The first ISSB Standards sets a promising tone for ESG regulation
At the end of June, The International Sustainability Standards Board (ISSB) issued its first two IFRS Sustainability Disclosure Standards. These consisted of the IFRS S1 General Requirements for Disclosure of Sustainability related Financial Information and the IFRS S2 Climate related Disclosures. These inaugural publications have been designed to provide a global baseline of sustainability related disclosures for the capital markets. The issuance came as a result of urgent demand from asset managers, other stakeholders and investors to have a global, measurable, set of sustainability reporting standards and disclosures.
The newly issued standards have received strong international support from policy makers, business leaders, market regulators and investors from across the globe, including the Financial Stability Board, the G20, the International Organization of Securities Commissions (IOSCO) and G7 leaders.
At Alternit One (A1), we know that better information leads to better investment decisions. The ISSB’s new standards are promising because they aim to deliver on global disclosure standards. Their inauguration should allow for businesses and investors to be able to ‘standardise on a single, global baseline of sustainability disclosures for the capital markets, with any additional jurisdictional requirements being built on top of this global baseline’, the IFRS (International Financial Reporting Standards) stated.
To support designing a robust ESG data management strategy that corresponds with the standards set out by the IFRS and ISSB, firms should consider working towards the following:
Seek to avoid duplicative regulatory reporting
A key consideration of the standards included the disclosure of ‘decision-useful, material information’. In a statement issued by the IFRS, the ISSB Standards focus exclusively on capital markets as this requires information that is ‘material, proportionate and decision-useful to investors’. The standards begin with climate related data that companies can phase into their sustainability disclosures.
A primary aim for the IFRS is to be able to reduce duplicative reporting for firms by providing a baseline approach that offers global comparability for financial markets, whilst simultaneously allowing jurisdictions to further develop any additional requirements should they need to be able to meet broader stakeholder needs or public policy demands.
Overcoming duplicate information/data is a priority for A1 and how we craft data management strategies for clients. Our infrastructure design sessions clearly define where data should be stored, whilst also developing clear processes and workflows so firms can be sure to navigate data succinctly and clearly. This is a primary objective for all data management strategies as companies can be obligated to report on many jurisdictional requirements.
Consider sustainability goals for the short, mid and long term
The IFRS S1 sets out that firms should be able to communicate both their sustainability risks and opportunities for the short, medium and long term. By focusing on this, firms provide information to investors that is highly relevant to decision making. Supporting firms strategic thinking is at the heart of our work at A1. We help our clients to plan for the now, near future and the long term. By doing so, we can respond to industry changes and demands, whilst ensuring our clients remain compliant as ESG regulation develops.
Strategise for risk management
A critical goal behind climate related financial disclosures in terms of risk management is to ensure that firms are able to highlight, assess, prioritise and monitor climate related positives and negatives within a business. This strategy demands that firms consider how their ESG risk processes relate to their overriding risk management process. Our bespoke strategies seek to minimise risk and design a business continuity plan as a proactive response to regulation as it changes.
The ISSB’s new IFRS Sustainability Disclosure Standards mark a promising milestone for the financial services industry and a step towards a promising future for ESG regulation. We look forward to embracing these changes with clients and helping instill these practices into data and risk management strategies for firms to create a more positive future. If you would like to learn about how we can help you, contact us today.