The joint vice-chair of the International Sustainability Standards Board (ISSB), Jingdong Hua, has reminded the board it is responsible for setting “descriptive standards rather than prescriptive standards”.

He said: “[O]ur job is really here to make sure there is a global baseline for companies to disclose what they are doing instead of telling them what they should do in terms of, you know, specific extra items.”

The former World Bank vice-president’s comment came during the board’s redeliberation of proposals to require businesses to disclose transition plans and targets.

This requirement includes any local or national government targets. However, ISSB member Ndidi Nnoli-Edozien questioned how the requirement would apply to developing and emerging nations.

She said: “[W]e are supposed to be a truly global baseline, and while some organisations and jurisdictions may be far behind in terms of transition planning from an investment and investor perspective in order to ensure that level playing field, this is a very important consideration to build in.”

The United Nations Framework Convention on Climate Change established the notion of Common But Differentiated Responsibilities (CBDRs). The convention introduced the idea that the ‘polluter pays’ and that developed and developing nations are at different stages of economic development and industrialisation.

Staff confirmed that their draft requirements are supposed to capture any type of global or national requirement including CBDRs.

Summing up the position, ISSB joint chair Sue Lloyd said the board would need to be clear in its drafting that the disclosures were meant to provide “what’s relevant” while reflecting how businesses were adapting to a lower-carbon environment.

The ISSB is currently redeliberating its first two draft sustainability standards dealing with general disclosure requirements and climate reporting, which it issued in March of this year.

Under the proposals, the board required companies to disclose information about the impact of climate-related risks and opportunities on their business thinking and their transition plans. In addition, they were also asked to disclose information about any climate-related targets.

The proposals do not – including in light of the board’s November discussion – require them to have a plan. This means companies can disclose to investors that they have made no such plans. The board’s staff set out plans for redeliberating IFRS S2 in September.

In October, during its meeting round in Montreal, the ISSB explored how its standards would operate alongside other international sustainability frameworks, such as the one currently under development in the European Union.

Then on 1 November, the board considered the need for companies to have guidance when disclosing information about climate resilience.

On a vote, however, all 13 ISSB members unanimously agreed to confirm their proposal for entities to disclose information about:

  • the impact of climate-related risks and opportunities on their business;
  • their plans to transition to a lower-carbon economy; and
  • climate-related targets.

Additionally, the board tentatively decided entities must disclose:

  • the basis for their transition plans;
  • additional information about climate-related targets such as greenhouse gases and their scope, as well as any international agreements that are relevant to those disclosures.

ISSB members tentatively decided, however, that they will not require entities to disclose the impact on their business of failing to meet their transition plan.

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