Respondents to ISSB’s agenda priorities consultation call for focus on biodiversity and nature, progress on social and human rights reporting standards.
In response to the International Sustainability Standards Board’s (ISSB) 120-day consultation on its priorities for its next two-year work plan market participants have underscored the importance of an increased focus on biodiversity and nature.
The ISSB noted that biodiversity loss poses a “significant threat to financial stability”, citing research by the World Economic Forum which projects US$44 trillion of economic value generation – more than half of the world’s GDP – is directly dependent on nature and its ecosystem services.
It also underlined that many ecosystem services are not replaceable and studies by bodies such as the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services have found that most ecosystem and biodiversity indicators are already in decline, highlighting the “immediacy of the financial risk” it presents.
Given the size of the potential projects which would limit the progress that could be made across all four projects in two years, the ISSB sought views on the relative priority of activities to determine potential trade-offs.
Responding to the consultation, the European Securities and Markets Authority (ESMA) said that if the ISSB chooses to focus on a single project over the next two years ensure “significant progress” is made that a project addressing biodiversity, ecosystems and ecosystem services would be a “suitable candidate” for prioritisation.
More than 60 market participants have responded to the request for information so far, which is due to close on 1 September.
The ISSB has already committed to balance advancing new projects in a timely manner with delivering its comprehensive global baseline of sustainability-related disclosure standards. These standards have also been endorsed by the International Organization of Securities Commissions, with it calling on its 130 member jurisdictions to adopt them into their respective regulatory frameworks.
According to ESMA, the “current momentum” on biodiversity and nature at the international level provides a “positive context for such a project” which could “advance quite swiftly”.
ESMA also suggested that the term ‘nature’ could be “more appropriate than ‘biodiversity, ecosystems and ecosystem services’” in describing the scope of the contemplated project, which it said would enable the ISSB to use the ‘biodiversity’ terminology for a more specific focus on biological diversity.
Singapore-based sovereign wealth fund Temasek said that nature and biodiversity should be the ISSB’s highest priority in its response.
“Climate change and the loss of biodiversity, ecosystems and ecosystem services are inter-connected and can pose a major threat to the global economy and financial system,” Temasek said, adding that it sees nature and biodiversity as the “next environmental emergency” after climate.
Spanish bank BBVA echoed similar sentiments, encouraging the ISSB to prioritise biodiversity in its new two-year plan. It highlighted water, pollution and deforestation as the most important nature-related issues to tackle, followed by resource exploitation and invasive non-native species.
Environmental non-profit Reclaim Finance said the ISSB must “urgently broaden its approach to climate-related risks”. It described the board’s seven criteria for deciding whether a potential project will meet investors’ needs not dealing with the climate, environmental and human impact as “worrying”.
Reclaim Finance flagged freshwater and marine resources and ecosystems use as the most important biodiversity issues to consider, with some activities, such as agriculture, already being significantly affected. Further, the NGO warned that rising risks of water stress and droughts could significantly impact many economical activities in the short-term and pose major social risks.
It then prioritised land-use and land-use change – due to its “strong links” to climate goals, human rights and biodiversity – followed by pollution and resource exploitation.
ESMA advised the ISSB to “draw lessons” from approaches already developed or currently under development, such as the TNFD which has defined concepts, including nature, nature realms, environmental assets or ecosystem services based on scientific consensus.
Several of the respondents spotlighted the Climate Disclosure Standards Board framework application guidance for biodiversity and water-related disclosures, the Global Reporting Initiative (GRI) standards, including GRI 304, the TNFD, and the United Nations Declaration on the Rights of Indigenous Peoples as being important regulations and initiatives for the ISSB to study.
Remembering human rights
ESMA said that the ISSB should also make a start on social and human rights-related reporting standards which are “as important and pressing as environmental standards”. The authority noted that the priority it places on biodiversity “should not undermine the importance of work on social and human rights matters”.
“Human rights-related issues are no less important or pressing a matter and are recognised as such by an increasing number of investors,” the ESMA said in its response.
Temasek also underscored the importance of human rights and human capital, noting that it has equal weighting with the other ESG-related issues.
“Human capital and human rights are inherently linked and being viewed as two important elements of the broader social domain of sustainability,” it said.
The sovereign wealth fund also highlighted human capital and human rights management given their relevance and impact on company’s corporate performance, value creation and reputation, as well as the “rising regulatory impetus on these topics”.
The US Securities and Exchange Commission (SEC) has included human capital disclosure on its regulatory agenda since 2021, with NGO Ceres pressing the organisation to issue the proposed rule as soon as possible.
BBVA said that after biodiversity, human capital and human rights should follow in priority.
“We would welcome the adoption of a first set of general standards regarding biodiversity, human capital and human rights in a short timeframe,” BBVA said.
ESMA added that the ISSB should “reflect on its planning for future standards-development beyond the next two years” which would be “highly beneficial to the quality and comparability of the sustainability reports, as well as to interoperability”.