Ceres welcomed the formation today of the International Sustainability Standards Board (ISSB) by the IFRS Foundation as it establishes a new entity that will establish global standards for climate and ESG reporting to help investors and companies integrate sustainability risks and opportunities into decision-making in a more transparent way.
The new standards are meant to complement the IFRS Accounting Standards, used by 144 jurisdictions worldwide. In addition, Ceres also welcomed the publication of two prototype disclosure requirements -- Climate-related Disclosures Prototype and the General Requirements for Disclosure of Sustainability-related Financial Information Prototype --- developed with input from securities regulators and standard setters. Over the next year, these prototypes will help to simplify reporting for companies and provide investors with comparable, decision-useful disclosure in many countries.
Mindy Lubber, Ceres President and CEO, said:
“Consistent global standards for financial reporting of sustainability issues will help accelerate progress by capital markets in addressing climate risk and opportunities, and other critical ESG issues. They will be a great benefit to companies, investors and stakeholders alike. For companies, they will make risk assessment and reporting more efficient, more useful, and less costly. For investors, they will help improve their ability to compare companies’ material risks, opportunities and performance on ESG issues. There is a clear need for these standards, and we welcome this deeper commitment to sustainability action from the IFRS as it builds on the work of Ceres, the Global Reporting Initiative (GRI), and the Task Force on Climate-Related Financial Disclosures (TCFD), among others who have helped pave the way for improved reporting.”
As a founding board member of the CDSB and strong supporter of the VRF, Lubber weighed in last year on the IFRS’ sustainability consultation, supporting the strengthening of IFRS ties with IOSCO and FASB to better address the systemic risks posed by climate change. For two decades, investors have advocated for improved climate and ESG disclosure in financial filings. And in recent months, companies have stepped up advocacy efforts, with calls to the U.S. Securities and Exchange Commission (SEC) to require companies to disclose their climate risks. The prototype standard is consistent with the recent call from 744 investors with more than $52 trillion in assets under management, for governments to adopt mandatory disclosure rules. The prototype comes as the SEC is preparing a proposed climate risk disclosure rule.
The Climate-related Disclosures Prototype contains several important features that merit serious consideration by securities regulators worldwide:
It incorporates the recommendations of the Task Force on Climate-related Financial Disclosures, including disclosures regarding strategy, risk management, governance and metrics and targets.
It requires disclosures of absolute gross Scopes 1, 2 and 3 GHG emissions, in accordance with the Greenhouse Gas Protocol standards.
Industry-specific disclosure requirements are fully integrated and have been derived from SASB Standards, which is important as climate risks manifest in different ways by industry.
Many other disclosure requirements are notable, such as those related to: scenario analysis, targets set by management to mitigate or adapt to climate-related risks or maximise climate-related opportunities, transition risks, physical risks, and internal carbon prices.
About Ceres
Ceres is a nonprofit organization working with the most influential capital market leaders to solve the world’s greatest sustainability challenges. The Ceres Accelerator for Sustainable Capital Markets is a center within Ceres that aims to transform the practices and policies that govern capital markets in order to reduce the worst financial impacts of the climate crisis. It spurs action on climate change as a systemic financial risk—driving the large-scale behavior and systems change needed to achieve a net zero emissions economy. For more information, visit ceres.org and ceres.org/accelerator and follow @CeresNews.