G7 taskforce calls for mandatory impact reporting

The G7 Impact Taskforce (ITF) has published its final report and summary recommendations aimed at improving the social and environmental impact of private capital, including an “urgent” call for global mandatory accounting for impact by businesses and investors.

There is an urgent need to narrow the gap between rhetoric and delivery and the risks attached to failure are “extremely dangerous”, the report warns. “Private capital is available in abundance,” it says. “The challenge lies in creating the conditions for it to flow with urgency, scale and integrity into investment opportunities that reflect investor appetite and risk and return tolerances while having a positive impact on the public effort to meet our challenges.”

Calling for mandatory impact disclosure, the report makes clear that voluntary disclosure alone is not moving fast enough to achieve the UN’s Sustainable Development Goals and the goals of the Paris Agreement. “A push by G7 member states and guest countries towards mandatory reporting on environmental and social information is critical to the implementation of global sustainable development accords,” it emphasises.

Mandatory environmental impact accounting and disclosure would represent a practical implementation of double materiality. This would expand the conventional understanding of what accounting standards consider material to include not only environmental impacts on the company but also the impacts of a company on the environment.

In total, the ITF report lays out eight “actionable” recommendations. It expresses strong support for the work of the recently established International Sustainability Standards Board to create global environmental reporting standards and calls for the expansion of those standards to include impacts. It also recommends collaboration on developing new approaches and methodologies for impact valuation and an enhanced role for multilateral development banks and development finance institutions.

“Leading financial institutions have already seen the writing on the wall – in terms of risks to manage and opportunities to seize,” the report concludes. “However, time is running out and we need governments, regulators, standard setters and investors of all stripes to step out of their comfort zones with urgency to help overcome the inertia of our system.”

Established during the UK’s G7 presidency this year, the ITF was mandated to “contribute practically to promote sustainable, impact-driven economies and societies worldwide”, and to advise on the mobilisation of private capital for public good at scale.

The body was divided into two workstreams, one focusing on the harmonisation of data, analysis and governance standards, and the other on instruments and policies. Its findings are aimed at decision makers and regulators in G7 member states, along with the 2021 G7 guest countries of Australia, India, South Africa and South Korea.