The International Sustainability Standards Board has launched its first sustainability reporting standards.
The newly released standards, which have the backing of large regulatory bodies, will be known as IFRS S1 (General Requirements for Disclosure of Sustainability-related financial information) and IFRS S2 (Climate-related Disclosures).
Sacha Sadan, director of environmental, social and governance at the Financial Conduct Authority, said: “At its launch at COP26 in November 2021, our CEO, Nikhil Rathi, referred to the ISSB as a ‘game-changer’ – and what we’ve seen over the past 18 months or so is that he was absolutely right. We have been working closely with the ISSB since the start and are hugely supportive of its mission to create a common, global language for companies around the world to communicate their sustainability stories in a consistent and comparable way. That is why we are delighted to see the final standards launched.”
The UK government has also signalled support for the ISSB and will establish a mechanism for formal endorsement and adoption of the standards in the near future.
Once available for use in the UK, the FCA plans to update its climate-related disclosure rules to reference the ISSB standards.
Laimonas Noreika, co-founder of Heavy Finance, said the standards will help “facilitate and promote the efficiency of capital markets, their transparency and accountability” which will build trust and reduce risks across the supply chain.
Noreika added: “As the FCA are key influencers in regulatory decisions to help meet the needs of capital markets and public interest, their support will overall aid in the ISSB’s adoption around the world and play a significant step in the fight toward net zero.”
The new standards build upon the UK government’s commitment towards ESG, with HM Treasury committed to consultations on potential regulatory regime for their providers. A consultation paper which opened on 30 March 2023 and sets out proposals for the scope of such a regulatory regime, is set to close on 30 June.
Hilkka Komulainen, head of responsible investing at Aegon UK, said the standards are a “welcome step” towards a standardised disclosure framework, which could bring more comparability in the market.
“At Aegon UK we support increasing climate disclosures and adopting a green taxonomy. Given the present complexity of different reporting frameworks, we believe that sustainability reporting standardisation will drive accountability and transparency.”
Komulainen said Aegon was encouraged by the amount of new information made available by companies and financial institutions, especially on the impacts and risks presented by climate change, human rights issues and biodiversity loss.
“Although sustainability reporting can be resource-intensive, we believe that investors need accurate and up-to-date information to unlock better management of the sustainability risks and opportunities they face.
“We welcome the progress ISSB is making to develop a global reporting standard and are encouraged that they are leveraging the Task Force on Climate-Related Financial Disclosures and Taskforce on Nature-Related Financial Disclosure recommendations. We hope that these disclosures ultimately support financial markets in taking action on systemic risks such as climate change. We urge companies, investors, regulators and standard setters to continue to build out sustainable disclosures that are aligned with science and focused on outcomes.”
