Adoption of new international sustainability reporting standards is moving quicker than expected, with countries accounting for more than 55 per cent of global GDP, including Canada, signing on to the initiative, its chairman said on Tuesday.
A little more than a year after the International Sustainability Standards Board published its first reporting rules aimed at bolstering climate and environmental finance and eliminating greenwashing, the number of jurisdictions putting them into force keeps increasing, ISSB chair Emmanuel Faber said.
Market participants are driving the push for standardized disclosure guidelines to replace a mishmash of frameworks, and the effort received a boost last July when the International Organization of Securities Commissions, which represents regulators in 130 jurisdictions, endorsed the program.
“We’re a year after, and I certainly did not expect that already jurisdictions that have committed to a pathway toward adoption of ISSB standards would represent more than half of global GDP, and actually about half of global emissions. So there is a significant momentum,” Mr. Faber said in an interview from Montreal.
The ISSB was launched at the Glasgow climate summit in 2021 to develop a global baseline for reporting in response to growing demand from investors and policy-makers. The group is based in Frankfurt, Germany, and its North American headquarters is in Montreal.
Countries are taking various approaches to implementation, including adapting them to the needs of their economies. Canada is in that camp, having established its own organization to tailor the standards to an economy with a high number of small- and medium-sized enterprises as well as resource-extraction companies.
The Canadian Sustainability Standards Board recently completed a consultation over its first guidelines, which are based on those set out by the ISSB. They include requirements for reporting material information about climate-specific and sustainability-related financial, market and legal risks, in similar fashion to traditional accounting.
One possible change from international standards could be the timing of requirements to report Scope 3 emissions – those that stem from companies’ value chains and from the end use of their products. The Canadian board has suggested potentially delaying Scope 3 reporting, given the need for many companies to become familiar with what are the most difficult emissions data to quantify.
Canadian climate finance policies have been criticized by environmental advocates and even one of the early backers of the ISSB, former central banker Mark Carney, as being too lenient for companies and slow to be implemented.
Mr. Faber said it is not his place to judge Canada’s adoption. He said the ISSB was created to help investors better understand the risks and opportunities related to sustainability, and they will allocate their capital appropriately based on the comparability and transparency that countries offer.
“That is true for a particular company, but it is also true at the macro level,” he said. “Most jurisdictions are looking at the standards as a way to assess or assert their own competitive advantage in facing the inevitable transitions, in particular when it comes to climate.”
Lisa French, vice-president of sustainability standards for Financial Reporting and Assurance Standards Canada, said the Canadian standards board is confident that its consultation process was inclusive, and is in the process of reviewing the responses. “The board is in analysis and decision-making mode now, and the aim is to make decisions this fall,” she said in a statement.
Canadian Securities Administrators, the umbrella group for the country’s securities commissions, has said it will conduct its own review of the standards and consider adoption once the Canadian Sustainability Standards Board completes its work.
The United States has not adopted the standards, but various regulators and state governments have pushed forward with its main tenets. The Securities and Exchange Commission, for example, adopted a rule in May to require some public companies to report their greenhouse gas emissions and climate risks, but it left out the category of Scope 3 indirect emissions in contrast to the ISSB.
Mr. Faber said his group and the SEC are aligning as much as possible on what is considered material. In addition, nearly four out of five companies registered with the SEC use the frameworks of the Task Force on Climate-Related Financial Disclosures and Sustainability Accounting Standards Board, which are being consolidated under the ISSB, he said.