Global Economic Times

IFRS Foundation and Inter-American Development Bank Join Forces to Accelerate ESG Disclosure Standardization in Latin America: KIM YOUNG MIN Specialized Reporter / Updated : 2025-05-04 21:48:26

International efforts to enhance the transparency of ESG (Environmental, Social, and Governance) management, which has emerged as a key driver for sustainable economic growth, are accelerating. Amidst this, the IFRS Foundation has joined hands with the Inter-American Development Bank (IDB) and its private sector arm, IDB Invest, to 본격적으로 expand ESG disclosure standards across Latin America, drawing significant attention.

ESG-focused media outlet ESG Today reported on the 29th (local time) on the strategic partnership agreement between the IFRS Foundation and the IDB Group, predicting that this collaboration will mark a crucial turning point in establishing a sustainable disclosure ecosystem in the Latin American region.

Through this agreement, the IFRS Foundation plans to actively support the adoption and implementation of IFRS S1 (General Sustainability-related Disclosures) and S2 (Climate-related Disclosures) standards, which were announced in June 2023. The IFRS Foundation emphasized, "Standardized disclosure of sustainability information is essential for enhancing the transparency of capital markets and improving investors' understanding of risks," and added, "Through cooperation with the IDB, we can significantly contribute to establishing an institutional foundation and ensuring the effectiveness of the standards in the Latin American region."

From Knowledge Sharing to Regulatory Coordination: Building a Comprehensive Cooperation System

This partnership is significant because it goes beyond simply disseminating standards and includes a customized dissemination strategy and implementation roadmap that considers regional characteristics. Specific areas of cooperation include:

Disclosure Capacity Building: Utilizing the IDB's public sector network and IDB Invest's private finance network, they will provide education and workshops on IFRS sustainability disclosure standards for regulatory authorities and private financial institution stakeholders in Latin America. This is expected to play a crucial role in increasing understanding of the standards and strengthening practical application capabilities.
Technical Assistance and Policy Dialogue: Providing support for technical issues arising during the adoption and application of IFRS standards, and cooperating through policy dialogue with governments and regulatory authorities in each country to ensure that IFRS standards are effectively integrated into the regional regulatory framework.
Publication of Policy Reports: Jointly publishing policy reports analyzing the adoption effects of IFRS standards and their impact on the Latin American regional economy to help policymakers understand and build consensus on the necessity of adopting the standards.
Pilot Introduction of Self-Assessment Tools: Developing and piloting self-assessment tools for private banks in the Latin American region to self-assess their compliance with IFRS standards and set improvement directions. This can contribute to encouraging companies' voluntary disclosure capacity building.
Regional Case Studies: Identifying and analyzing cases of Latin American companies that have successfully adopted and applied IFRS standards to present benchmarking models to other companies and provide motivation for adopting the standards.
The IDB also announced plans to gradually revise its ESG disclosure standards over several years to align with IFRS standards as a result of this collaboration, demonstrating its leading role as a public financial institution in securing ESG management transparency. The IFRS Foundation added that the governments of many Latin American countries already recognize that IFRS standards can be an important tool for enhancing the credibility of capital markets and have expressed strong intentions for adoption.

IFRS Foundation Executive Director Michel Madelain stated, "This collaboration with the IDB is an important stepping stone in supporting the Latin American region to build an effective sustainability disclosure system and promote the sound growth of its capital markets," reiterating the importance of market transparency and information consistency.

Latin America's Entry Amidst Global Standardization Trend... IOSCO's Integration Recommendation Also Lends Support

At the 26th United Nations Climate Change Conference of the Parties (COP26) in 2021, the IFRS Foundation launched the International Sustainability Standards Board (ISSB), striving to establish a global standard framework that allows investors to accurately assess companies' sustainability-related risks and opportunities. As a result, IFRS S1 and S2 were officially announced in June 2023, and the International Organization of Securities Commissions (IOSCO) strongly recommended that regulatory authorities in each country integrate these standards into their national regulatory frameworks. To date, more than 35 countries are in the process of adopting IFRS sustainability disclosure standards, indicating a growing international consensus.

The IFRS Foundation interprets its entry into the Latin American region as a natural extension of the global trend towards standardizing ESG disclosure standards. In particular, Latin America is considered a promising region with abundant natural resources and growth potential, where the ESG financial market can grow rapidly. The IDB also expressed its anticipation, stating, "IFRS standards will align the understanding between information providers, investors, and regulators, ultimately playing an important role in making better investment decisions."

IDB President Ilan Goldfajn emphasized, "Transparency is the key to building trust," adding, "This collaboration with the IFRS Foundation will be an important opportunity to significantly accelerate the pace at which IFRS standards are disseminated and implemented throughout the Latin American region."

The partnership between the IFRS Foundation and the IDB is considered an important step towards the sustainable development of the Latin American region. The adoption of internationally accepted ESG disclosure standards is expected to enhance the transparency and efficiency of the region's capital markets and ultimately contribute to securing long-term growth drivers for the regional economy by attracting sustainable investment. The future success and spread of IFRS standards in each Latin American country will be closely watched.