‘Greenwashing’ activists take part in the final day of four days of ‘The Big One’ climate protest organized by Extinction Rebellion (XR) in London, England, April 24, 2023.
Mark Collison | In Pictures | Getty Images
Companies will face increased pressure to disclose how climate change is affecting their businesses under a new set of global rules backed by the G20 to help regulators fight green laundering.
The norms released on Monday were written by the International Sustainability Standards Board (ISSB), and trillions of dollars have flowed into investments that tout their environmental, social and governance credentials.
ISSB Chairman Emmanuel Faber said it was up to individual countries whether to require listed companies to apply the standards, adding that the standards could be used for annual reporting from 2024 onwards.
Canada, the United Kingdom, Japan, Singapore, Nigeria, Chile, Malaysia, Brazil, Egypt, Kenya and South Africa are considering using them, Faber told Reuters.
These standards build on the voluntary standards of the G20 Task Force on Climate-related Financial Disclosures (TCFD).
The UK is the first major economy to mandate TCFD disclosure by listed companies.
“We are committed to incorporating reporting into the UK-approved version of the IFRS Sustainability Disclosure Standard published today,” UK Finance Minister Joanna Penn said at the standards launch.
The ISSB is part of the independent International Financial Reporting Standards Foundation, which also sets the accounting rules used in more than 100 countries, while global securities regulator IOSCO is expected to “endorse” the new standard.
“Accreditation is a real game-changer for regulators around the world when considering the use of the ISSB framework,” said IOSCO President Jean-Paul Servais at the launch.
David Harris, head of sustainable finance strategic initiatives at London Stock Exchange Group, said the new norms make sustainability reporting more rigorous and more consistent with financial reporting.
According to Harris, 42% of the Global 4000 companies do not provide Scope 1 and Scope 2 carbon emissions data.
“That means the capital markets are much less efficient because you don’t have the full picture,” Harris said. Under the ISSB rules, companies are required to disclose material emissions and have them checked by external auditors.
The European Union finalizes its own disclosure rules next month, and the bloc and the ISSB have sought to make each other’s specifications “interoperable” to avoid duplication among global companies.
The ISSB requires banks to disclose more detailed carbon emissions associated with individual industries such as oil and gas.
“We’re sticking with that because the banks and banking regulation are very clear that they need to do this,” Faber said.
The ISSB and EU will issue guidance to avoid duplication in the coming months.