A group of 120 major financial firms and investors have called on governments around the world to ensure they adopt consistent, comparable and economy-wide sustainability disclosure requirements by 2025 in order to provide a “level-playing field” for businesses and asset managers worldwide.
A joint statement published this week, which has been signed by the London Stock Exchange Group (LSEG), Baillie Gifford, Ruffer, Rathbones and Legal & General Investment Management (LGIM) – urges relevant authorities and jurisdictions worldwide to commit adopting by the end of next year the sustainability reporting guidelines developed by the International Sustainability Standards Board (ISSB) last year.
The standards in question – IFRS S1 and IFRS S2 – are based on the framework established by the Financial Stability Board’s Task Force on Climate-related Financial Disclosures, which have since been endorsed by the International Organisation of Securities Commission.
Ensuring company disclosure frameworks either use or incorporate the ISSB standards is a “natural next step” to prompt companies to report “material information” on climate and other sustainability-related risks and opportunities, the cohort of investors said in the statement.
They argued the adoption of the standards could significantly benefit companies and the financial sector by helping them to manage and tackle material financial risks, open up fresh opportunities for attracting international capital, and reduce reporting burdens for multinational businesses.
In their statement, the 120 investors set out three main principles for developing disclosure requirements. Firstly, they argue international coordination will be paramount to ensuring sustainability disclosure rules work effectively, noting that the ISSB guidelines have “addressed fragmentation in sustainability reporting” practices while also allowing for country- or region-specific features.
Moreover, they highlight the critical importance of the sustainability reporting standards being applied on an economy-wide basis, so that disclosure rules can apply to both listed and private companies – although the group emphasised the rollout should be based on company size rather than the methods used to raise capital, in order to manage burdens placed on companies.
And finally, the investors said the ISSB standards implementation should be “timely” given that calls have come across the financial sector for more than a decade for standardised, global, consistent corporate sustainability data.
“There is an urgent need for this data to enable capital markets to act in a more efficient and effective manner to account for sustainability priorities,” the statement argues. “The world is already falling behind in achieving the Paris goals and other sustainability objectives, and policymakers need to act now to remove these barriers to market action.”
Commenting on the statement, Jane Goodland, group head of sustainability at LSEG, said she was “looking forward” to seeing others back investors’ calls today, in order to help support the transition to net zero.
“Effective policy frameworks that enable capital to be channelled efficiently are vital in supporting the transition to net zero,” she said. “The ISSB standards bring much-needed consistency and reliability to corporate sustainability reporting, as well as providing decision-useful sustainability data that could unlock investment and growth opportunities in the global green economy.”
A version of this article originally appeared at Investment Week.
