The International Organization of Securities Commissions (IOSCO) recently announced their endorsement of the ISSB’s Sustainability-related Financial Disclosures Standards.

Here’s an extract:

• IOSCO has engaged extensively with the ISSB over the last two years, culminating in a comprehensive and independent review of the final ISSB Standards. After a detailed analysis, IOSCO has determined that the ISSB Standards are appropriate to serve as a global framework for capital markets to develop the use of sustainability-related financial information in both capital raising and trading and for the purpose of helping globally integrated financial markets accurately assess relevant sustainability risks and opportunities.
• IOSCO now calls on its 130 member jurisdictions, regulating more than 95% of the world’s financial markets, to consider ways in which they might adopt, apply or otherwise be informed by the ISSB Standards within the context of their jurisdictional arrangements, in a way that promotes consistent and comparable climate-related and other sustainability-related disclosures for investors.
• Jean-Paul Servais, Chair of the Board of IOSCO, commented: “This is a critical moment in advancing IOSCO’s goal of improving climate-risk disclosure for investors. Investors are demanding better information about sustainability risks and opportunities, and the G20, the G7, and the FSB rely on IOSCO to assess whether the ISSB Standards are fit for purpose for capital markets…At the beginning of my mandate as Chairman, I said IOSCO would meet expectations because the delivery of high-quality standards in due time is of the essence when it comes to sustainability. Today, with the publication of the endorsement decision, I am honoured to say we did just that.”

The IFRS Foundation is working on an adoption guide to support jurisdictions in adopting the standards, and already published a “high-level roadmap” as a precursor to that. This acknowledges that, of course, regardless of the transition mechanics envisioned in the standards themselves, “jurisdictions may consider the scaling and phasing‑in of requirements in ISSB Standards based on different parameters, including the size and relative preparedness of companies, and the industries and market segments in which companies operate.” So how does this correlate with the Canadian actions we looked at here, centered on setting up a Canadian Sustainability Standards Board to look at how the standards should be adapted to Canada’s “unique circumstances”? The answer is…well, we’ll have to see, but in a worst case, not at all (whatever is of the Canadian essence, it’s not time).  (As a reference point, the relevant United Kingdom government body indicated that “UK endorsed standards will only divert from the global baseline if absolutely necessary for UK specific matters,” which sounds like a much more hard-nosed position).

One of the CSSB’s initial press releases noted how it’s “especially important to have high-emitting sectors like oil and gas, mining, energy and agriculture at the table, considering the focus of IFRS S2 – which establishes requirements for climate-related disclosure.” Well, certainly, it’s important to have them at some table. But arguably not at the one which carries one of the louder voices on whether the ISSB standards should be adopted in Canada without modification. As I suggested before, Canadian regulators would do better to adopt the ISSB standards wholesale, with perhaps some industry-specific, time-limited scope for companies to explain why they couldn’t or wouldn’t comply with defined aspects of it (thus making the limitations of their disclosure transparent to stakeholders, who can then react to the omission as they see fit).

The main sense in which time is of the essence is the one that’s obvious when you look at the news, or (depending on where you live or take vacations) when you step out the door and leave the air-conditioning behind you. But in North America’s perverse political climate, the more obvious the case for action on ESG, the seemingly greater the right-wing determination to resist it. A Republican Presidential victory in 2024 would certainly kill any US disclosure initiatives, and maybe go much further than that. Meanwhile, for all Canada’s progressive reputation, there’s a better than even chance of a Conservative victory at the next general election, meaning at the very least a reduced emphasis on climate change, with a likely knock-on effect on provincial and regulatory discussions.

No doubt those Canadian “high-emitting sectors” would like to tout complete compliance with local disclosure requirements, even that can only be achieved by having those standards be diluted from the international standards. But really, they shouldn’t waste all our time. Certainly, some investing and financial analysts and commentators would see an enterprise’s partial non-compliance as a negative, although not necessarily to the extent of rendering it unacceptable as a capital allocation prospect. But if this means that some investors and capital providers choose to leave dirty short-term financial returns on the table, there will certainly be alterative profit-seekers who are happy to scoop up the opportunity. Of course, this won’t help in persuading those high-emitting sectors to become less-high-emitting, but, well, it’s not entirely clear that anything ever will…  

The opinions expressed are solely those of the author.