The chair of the International Sustainability Standards Board (ISSB) has insisted the momentum behind the push to develop a globally applicable baseline in sustainability reporting is down to market forces rather than political influences.

Emmanuel Faber said: “The progress and momentum of ISSB standards are not driven by political reasons but are backed by the market.

“It is about making the market more efficient and ensuring that risks and opportunities are appropriately priced by both global and local capital markets for the first time.”

Despite acknowledging that the political landscape during this election year is fraught with uncertainties, Faber added that “the more these reporting systems are in place and used by finance, the less they will be challenged by the natural evolution of political consensus”.

Faber’s comments came yesterday, 28 May, during a press conference hosted jointly with the International Organization of Securities Commissions (IOSCO) ahead of the IOSCO’s annual meeting in support of global regulators.

IOSCO endorsed the use of the ISSB’s sustainability reporting standards last year following a comprehensive review. Additionally, the IFRS Foundation also unveiled a new Jurisdictional Guide at the event.

In a statement, the IFRS Foundation, the ISSB’s parent body, reported that around 20 jurisdictions, including the European Union and China, representing over half the global economy by GDP, have taken steps toward adopting ISSB standards.

These jurisdictions collectively account for nearly 55% of global GDP, over 40% of global market capitalisation, and more than half of global greenhouse gas emissions.

However, the statement also noted that these jurisdictions have not uniformly adopted the ISSB standards.

Emmanuel Faber at ISSB

Emmanuel Faber at ISSB

The EU, an early mover in sustainability reporting due to the 2022 Corporate Sustainability Reporting Directive (CSRD), seeks high compatibility between its European Sustainability Reporting Standards (ESRS) and the ISSB standards, particularly regarding climate disclosures.

However, a newly released guidance document confirms that there is no automatic read-across between ESRS and ISSB standards, meaning companies cannot claim full compliance with both sets by applying one.

In contrast, the US has not yet adopted the ISSB standards. Although the US Securities and Exchange Commission (SEC) acknowledges similarities between their proposed climate disclosure rules and the ISSB standards, legal challenges have stymied the application of the SEC’s climate-disclosure rules.

For their part, China’s Sustainability Disclosure Standards have been “heavily influenced” by the ISSB’s work, supposedly offering significant alignment with international standards.

The IFRS Foundation also released a guide to assist jurisdictions in adopting the ISSB standards. The Inaugural Jurisdictional Guide aims to:

  • enable investors and market participants to track individual countries’ progress towards comparable sustainability data systems;
  • acknowledge the flexibility jurisdictions have in adopting the ISSB standards, allowing for full adoption, specific elements, or use alongside existing regulations.

Finally, the Foundation has launched a comprehensive Regulatory Implementation Programme alongside the guide to foster collaboration with security regulators worldwide.

IFRS Foundation trustees chair Erkki Liikanen stated: “Global regulators and standard-setters have complementary roles in supporting capital markets efficiency. 

“We look forward to building on our close working relationship with IOSCO to support regulators on their journey to adopt or otherwise use ISSB Standards.”

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