Sustainability Reporting Global Update March 2022
International Sustainability Standards Board (ISSB) releases exposure drafts
Global sustainability-related reporting standards are now closer following the publication of the ISSB’s Exposure Drafts on climate and general sustainability-related financial disclosures. A4S welcomes this significant milestone being reached so soon after the ISSB’s establishment – an important signal that the ISSB is responding to the urgent need for common, global and mandatory standards on climate and other sustainability factors. We will be supporting the consultation on the Exposure Drafts, working with our networks to gather views and to share insights.
- Read our reaction to the release including initial key takeaways >
- Access the Exposure Drafts and consultation >
New climate disclosures required by SEC
The US Securities and Exchange Commission's (SEC) proposed rules require climate disclosures beginning in 2024, including Scope 1 and 2 emissions (with reasonable assurance by 2026/27), Scope 3 emissions with safe harbour (if material or part of a GHG emissions target), reporting in the aggregate (not including offsets) and details on the governance of climate-related risks. This follows another SEC release on ESG just a few weeks ago – proposed new cybersecurity disclosures, covering a companies’ governance, risk, management, and strategy to cybersecurity risks. Additional proposed disclosure requirements related to human capital are also expected later this year.
IFRS Foundation and GRI to align capital market and multi-stakeholder standards
The IFRS Foundation and Global Reporting Initiative (GRI) have announced a collaboration agreement. Under this agreement their respective standard setting boards, the International Sustainability Standards Board (ISSB) and the Global Sustainability Standards Board (GSSB), will seek to coordinate their work programmes and standard-setting activities.
A4S welcomes this agreement as another step closer to globally aligned sustainability reporting standards. It is important that the ISSB and GRI are aligned in order to properly facilitate a ‘building blocks’ approach that can enable global interoperability, something A4S called for at the creation of the ISSB back in November.
A4S Reporting Roundtable
Earlier in March, HM King Charles III, when he was The Prince of Wales, on behalf of A4S, hosted a roundtable for global finance leaders to discuss sustainability reporting. The event brought together CFOs with other leaders from the finance world to agree actions to support the adoption of common metrics and standards in the sustainability reporting sphere. It was clear from the discussion that the preparer community continues to call for convergence and the adoption of one common set of global standards, while recognizing that there remain differing views on the question of materiality. For some organizations, their views aligned closely with the approach taken by the ISSB and SASB centred around investor needs. For others, they felt strongly that the EU’s ‘double materiality’ perspective, recognizing the needs of investors and other stakeholder groups, was critical. The MoU between ISSB and GRI mentioned above has the potential to play an important bridge helping to reconcile these different perspectives. Keep an eye out for A4S’s upcoming Insights Series on reporting, which will cover the question of materiality in more detail.
- Read the speech from the event by Erik Thedéen, Director General, Finansinspektionen and Chair, IOSCO Board-level Task Force on Sustainable Finance >
- Read a summary of the event by Veronica Poole, a Vice Chair of Deloitte UK and Deloitte Global IFRS and Corporate Reporting Leader >
Announcements in Europe
- The European Financial Reporting Advisory Group (EFRAG) are expected to publish Exposure Drafts for The European Sustainability Reporting Standards (ESRS) in Q2.
- The EU Legal Affairs Committee (EU Parliament) has adopted its position on the Corporate Sustainability Reporting Directive (CSRD). The text clarifies reporting rules for companies by introducing more detailed reporting requirements. Proposed changes include:
- Small and medium-sized undertakings should be able to adhere to reporting standards on a voluntary basis.
- More detailed requirements on what companies will need to disclose on net zero transition plans.
- Give companies an additional year to adapt to the new rules, with the first public reports due in 2025.
- Details here >
Nature-related financial disclosure framework closer to full release
The Taskforce on Nature-related Financial Disclosures (TNFD) has released the first beta version of its Nature-Related Risk & Opportunity Management and Disclosure Framework, marking an important step by the market to tackle the risk of nature loss to the global economy and reduce negative impacts on the natural world. The framework aims to enable organisations to report and act on evolving nature-related risks.
News on sustainability reporting will be coming thick and fast over the next year. Please stay tuned to the A4S Newsletter, communications and events to keep up to date.