July 2024
International sustainability standards start to take on a global look – apart from in the US of A!
Major economies around the world including Japan, the UK, Nigeria, Brazil and China have all recognised the value of ISSB standards. But not the US!
Jurisdictions representing over half the global economy by gross domestic product (GDP) have announced steps to use the International Sustainability Standards Board’s (ISSB) Standards or to fully align their sustainability disclosure standards with those of the ISSB.
A growing number of jurisdictions are moving ahead with or considering measures to ensure global comparability in companies’ climate and other sustainability-related disclosures by relying on the global baseline established by the ISSB Standards.
More than 20 jurisdictions have already decided to use or are taking steps to introduce ISSB Standards in their legal or regulatory frameworks. Together, these jurisdictions account for:
- Nearly 55% of global GDP.
- More than 40% of global market capitalisation.
- More than half of global greenhouse gas emissions.
European Union goes first
Many jurisdictions are seeking full alignment with or adoption of the ISSB Standards: the European Union was first. The Corporate Sustainability Reporting Directive established in June 2022 that the European Sustainability Reporting Standards would incorporate ISSB Standards to the greatest extent possible.
That decision paved the way to a high level of alignment on climate and the interoperability guidance the IFRS Foundation and EFRAG recently jointly issued; the latest is China, where the Ministry of Finance of the People’s Republic of China issued the Exposure Draft of Chinese Sustainability Disclosure Standards for Business Enterprises – Basic Standard and Explanation of the Drafting. The draft formulates the unified China Sustainability Disclosure Standards based on ISSB Standards, drawing on the beneficial experiences of ISSB Standards, aligning with China’s context and showcasing Chinese characteristics.
Where is the USA?
Together, the 20-plus jurisdictions that have taken steps to adopt or otherwise use ISSB Standards account for around 75% of global market capitalisation, excluding the United States. In the US, when the Securities and Exchange Commission (SEC) recently issued a release in respect of their climate- disclosure rule they acknowledged similarities with the ISSB Standards. In acknowledging the role of the ISSB Standards and the range of jurisdictions currently considering requirements using the Standards, the SEC noted that the Standards are not yet integrated in those jurisdictional rules and, accordingly, declined at this time to recognise the ISSB Standards for use as an alternative to the SEC’s climate disclosure rules.
The progress towards the introduction of sustainability disclosure requirements globally reflects a significant response since IOSCO (the International Organization of Securities Commissions) announced its endorsement of ISSB Standards in July 2023.
IOSCO called on its members, who regulate companies in more than 95% of the world’s financial markets, to consider ways in which their jurisdictions might adopt, apply or otherwise be informed by ISSB Standards within the context of their jurisdictional arrangements, in a way that promotes companies’ consistent and comparable climate-related and other sustainability- related disclosures for investors.
