The International Sustainability Standards Board (ISSB) has published new global rules, backed by the G20, to address greenwashing and increase disclosure on how climate change affects businesses.
- Trillions of dollars are being invested in companies that promote their environmental, social, and governance credentials, and the new norms aim to help regulators crack down on misleading claims.
- The standards are built upon voluntary guidelines from the G20’s Task Force on Climate-related Financial Disclosures (TCFD).
- Individual countries can choose whether to require listed companies to apply the standards, with several countries, including Canada, Britain, Japan, Singapore, Nigeria, and others, considering their use.
- The UK was the first major economy to make TCFD disclosures mandatory for listed companies and expressed a commitment to including reporting against the newly launched IFRS sustainability disclosure standards.
- The ISSB is part of the International Financial Reporting Standards foundation, which writes accounting rules used in over 100 countries. The new standards are expected to be endorsed by the global securities watchdog IOSCO.
- The new norms bring more rigor to sustainability reporting, aligning it more closely with financial reporting. They aim to address gaps in data provision, such as the lack of disclosure on Scope 1 and 2 carbon emissions by 42% of the world’s top 4,000 companies.
- The ISSB rules require companies to disclose material emissions, subject to external audits. The European Union is also finalizing its own disclosure rules, and efforts are being made to ensure interoperability between the EU and ISSB norms to avoid duplication for global companies.