ISSB vice chair lays out the ‘three Cs’ of sustainability reporting

Sue Lloyd, vice chair of the International Sustainability Standards Board (ISSB), has emphasised the organisation’s dual focus on consolidating sustainability standards, collaborating with jurisdictions, regulators, and investors worldwide, and cutting complexity.

In a speech delivered to the IFRS Foundation’s World Standard-setters conference, she said these efforts were intended to build a global baseline in sustainability disclosures to support informed investment decisions across international markets.

Lloyd said: “We’ve consolidated the work of the key investor-focused initiatives […] into a single, global baseline of sustainability-related financial disclosures.”

She claimed that this consolidation has not only simplified sustainability reporting but also reduced the complexity for companies navigating a growing array of sustainability frameworks.

Since its creation in March 2022, the ISSB has set about consolidating key investor-focused frameworks to varying degrees of success.

On the theme of collaboration, Lloyd said this has been a vital component of the ISSB’s strategy to ensure that sustainability standards are aligned with other globally acknowledged reporting frameworks.

These frameworks include the Taskforce on Climate-related Financial Disclosures, Sustainability Accounting Standards Board, Climate Disclosure Standards Board, and elements of the Integrated Reporting Framework.

In particular, the ISSB has worked with the European Financial Reporting Advisory Group (EFRAG) to ensure a high degree of interoperability between its global baseline and Europe’s impact-focused sustainability reporting rulebook.

“We’ve been working with EFRAG and others to ensure interoperability […] reducing complexity and reduced risk of duplication in reporting,” the ISSB vice chair said. 

A key milestone in the ISSB’s work was its endorsement by the International Organization of Securities Commissions (IOSCO) in 2023. IOSCO’s backing has encouraged over 25 jurisdictions, including regions in the Americas, Asia, Oceania, and Europe, to begin adopting or progressing toward the ISSB’s sustainability standards.

Lloyd told her audience: “Once again, IOSCO has played a key role […] [with its] 2023 decision to endorse the ISSB Standards and encourage their use worldwide.”

And by the IFRS Foundation’s preferred yardstick, jurisdictions have indeed reacted positively to the new global baseline.

US remains on the sidelines

The tally of jurisdictions adopting the ISSB’s standards now adds up to more than 40% of global market capitalisation and over 50% of global greenhouse gas emissions.

However, as with the Foundation’s financial reporting standards, the world’s leading capital market, the US, remains on the sidelines and has not adopted the new reporting standards.

The US Securities & Exchange Commission proposed its own climate disclosure rules in 2022 but immediately ran into substantial political resistance.

Following their finalisation earlier this year, the SEC voluntarily suspended the rules pending judicial review.

While some legal experts have argued that the SEC’s proposals are consistent with the Securities Act of 1933 and the Securities Exchange Act of 1934, industry groups have pushed back strongly, arguing that the agency has overstepped its Congressional remit. 

The issue has been given added complexity by the US Supreme Court’s ruling in Loper Bright Enterprises vs Raimondo, which overturned the so-called Chevron deference to agency interpretations – potentially limiting the SEC’s room for manoeuvre.

Elsewhere, however, the ISSB’s standards have been more warmly received in emerging market jurisdictions such as Brazil and Nigeria.

Lloyd said: “We’ve seen tremendous support for our work across these economies […] with their vocalisation of the perceived benefits in adoption, such as access to capital and greater transparency.”

In a nod toward those anti-ESG voices, Lloyd acknowledged the ongoing debate about the value of sustainability reporting.

However, she argued, investors “need robust information about an entity’s prospects […] to make informed investment decisions”.

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