A new set of global regulations backed by the G20 will put more pressure on businesses to explain how climate change impacts their operations and will aid regulators in their efforts to combat “greenwashing.”

The International Sustainability Standards Board (ISSB) developed the guidelines that were released on Monday as trillions of dollars are invested in projects that promote their environmental, social, and governance credentials.

According to ISSB Chair Emmanuel Faber, it would be up to individual nations to determine whether or not to mandate listed businesses to implement the criteria. He also added that the standards might be applied to annual reports starting in 2024.

Faber said that countries including Canada, Britain, Japan, Singapore, Nigeria, Chile, Malaysia, Brazil, Egypt, Kenya, and South Africa are considering using them.

The criteria expand upon those developed voluntarily by the Task Force on Climate-related Financial Disclosures (TCFD) of the G20.

The first developed country to require TCFD disclosures from listed firms was Britain.

“We are committed to including reporting against UK endorsed versions of the IFRS sustainability disclosure standards launched here today,” UK treasury minister Joanna Penn told a launch event for the standards.

The global securities watchdog IOSCO is anticipated to “endorse” the new standards. The ISSB is a component of the independent International Financial Reporting Standards organisation, which also creates accounting rules used in more than 100 nations.

“Endorsement shall be a real game changer for regulators around the world in considering the use of the ISSB framework,” IOSCO Chair Jean-Paul Servais told the launch event.

The new standards, according to David Harris, head of sustainable finance strategic initiatives at the London Stock Exchange Group, give sustainability reporting more rigour and make it more consistent with financial reporting.

According to Harris, 42% of the top 4,000 corporations in the world do not disclose their Scope 1 and Scope 2 carbon emissions data.

“It means capital markets are far less effective because you haven’t got a full picture,” Harris said. Under the ISSB rules, companies would need to disclosure material emissions, with checks by external auditors.

In order to prevent duplication for multinational corporations, the European Union and the ISSB have worked to make their respective disclosure standards “interoperable” before they publish them next month.

Banks must provide more specific information to ISSB regarding their carbon emissions in specific industries, such as oil and gas.

“We maintain that because banks and banking supervision were really clear that it is needed for them,” Faber said.

In the upcoming months, the ISSB and EU plan to release guidelines for preventing duplication.

(Adapted from ThePrint.in)

Categories: Economy & Finance, HR & Organization, Regulations & Legal, Strategy, Sustainability