ECB and IMF tell ISSB to align company disclosures

August 11, 2022

Move follows ISSB sustainability disclosure standards consultation

The European Central Bank (ECB) and the International Monetary Fund (IMF) have called for a global standard setter to align climate disclosures across jurisdictions and make these more reliable for investors.

The calls came after the International Sustainability Standards Board (ISSB) received over 1,300 responses to its proposed global “baseline” reporting standards.

Such standards would seek to make the inflation of climate-related claims more difficult and therefore easier for investors to identify cases of greenwashing.

“Interoperability between the forthcoming ISSB standards and jurisdictional requirements remains one of the largest challenges that harmonisation work ultimately faces... it is important to avoid further fragmentation," the International Monetary Fund said in a statement.

While the move to a standardised climate disclosure baseline has been widely supported, obstacles still remain, notably in the lack of definitions of key concepts.

Such descriptors are essential for the compatibility of disclosures across the European Union and the US’s Securities and Exchange Commission (SEC).

Read Minerva's previous coverage of this story:

https://www.old.manifest.co.uk/issb-seeks-feedback-on-global-sustainability-disclosure-plan/

With so many jurisdictions and different authorities revisiting company disclosure rules, investors have complained about the misalignment between these.

EY, which will audit the ISSB’s disclosures, noted that even the most basic terms, such as “climate-related” lack a sufficiently clear definition.

The London Stock Exchange Group (LSEG) said that multiple approaches, definitions and standards risked market fragmentation.

Without standardised disclosure rules, businesses and investors may not be able to accept disclosures from different regulatory jurisdictions and may face additional costs in duplicating reporting documents.

The ECB has urged the ISSB to “iron out” any differences that arise between baselines standards,

Emmanuel Faber, chair of the ISSB, said: “Global solutions require collective action, and the feedback we have received provides a critical grounding on which to build sustainability disclosure standards that provide a global baseline for the capital markets.”