The world is one step closer to achieving global sustainability disclosure standards for the capital markets after the International Sustainability Standards Board (ISSB) finished the first draft of its International Financial Reporting Standards and kicked off a market-wide consultation on its work, with adoption targeted by year end.
The ISSB – established late last year at United Nations Climate Change Conference (COP26) to develop a comprehensive global baseline of sustainability disclosures for the capital markets – has launched a 120-day consultation period from March 31 to July 29 during which it will solicit feedback on the draft proposals that it issued to the market on March 31. Subsequently, the board will review feedback on the proposals in the second half of 2022 and aims to issue the new standards by the end of the year, subject to the feedback.
The new disclosure standards will provide a common set of rules for corporates and financial institutions that will be the basis for reporting of their greenhouse gas emissions, sustainability financing, and compliance with the net-zero targets set under the Paris agreement.
The standards will address the outstanding issues on environmental, social and governance (ESG) reporting and disclosures, which were verbalized by Abigail Ng, executive director, Monetary Authority of Singapore, speaking during the keynote speech at the Stewardship Asia Roundtable 2022 on March 31, the same day that the ISSB launched its consultation: “Today, ESG disclosures lack detail and do not provide enough decision-useful information for investors.
“There is also a lack of consistency and comparability, with companies selectively reporting against different standards and frameworks. This state of affairs is not ideal and makes it difficult for investors to exercise stewardship based on ESG considerations.”
The proposals, officially referred to as “exposure drafts”, build upon the recommendations of the Task Force on Climate-Related Financial Disclosures and incorporate industry-based disclosure requirements derived from the standards of the Sustainability Accounting Standards Board (SASB).
When the ISSB issues the final requirements, they will form a comprehensive global baseline of sustainability disclosures designed to meet the information needs of investors in assessing enterprise value. The ISSB is working closely with other international organisations and jurisdictions to support the inclusion of the global baseline into jurisdictional requirements.
The proposals have been developed in response to requests from G20 leaders, the International Organization of Securities Commission and others for enhanced information from companies on sustainability-related risks and opportunities.
“Rarely do governments, policymakers and the private sector align behind a common cause,” says Emmanuel Faber, chair of the ISSB. “However, all agree on the importance of high-quality, globally comparable sustainability information for the capital markets. These proposals define what information to disclose, and where and how to disclose it. Now is the time to get involved and comment on the proposals.”
