CFOs and banking giants call on ISSB to standardise ‘alphabet soup’ of non-financial disclosure

74% of organisations expect to have to comply with two or more global regulations moving forward, while 47% expect to comply with more than three

The IFRS Foundation Trustees marked Finance Day at COP26 last year by confirming the formation of an International Sustainability Standards Board (ISSB) to create a global baseline for corporate sustainability disclosures that meet investor demands. The ISSB was first proposed by the not-for-profit International Financial Reporting Standards Foundation (IFRS Foundation), earlier that year.

The aim of the ISSB is to unify disclosures from corporates, helping investors and other stakeholders to properly compare their sustainability performance and related risks. At present, the Foundation has stated, a patchwork of various voluntary disclosure guidelines has made meaningful comparisons of corporate environmental credentials complicated.

The ISSB’s consultation on these proposed global standards for sustainability disclosures launches on Friday (29 July). In advance of the consultation, the ISSB has published its “Exposure Draft” for climate-related disclosures which outlines the recommendations it believes can be introduced to help unify reporting processes.

In response, hundreds of investors and chief financial officers have written to the ISSB to outline their recommendations that they deem crucial to creating a standardised reporting framework for non-financial disclosures.

Firstly, the UN-convened Net-Zero Asset Owner Alliance (NZAOA) – with more than $10trn in assets under management – has welcomed the draft.

The NZAOA, which has called on its members to commit to net-zero emissions for investment portfolios by 2050 at the latest, has stated that the ISSB can build on the recommendations of the  Task Force on Climate-Related Financial Disclosures (TCFD) and the standards introduced by the Sustainability Accounting Standards Board (SASB)

Are you struggling to keep up with all of these acronyms and frameworks? Read edie’s A-Z guide of ESG frameworks here.

Additionally, more than 80 chief financial officers worldwide have signed a joint letter calling for the ISSB to improve the current proposals.

Convened through A4S, the signatories have laid out six key recommendations for the framework.

Firstly, A4S wants the ISSB to align any proposals with existing and emerging standards, including the increased scope of the SASB. The ISSB should also consider industry-specific materiality in assessments and how these can be explained to investors.

A4S is also calling for clearer definitions and guidelines on reporting and that disclosure should also encourage firms to increase action, namely by setting science-based targets. As such, the ISSB should encourage a long-term journey, rather than getting organisations to prioritise short-term data reporting as a means to tick boxes.

A4S’s executive chair Jessica Fries added: “Reporting is not an end in itself. Global alignment on sustainability disclosure standards is needed so that organisations can focus on action, rather than reconciling the ‘alphabet soup’ of requirements across jurisdictions.

“This is why the IFRS and other standard setters need to listen to the call from CFOs and investors to establish a common set of global standards which will provide the information needed to deliver ambitious targets and action.”