Companies will be subject to more pressure to disclose how climate change affects their business under a new set of G20-backed global rules aimed at helping regulators crack down on greenwashing.
The rules have been written by the International Sustainability Standards Board (ISSB) as trillions of dollars flow into investments that proclaim their environmental, social and governance credentials.
It would be the responsibility of individual countries to decide whether to require listed companies to apply the standards, ISSB Chair Emmanuel Faber said, adding the standards can be used for annual reports for 2024 onwards.
Canada, Britain, Japan, Singapore, Nigeria, Malaysia, Brazil, Chile, Egypt, Kenya and South Africa are considering their use, Faber told Reuters.
The standards are built upon voluntary ones from the G20’s Task Force on Climate-related Financial Disclosures (TCFD).
Britain was the world’s 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 makes accounting rules used in more than 100 countries, while global securities watchdog IOSCO is expected to “endorse” the new standards.
“Endorsement shall be a real game changer for regulators around the world in considering the use of the ISSB framework,” IOSCO Chair Jean-Paul Servais said.
David Harris, from the London Stock Exchange Group, said the new rules will bring more rigour to sustainability reporting, more aligned with financial reporting.
Harris explained that 42% of the world’s top 4,000 companies do not provide data on Scope 1 and 2 carbon emissions.
The European Union finalises its own disclosure rules next month and it and the ISSB have sought to make each other’s rules “interoperable” to avoid duplication for global companies.
ISSB demands more detailed disclosures from banks on carbon emissions related to individual sectors such as oil and gas.