Draft sustainability reporting standards put forward by the International Sustainability Standards Board (ISSB) have been welcomed by a collection of peak finance and business bodies.
The 20 Australian peak bodies, which combined represent US$33 trillion in assets under management, 500,000 business and finance professionals and more than 400 companies, said they had reached an “unprecedented consensus” on the need for sustainability reporting.
“We consider clear, transparent, comprehensive and comparable disclosure of sustainability-related information to be part of the foundation of a well-functioning global financial system,” the bodies said in a joint submission to the ISSB.
“We fully support a global approach to the development of sustainability reporting standards and are supportive of the ISSB being the global body to issue these standards.”
The ISSB was originally established at last year’s COP26 summit and was tasked with developing a single set of standards to meet the information needs of investors.
In March, the ISSB published two exposure drafts that set out general sustainability-related disclosure requirements and specified climate-related disclosure requirements while also providing stakeholders with the opportunity to comment on the proposed standards.
“The overarching goal should be a globally consistent, comparable, reliable, and verifiable corporate reporting system to provide all stakeholders with a clear and accurate picture of an organisation’s ability to create sustainable value over time,” the peak bodies suggested.
“We consider it critical that the ISSB and other jurisdictions developing sustainability standards take a coordinated approach to avoid regulatory and standard setting fragmentation by aligning key definitions, concepts, terminologies, and metrics on which disclosure requirements are built.”
The bodies — which include the Australian Banking Association, the Australian Council of Superannuation Investors, the Financial Services Council, the Insurance Council of Australia and Chartered Accountants Australia and New Zealand — stated that climate represents a “first order risk” to Australia’s economy, financial system and investors.
They highlighted the importance of collaboration and coordination between sustainability disclosure initiatives and financial accounting standard setting, and said that the ISSB was best placed to achieve this due to its connection to the International Accounting Standards Board.
Additionally, the group pointed to the critical role of independent external assurance to lend credibility to sustainability information.
“In our view, the goal should be for investors and other stakeholders to rely on the assurance performed and the integrity of the information provided, similar to how they rely on audited financial statements,” they said.
“A consistent baseline is needed for there to be trust and confidence in the information provided and to avoid confusion or misunderstanding amongst investors and other stakeholders.”
The peak bodies also expressed support for the Paris Agreement and its objective to take into account the needs for a “just transition” while also achieving a net zero emissions economy.
“To avoid large-scale financial risks from a disorderly transition to net zero emissions and the physical impacts of climate change, there must be clear and comparable disclosure of sustainability-related and in particular, climate-related information,” the group concluded.
“The peak bodies each look forward to working with the Australian Government and key national and international stakeholders as the climate change reporting regime is finalised and phased in.”
ASIC had previously encouraged Australian companies and other stakeholders to provide feedback on the exposure drafts to ensure that the ISSB’s final standards were appropriate and workable for the Australian market and economy.
“Should the exposure drafts be adopted internationally, they will inevitably impact Australia’s capital markets and participants, as investors continue to demand comparable sustainability and climate-related corporate disclosures,” ASIC deputy chair Karen Chester said in June.
