Exposure Drafts: Proposed climate and general sustainability disclosures
The International Sustainability Standards Board (ISSB) published exposure drafts of two International Financial Reporting Standards (IFRS), whereby such standards require companies to disclose (i) material information about significant sustainability-related risks and opportunities to which they are exposed; and (ii) material information about their exposure to significant climate-related risks and opportunities (together, the Standards).
The Standards not only focus on the governance processes and procedures employed by companies to monitor such risks and opportunities, but also strategy, risk management, metrics and measurement targets adopted to address these.
What’s the punchline?
The final version of these Standards can be used by the International Organization of Securities Commission (IOSCO) members, which include amongst others the UK Financial Conduct Authority, as a baseline for their own jurisdictional ESG reporting requirements.
Once finalised, these Standards could assist securities regulators in their own efforts to prevent ‘greenwashing’ – which is the overuse of buzzwords referencing ‘green’ products that may mislead investors and in turn undermine confidence in the green sector.
The ISSB will review responses to the consultation of the Standards in the second half of this year and aims to issue the new standards by the end of 2022. IOSCO has welcomed ISSB’s publication of the Standards and has now commenced its review with a view of endorsing these.
With IOSCO’s positive approach to this development, we may expect securities regulators have their own jurisdictional ESG reporting requirements be informed by the final Standards in the future.
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