The corporate climate disclosure landscape is rapidly evolving. Investor demand for information concerning companies’ climate-related financial risks has grown at an accelerating pace over the last decade. In the absence of regulatory disclosure mandates, a number of voluntary reporting regimes have emerged. While helpful in focusing companies on climate change as a business concern, this proliferation of standards quickly became confusing as both investors and issuers complained about the “alphabet soup” of guidelines and called for convergence and harmonization of reporting standards.
The year 2021 saw important progress toward such harmonization, prompted by leaders in the international reporting community. In June 2021, the International Organization of Securities Commissions (IOSCO) published a report that investor demand for consistent and comparable sustainability disclosures was not being met. The IOSCO report concluded “there is an urgent need to work towards improving the completeness, consistency, comparability, reliability and auditability of sustainability reporting.” It identied three priorities to improve sustainability reporting: (1) encouraging globally consistent standards, (2) promoting comparable metrics and narratives, and (3) coordinating across approaches. IOSCO endorsed efforts by the IFRS Foundation to form an International Sustainability Standards Board (ISSB) to develop a global baseline of sustainability standards to help harmonize sustainability disclosure requirements around the world.1
Consistent with IOSCO’s recommendation, the IFRS Foundation established the ISSB in November 2021. Over the past three months, the US Securities and Exchange Commission (SEC) and the EU’s European Financial Reporting Advisory Group (EFRAG) have published proposed sustainability disclosure rules, and the International Financial Reporting Standards (IFRS) organization has published proposed sustainability disclosure standards. Each of these proposals is undergoing public consultation before international rules or standards are adopted.