Two statements, from Chief Financial Officers and institutional investors, respond to proposed IFRS Sustainability Disclosure Standards, created by the International Sustainability Standards Board (ISSB).
- Both communities call for global alignment on sustainability reporting and for the ISSB to strengthen their proposed standards in a number of ways.
- CFOs set out six areas for the ISSB to address to achieve effective sustainability reporting standards.
- Investors call for decision-useful data that considers both environmental and social impacts on a company as well as the company’s impact on the environment and society.
The call for global alignment
86 global Chief Financial Officers from around the world and institutional investors representing more than £620 billion in assets under management, convened by A4S, have signed respective statements of support for the proposed IFRS Sustainability Disclosure Standards. The statements welcome the role of the IFRS and the proposals, but also encourage them to revisit and further develop some of the proposed requirements for when the final standards are released.
Based on their experience in providing both financial reporting and sustainability-related disclosures, the CFO signatories have set out six areas for the ISSB to address to achieve effective sustainability reporting standards. This includes further alignment, to considering dynamic materiality, and to quickly move on to address a broader set of environmental, social and economic factors.
This group of CFOs represents organizations from Asia Pacific, Europe, North and South America, signalling a broad consensus for globally-aligned sustainability standards.
“Businesses and investors need transparency and consistency to be able to invest in a sustainable future. The adoption of a common set of sustainability standards is pivotal in meeting these needs and no one is better positioned than the ISSB to play this role globally. Time is running out and the business and finance community need to meet the moment. Let’s seize this opportunity to achieve global alignment through the proposed ISSB standards so that companies and investors can focus on action.” George Quinn, Group Chief Financial Officer, Zurich Insurance Group
Investors need decision-useful data
The disclosure of robust, comparable and decision-useful information is vital for investors, and others, to assess an entity’s performance and impact, supporting the allocation of capital needed to achieve a sustainable global economy. Institutional investors, including chairs of pension schemes, have therefore supported a high-level response to the proposed IFRS Sustainability Disclosure Standards. The response welcomes the role of the ISSB and the call for global alignment, but – as investors in the real economy – the group calls for the ISSB to strengthen their inclusion of factors beyond those narrowly impacting enterprise value.
“As the International Sustainability Standards Board (ISSB) develops global standards on sustainability-related financial disclosures, we – as investors – have a significant and unique opportunity to signal to the global market what data needs we really have for investment decisions. Understanding the impact the entity’s activities has on wider society is just as important as understanding the risks and opportunities affecting the entity’s enterprise value. As users of sustainability data, we must ask the ISSB to enhance the proposed global standards and deliver a watershed moment on decision-useful, sustainability data.” Russell Picot, Chair, HSBC Bank (UK) Pension Trust and Co-Chair, A4S Asset Owners Network
Reporting is a means to an end
Sustainability factors can present both risks and opportunities to organizations, but without the right information neither businesses nor investors will be able to make fully informed decisions.
In determining what disclosures are required, the focus needs to remain on enabling action. Reporting is a means to an end, not an end in itself.
Companies that operate over different jurisdictions spend valuable resources reconciling reporting requirements across multiple standards. Resources that should be focused on action.
“Reporting is not an end in itself. Global alignment on sustainability disclosure standards are needed so that organizations can focus on action, rather than reconciling the ‘alphabet soup’ of requirements across jurisdictions. This is why the ISSB 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.” Jessica Fries, Executive Chair, A4S
Read the statements and signatories here