Global sustainability disclosure standards to help investors understand how a company connects sustainability and value will be finalized by the end of 2023, ISSB Chairman Emmanuel Faber said Friday.
At an International Sustainability Standards Board symposium in Montreal, Mr. Faber said final proposals will come out by June, "with the view to finalize by end of year."
A general sustainability-related disclosures standard, S1, will describe sustainability as a company's ability to sustainably maintain resources and relationships with and manage its dependencies and impacts within its whole business ecosystem over the short, medium and long term.
A second standard, S2, will address corporate disclosure around climate, also in the context of a company's value creation.
The new rules will based on a framework developed by the Task Force on Climate-related Financial Disclosures for assessing and reporting on the financial risks of climate change within their portfolios.
The news was welcomed by institutional investors attending the IFRS Foundation-sponsored symposium.
"The natural lens for us to look at these companies is financial materiality," said Elisa Cencig, senior ESG policy adviser with Norges Bank Investment Management, the manager of the 12.11 trillion Norwegian kroner ($1.19 trillion) Government Pension Fund Global, Oslo.
The upcoming standards "can really provide a sound basis for companies to decide what information they need to disclose to investors," Ms. Cencig said during a panel discussing feedback received on the proposals.
For the final standards to succeed, she said, companies must integrate sustainability disclosure in their financial statements and have shared governance and verification processes. "This will ensure having the same quality of information," Ms. Cencig said. Investors will also want companies to be transparent about how they conduct scenario analyses and how they use the results.
"It is equally important to know what changes the company makes as a result," she said.
Speaking as both an investor and representative of a public company that will follow the new standards, panelist Gabriela Infante, director, corporate ESG for T. Rowe Price, said, "we view this as an incredibly beneficial development."
Yasunobu Kawanishi, chairman of the Sustainability Standards Board of Japan said his country is working to produce domestic standards by spring 2025 that would be consistent with the ISSB ones.
Building on the TCFD framework will help, said keynote speaker Mark Carney, U.N. special envoy for climate action and finance, and co-chairman of the Glasgow Finance Alliance for Net Zero. "It's important that you build up on the lessons learned. What I really want to know is how does the management manage risks (and) how is it going to seize all the opportunities?"
