Written by Hugh Jones and Simon Jessop
LONDON (Reuters) – Companies will face mounting pressure to disclose how climate change is affecting their business, according to new global rules backed by the G20 that are meant to help regulators crack down on so-called “green formulating”.
The standards, released on Monday, were drafted by the International Sustainability Standards Board (ISSB), at a time when trillions of dollars are pouring into investments touting their environmental, social and governance credentials.
It is up to each country to decide whether to require publicly traded companies to apply the standards, said Emmanuel Fabre, head of the ISSB, adding that it will be possible to use the standards in annual reports starting in 2024.
Canada, the United Kingdom, Japan, Singapore, Nigeria, Chile, Malaysia, Brazil, Egypt, Kenya and South Africa are considering using it, Fabre told Reuters.
The standards are based on voluntary standards from the G20 Task Force on Climate Financial Disclosure (TCFD).
The UK was the first major economy to make TCFD disclosures by listed companies mandatory.
The ISSB is part of the independent International Financial Reporting Standards Foundation, which also writes accounting standards used in more than 100 countries. The global securities watchdog, IOSCO, is expected to “approve” the new rules.
David Harris, Head of Strategic Initiatives for Sustainable Finance London Stock Exchange Group (LON:), said the new standards bring more accuracy to sustainability reporting and bring greater alignment to financial information.
Harris noted that 42% of the world’s 4,000 largest companies do not provide data on Scope 1 and 2 carbon emissions.
“It means that capital markets are much less efficient because you don’t have the full picture,” Harris said. Under ISSB rules, companies are required to disclose material emissions, with verification by external auditors.
(Reporting by Hugh Jones; Editing in Spanish by Javier López de Llerida)
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