Proposed sustainability board could be key for ESG reporting: Fitch Investment ExecutiveProposed sustainability board could be key for ESG reporting: Fitch Investment ExecutiveProposed sustainability board could be key for ESG reporting: Fitch Investment Executive
Impact Investing Forum 2023
London. May 04-05, 2023.
The International Financial Reporting Standards Foundation (IFRS Foundation), which oversees global accounting standards, proposed the creation the ISSB. It is expected to launch at November’s United Nations global climate summit (with Canada seeking to become the organization’s headquarters). Fitch stated that this is a “significant event” that could facilitate consistent sustainability disclosures across all sectors. Investors see the lack of standard ESG data and disclosure as a critical issue. “The sustainability standards will aim to capture financially material information about companies’ sustainability-related risks and opportunities, and their impact on enterprise value, with an initial focus on climate-related risks,” Fitch said. The rating agency suggested that the final content and adoption of these standards will determine their effectiveness. Fitch stated that while the concept of the ISSB is widely supported by regulators and governments, there are “important uncertainties around adoption prospects and adherence prospects,” particularly in relation to different definitions and standards of sustainability in different jurisdictions. Fitch stated that the ISSB will be more clear as technical work on sustainability standard-setting begins in 2022. “If embraced globally, ISSB would make sustainability standards simpler and accelerate the adoption of sustainability reporting for corporations, financial institutions, and other entities.” A common standard for sustainability data can help to understand the interplay between financial and sustainability factors and their impact on earnings and assets across all sectors. This will be especially true if ISSB disclosures are made mandatory in national jurisdictions,” Fitch said. Fitch acknowledged that there have been many efforts to create ESG reporting standards. However, it believes that the proposed ISSB could “rapidly become the dominant standard-setting body,” building on existing efforts in this field. Fitch also noted that the initiative is supported by a “sense of urgency around cohesive sustainability standards, especially regarding climate change.”