IOSCO endorses ISSB climate and sustainability standards

Emmanuel Fabber

The International Organization of Securities Commissions, an association of organizations that regulate the world’s securities and futures markets, of which the Securities and Exchange Commission is a member, on Tuesday formally endorsed sustainability and climate disclosure standards from the International Sustainability Standards Board.

IOSCO, as the group is commonly known, was an early proponent of the creation of the ISSB as a means of bringing together the various standard setters in the field of sustainability. The Value Reporting Foundation’s Sustainability Accounting Standards Board and the International Integrated Reporting Board merged into the ISSB last year, along with the Climate Disclosure Standards Board. The ISSB is overseen by the International Financial Reporting Standards Foundation, which also oversees the International Accounting Standards Board. Last year, the ISSB published draft versions of it The first two standardsS1 on general sustainability and S2 on climate-related information disclosure and completed them at the end of last month (See the story).

IOSCO is now calling on its 130 member jurisdictions, which regulate more than 95% of the world’s financial markets, to consider ways in which they can adopt, apply or otherwise be informed by the ISSB standards. However, this will be in the context of their jurisdictional arrangements, so as to facilitate consistent and comparable climate and other sustainability-related disclosures to investors. The SEC has its own Proposed rule The climate report it released last year is expected to be completed this fall after a delay, but it has faced significant backlash and is likely to lead to lawsuits.

Nevertheless, IOSCO believes that its support will carry significant weight. “The approval of IOSCO’s final standards creates momentum, which is a real boost for ISSB standards, because it is not a signal to jurisdictions that the global standard setter for capital markets considers these standards to be fit for purpose,” IOSCO chairman Jean-Paul Servais said at a press conference in Brussels. “I hope, frankly, that my successor can sit in front of you 20 years from now… and tell our successors that the ISSB standards have served the same purpose and played a key role in addressing the fragmentation of sustainability disclosure since IOSCO’s approval.”

He sees the standards as playing an important role in reducing the practice of “greenwashing” by companies that can pick and choose which standards to use. He noted that data collection and data management will be key issues.

IOSCO also hopes to have ESG assurance standards in place in 2024, according to the slide deck.

Individual countries will still be responsible for adopting sustainability and climate standards, and there may be some national and regional differences, although IOSCO and ISSB hope they will be consistent.

“It means real engagement and added value as a sustainability reporting facilitator and also more opportunities if we’re speaking the same language, with different accents, just to be understood,” Servais said.

The approval comes at the request of G20 and G7 financial leaders and the Financial Stability Board, an international body that monitors and makes recommendations on the global financial system.

“The widespread regulation of a global baseline for sustainability disclosures through the ISSB Standards provides the consistency and comparability of information that capital markets demand,” ISSB Chairman Emmanuel Faber said in a statement. “IOSCO’s timely support and strong encouragement for capital markets authorities to act confirms that the ISSB standards are fit for purpose. Together with IOSCO, we are committed to delivering a substantive and inclusive capacity-building program to enable everyone to act.”

International Sustainability Standards Council Chairman Emmanuel Faber at the Bloomberg Sustainable Business Summit in London

IFRS Foundation published a An overview of the adoption guide Tuesday outlined ways to help different jurisdictions implement the two standards, in a preview of an upcoming adoption guide that will outline more specific ways to implement the ISSB standards.

“Today’s approval of these standards by IOSCO is a landmark and historic achievement,” said IFRS Foundation Trustee Chairman Erki Likkanen. Changing voluntary standards and frameworks have led to fragmentation and even confusion among investors and companies. This meant that companies could not communicate effectively and had difficulty using multiple reporting frameworks. Investors were not receiving the necessary information to assess sustainability risks and opportunities. Securities regulators around the world are working to achieve the consistency and comparability of information that capital markets demand.”

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