FILE PHOTO: A person holds a placard as climate activists including Extinction Rebellion and Fridays for Future stage a protest demanding more action whilst G20 climate and environment ministers hold a meeting in Naples, Italy, July 22, 2021. REUTERS/Guglielmo Mangiapane
March 31, 2022
By Huw Jones
LONDON (Reuters) – A new global standard setter for company sustainability reporting set out its first draft guidelines on Thursday, entering a crowded field as trillions of dollars pour into investments marketed as “green.”
The International Sustainability Standards Board (ISSB) published two draft standards for public consultation until July 29 ahead of formal adoption by the end of the year.
The move is backed by world leaders, top investors and regulators, who want a more rigorous international approach to corporate sustainability disclosures which replaces a patchwork of standards. There are also growing calls to combat the risk of greenwashing, or exaggerated sustainability claims by companies.
The ISSB has proposed two new standards, which countries will decide whether to make mandatory.
The first sets out general sustainability related financial disclosures.
The second details specific climate-related disclosure requirements covering “Scope 1-3,” meaning data on the company’s direct emissions, indirect emissions from purchased energy, and indirect emissions from a company’s value chain, such as raw material suppliers.
Critics have argued the ISSB is being less ambitious the European Union, whose rules also require disclosures on a company’s own impact on the environment, known as double materiality.
ISSB Vice Chair Sue Lloyd said the ISSB standards seek to meet the needs of investors who want to know the impact of sustainability factors on a company’s enterprise value, meaning the value of its shares and net debt.
The ISSB draft standards ultimately capture the impact of a company on the environment given that polluting results in fines and potential customer boycotts which affect profitability, Lloyd said.
“When a company is doing things to people, the planet, the environment which are having impacts, much of that will affect its enterprise value,” Lloyd said.
The ISSB can work in tandem with the EU norms, she said.
The U.S. Securities and Exchange Commission (SEC) has also proposed disclosure rules for listed companies which are very similar to the draft ISSB standards, Lloyd said.
“We will be working with the SEC and the EU to try to bring our proposals even closer together,” Lloyd said.
(Reporting by Huw Jones; Editing by Mark Potter)