The ISSB is poised to finalise its Inaugural Jurisdictional Guide by mid-year, marking a stride towards global consistency in sustainability financial disclosures.
According to ESG Investor, this comes as part of an effort to encourage the uniform adoption and application of the International Financial Reporting Standards (IFRS) S1 and S2, which focus on general sustainability and climate-related disclosures, respectively.
In a move lauded by industry leaders, the ISSB aims to address the current fragmented landscape of sustainability reporting standards that has been a source of increased costs, complexity, and risk for entities and investors alike. “The best course of action the ISSB can take is one of patience and flexibility,” Investment Company Institute President and CEO Eric Pan remarked, underscoring the potential of the ISSB standards to enhance global interoperability and investor confidence through improved comparability of reported information.
The guide is designed to assist jurisdictions in overcoming the hurdles to implementing these standards, factoring in the unique challenges and costs that entities may face based on their preparedness and specific circumstances. It introduces proportionality mechanisms and transition reliefs for certain disclosure requirements in the initial reporting period starting from 1 January this year. Furthermore, it acknowledges the necessity for some jurisdictions to adapt existing legislations or regulations to effectively adopt or utilise the ISSB Standards.
Despite the ISSB Standards serving as a foundation, the need for jurisdictions to tailor reporting requirements to local needs has been highlighted by international law firm Allen & Overy. However, it suggests that convergence can be achieved if more jurisdictions are convinced of the benefits of optimising interoperability and aligning closely with the standards.
The guide’s development is backed by global consultations, including open consultations in China, Australia, Nigeria, and Malaysia, aimed at enhancing stakeholder awareness and participation in the sustainability reporting dialogue. “There are 14 different countries at one stage or another in the adoption process…representing 18% of the global large-cap universe,” noted Jay Eisenhardt, Senior Sustainable Investing Product Manager at Northern Trust Asset Management. This signifies a crucial moment for sustainability reporting, with approximately half the global market cap represented by countries in the process of adopting these standards.
In conclusion, the ISSB’s forthcoming Jurisdictional Guide is a key step towards reducing the global fragmentation of sustainability reporting, aiming for a world where financial disclosures are consistently and comparably reported across jurisdictions. As the financial industry awaits the guide’s finalisation, the anticipation builds for a future where sustainability reporting not only meets global standards but also addresses local nuances effectively.
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