FSB reports significant progress on climate-related disclosures

The Financial Stability Board (FSB) progress report highlights “significant progress in setting comparable, consistent and decision-useful climate-related financial disclosure standards and requirements”.

In a year full of milestones and backlashes against standard-setting bodies and sustainability disclosure frameworks, the report highlights the progress made by the International Sustainability Standards Board (ISSB) in publishing its inaugural standards earlier this year. These standards are intended to serve as the foundation for future reporting obligations on sustainability.

Also covered by the annual report is progress made by the International Organisation of Securities Commissions (IOSCO) in supporting the work on both disclosure and assurance standards. Having endorsed the ISSB standards, IOSCO called on its 130 member jurisdictions, regulating more than 95% of the world’s financial markets, to adopt the standards. The UK subsequently adopted the standards as a means to appeal to global investors.

The issue of interoperability and the burden of reporting have been contentious issues. The US, in particular, has witnessed strong opposition to any element of ESG, polarising federal and state legislatures. Meanwhile, EU lawmakers recently fended off motions to reject the European Sustainability Reporting Standards (ESRS).

Despite sharing their foundations in the Taskforce on Climate-Related Financial Disclosures (TCFD), there are still differences between disclosure requirements set by the ISSB, ESRS and the US Securities and Exchange Commission, in terms of materiality lens, targets and transition plans, and the way in which greenhouse gas emissions are to be reported.

The FSB reports that the ISSB and EU bodies are working together to support companies wishing to apply to both standards together, reducing the reporting burden and aligning interoperability between standards.

Furthermore, the International Auditing and Assurance Standards Board and the International Ethics Standards Board for Accountants have made substantial progress in developing a comprehensive global set of assurance, ethical, and independence standards that could serve to deter greenwashing, according to the report.

In keeping with previous years, the FSB report highlights the findings of the TCFD’s 2023 report. The number of companies disclosing TCFD-aligned information has grown, however figures show there is much work to be done. In 2022, 58% of companies disclosed information in line with at least five of the 11 recommended disclosures, up from 18% in 2020, although only 4% disclosed in line with all 11 disclosures.