a major asset owner or asset manager, and (3) someone from the stewardship team of a major asset owner or asset manager who understands how standards can contribute to dialogue and engagement between companies and their investors.

More generally, at both the board and staff level, there is a need for the appropriate degree of diversity. One obvious dimension will be citizenship since the SSB is intended to set global standards. Which introduces the political dynamics. Here there is a bit of a chicken-and-egg problem since one factor is the extent to which the EU and U.S., especially, are supportive of the SSB. Each jurisdiction may require for its support a certain representation of its citizens, along with what it considers to be an appropriate role in governance. While the EU has kept its cards pretty close to its vest regarding the SSB vis a vis the NFRD, it is likely that it will eventually accept the SSB as at least the baseline for sustainability reporting. In which case, it will be well-placed to press for proper EU representation at the board and staff level.

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