ISSB finalizes global climate reporting standards

Long-awaited global reporting standards for climate risk are due to be released by mid-year, and are slated to take effect in 2024, the International Sustainability Standards Board (ISSB) says.

Following its latest meeting in Montreal, the ISSB said that it has finalized the technical content of its initial standards, which underwent an extensive public consultation last year.

“With the substance of the standards now fully agreed, the ISSB unanimously approved entering the thorough drafting and formal ‘balloting’ process of the standards, ahead of their expected issuance at the end of Q2 2023,” it said.

At the meeting, the ISSB also agreed that its initial sustainability disclosure standards will become effective in January 2024.

“The decision on effective date is answering the strong demand from investors for companies globally to disclose comprehensive, consistent and comparable sustainability-related information,” it said, noting that global regulators and governments have also called for comprehensive climate disclosure standards “to support systemic financial stability and for investor protection.”

“We responded to capital market and G20 demand for a common language of investor focused sustainability-related disclosure, working diligently to deliver standards that fulfil the global baseline. Setting a 2024 effective date is consistent with this demand,” ISSB chair Emmanuel Faber said in a release.

“Now, we will work with regulators around the world as they play their part, creating the conditions within their markets for adoption, so that investors can use comparable information about sustainability-related risks and opportunities in their investment decisions without delay,” he addd.

In a statement, the International Organization of Securities Commissions (IOSCO) welcomed the ISSB’s announcements.

“IOSCO is very pleased to see the determined progress being made by the ISSB in completing this milestone. It is particularly important that the ISSB has confirmed that its standards will be ready for use as early as January 2024,” IOSCO chairman Jean-Paul Servais said.

Servais noted that the international audit standard setters intend to establish assurance standards before the end of 2024 too.

“Together, these standards will meet an urgent need in financial markets to get away from the current fragmented situation when it comes to sustainability disclosures,” he said.

“This announcement enables IOSCO to move forward with its independent assessment of the ISSB standards in terms of quality and governance, with a view to completing its review in 2023,” said Rodrigo Buenaventura, chair of IOSCO’s sustainability task force.

“Our assessment team is ready to go, our assessment criteria have already been published and our board is closely engaged. Mindful of the importance of reliable and robust sustainability information for financial markets around the world, we will make sure the assessment is done in a prompt, orderly, and thorough way,” he added.

In the meantime, the ISSB said that it will be developing guidance and training materials to help with the implementation of the new standards.

The Canadian Securities Administrators (CSA) were among the first out of the gate with proposed climate risk disclosure standards in late 2021. However, that effort has been on hold amid the launch of the ISSB’s work, and proposals from the U.S. Securities Exchange Commission (SEC) last year — given the desire for harmonization between Canadian requirements and global and U.S. standards.

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.