Global regulatory leaders discuss barriers to further harmonisation of standards at the Sustainability Accounting Standards Board Symposium.
Clear global guidelines for non-financial sustainability-based reporting are an urgent priority for investors, corporates and policymakers, according to global regulatory leaders at the Sustainability Accounting Standards Board’s (SASB) 2020 Symposium yesterday.
SASB CEO Janine Guillot called for increased communication and collaboration globally as industry and regulatory bodies take steps to develop, coordinate and enforce non-financial disclosure guidelines.
“What we would really like to see is globally consistent standards for enterprise value creation, because capital markets are global, big investors hold global portfolios and companies operate globally,” she said.
Last week, SASB announced it will be merging with the International Integrated Reporting Council (IIRC) to form the unified Value Reporting Foundation by 2021, which will aim to provide investors and corporates with a more comprehensive reporting framework. The organisation will be led by Guillot and will prove to be a “building block towards global standards”, she reiterated at the summit.
A harmonised global framework for disclosure of sustainability-related metrics is needed to avoid the risk of greenwashing currently arising from fragmented regulations, said Erik Thedéen, Chair of the Taskforce on Sustainable Finance for the International Organisation of Securities Commissions (IOSCO), also speaking at the event.
“By cherry-picking standards, this makes it easier for members of the financial community to seek out green opportunities to earn some quick money,” he explained.
To support greater coordination, a Sustainability Standards Board (SSB) has been proposed by the International Financial Reporting Standards (IFRS), with a remit to introduce global dimensions to existing regional initiatives around non-financial reporting.
“Global and regional initiatives in non-financial reporting could and should be complimentary,” said Erkki Liikanen, IFRS Foundation Trustees Chair. Taking a “gradualist approach”, the SSB would identify the most relevant information for investors across the globe and implement these demands into one more global set of guidelines, he explained.
“International convergence and comparability”
Industry experts praised the work of the European Commission (EC) to provide clearer guidelines around non-financial disclosures, but Thedéen said European initiatives should not be at the expense of other jurisdictions.
“The EC should work to connect with international bodies outside the EU and discuss how there can be a more global approach towards non-financial reporting regulations,” he added.
Alain Deckers, Head of Unit for Corporate Reporting at the European Commission (EC), said Europe’s proposed taxonomy does need to “work towards international convergence and comparability”, but admitted harmonisation is challenging on an international stage.
Deckers pointed out that the EC taxonomy had to align with EU-specific legislation, adding that a global standard for non-financial reporting would need to have the flexibility to cater for different regional legislation.
Regulatory intervention in US
Panellists also addressed the need for improved disclosures within jurisdictions. Commissioner Allison Herren Lee of the US Securities and Exchange Commission (SEC) said regulatory intervention is likely to be required in the US to achieve consistency and comparability for non-financial disclosures.
“I am not fully convinced we can achieve a standardised regime without regulatory involvement – so I think there is a place for the SEC to get involved to ascertain standardised disclosures are both consistent and reliable,” she said.
Lee said the work being done by the Task Force on Climate-related Financial Disclosures (TCFD) and the World Economic Forum towards a harmonisation of existing reporting standards is “a step in the right direction”.
“It is so important for domestic regulators to recognise systemic climate issues experienced by the entire financial system so that we can collaborate productively with our colleagues both domestically and internationally to ensure a more cohesive approach,” she added.
CDP CEO Paul Simpson said significant progress had been made toward harmonised reporting standards, citing the September release of the ‘Statement of Intent to Work Together Towards Comprehensive Corporate Reporting’ a joint report which outlined collaboration between five integrated reporting organisations: CDP, Climate Disclosure Standards Board (CDSB), Global Reporting Initiative (GRI), IIRC and SASB.
Simpson said that further coordination also depended on country-level consensus, noting the risk of “196 different regulatory approaches to sustainability disclosure” unless a global solution is found.
Deckers said future standardisation efforts on sustainability-related non-financial reporting should focus on comparability, relevance and reliability. “At the moment, sustainability-related disclosures are nowhere near the level of maturity that we have achieved over the decades in the field of financial reporting,” he said.