June 13, 2022
Leading financial market participants call for stronger alignment of regulatory and standard setting efforts around sustainability disclosure

Financial market regulators should seize the opportunity to get it clear, comprehensive and comparable disclosure of sustainability-related information right by ensuring compatible standards. These are some of foundational building blocks of a well-functioning global financial system. The International Sustainability Standards Board (ISSB), in addition to the US Securities and Exchange Commission (SEC), the European Commission together with the European Financial Reporting Advisory Group (EFRAG), all aim to address the need to enhance and develop corporate reporting to include and consider sustainability information. The WBCSD (World Business Council for Sustainable Development), PRI (Principles for Responsible Investment), and IFAC (International Federation of Accountants) collectively welcome and support these efforts. Together they account for representing over 200 companies, 4,902 investors with US $121.3 trillion in assets under management, and more than 3 million included professional accountants. However, current draft standards and initiatives are not technically congruent in terms of concepts, terminologies, and metrics. 

As these planned sustainability-related disclosure requirements are refined and finalized, we urge bodies for each initiative to pointedly circumvent regulatory and standard setting fragmentation by affiliating key concepts, terminologies, and metrics on which disclosure requirements are built.

A corresponding approach is required to provide the comprehensive global baseline of sustainability disclosures needed by capital markets. Collaboration and coordination are also vital between sustainability disclosure initiatives and financial accounting standard-setting.

A worldwide consistent, equivalent, reliable, and assurable corporate reporting system is key in providing all stakeholders with a clear and accurate picture of an organization’s ability to create sustainable value over time.

Interoperability – permitting companies to collect and report effectively to meet both requirements locally and globally– assists in handling the needs of global capital markets, including, investors, companies, and the accounting profession alike.

  • For reporting entities - a global baseline for capital markets will help reduce cost, complexity, and confusion — increasing the utility, comparability while serving the essential purpose of sustainability reporting, which includes delivering more sustainable results.
  • For investors - global consistency is a matter of investor protection, growing market demand, and the ability to incorporate ESG issues into investment decisions that contribute to sustainable outcomes.
  • For professional accountants, - providing the best foundation for high-quality sustainability-related reporting and its assurances by being charged with transforming disclosure requirements into high-quality and decision-useful information, international consistency and alignment.
 

The International Sustainability Standards Board welcomes the establishment of this coordination mechanism to enhance compatibility between the global baseline and jurisdictional initiatives. We strongly encourage all involved policymakers to engage with this platform in order to deliver the level of alignment needed by financial markets at the global level.

We look forward to supporting this process to contribute to a global financial system that delivers sustainable and long-term value creation.

Download the joint statement here.

Source: Sustainability Reports