Here is our pick of the 3 most important XBRL news stories from the last week.
IOSCO Chair Ashley Alder believes we’re in sight of “a real step change” in sustainability reporting. The IFRS Foundation’s climate-first approach to globally standardised sustainability reporting offers the most efficient path to decision-useful, corporate-level ESG information for institutional investors, according to Ashley Alder, Chair of IOSCO and CEO of Hong Kong’s Securities and Futures Commission (SFC).
We couldn’t agree more. As sustainability reporting goes mainstream, it will have to be globally standardised, mandatory, audited and prepared using a control framework similar to financial reporting’s. Or as this fabulous piece expresses it in the most concise way possible: Measure less, better.
The European Commission has adopted a proposal for a Corporate Sustainability Reporting Directive (CSRD), to amend and replace the current Non-Financial Reporting Directive (NFRD). It will require the use of Inline XBRL (or iXBRL) in reporting detailed and consistent structured data, and marks a new chapter in environmental, social and governance (ESG) disclosure, promising much more meaningful, comparable information for investors and other stakeholders. It was announced as part of a sustainable finance package intended to foster sustainable activity.
And yet another acronym to learn in the ESG pantheon: CSRD! While we certainly support the expanded scope of the reporting requirement as well as the data vector to be used, we are concerned that the lack of informational focus and standardisation as per the above comment will render that information less decision useful that necessary. But we’re open to be positively surprised!
Some suggest that, had data on over-the-counter (OTC) derivatives transactions been available before the financial crisis in 2008, the build-up of risk could have been foreseen and managed very differently. This is what led to G20 demands that all derivatives products be reported to trade repositories and made available to regulators.But as early as 2010, before the first repositories were live, regulators, the Depository Trust & Clearing Corporation (DTCC) and others in the industry had identified derivatives data fragmentation issues and began raising awareness of the need to implement standards at that time. Derivatives markets are interconnected and international — therefore, derivatives data needs to be consistent and readable across all jurisdictions.
Read this piece to learn many more arcane acronyms from the derivatives trading world! But more seriously: the article supplies a useful overview of the growing understanding around the globe that intergovernmental regulatory cooperation in the world of derivatives trade reporting is pointless unless broken down to the fine technical detail, because that’s where the devil is, as we all know.
Christian Dreyer CFA is well known in Swiss Fintech circles as an expert in XBRL and financial reporting for investors.
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