'Significant step in the right direction: UK Officially Adopts ISSB Climate Disclosure Standards
The United Kingdom has taken a major stride towards the right direction as they have accepted the ISSB climate disclosure standards.
The government has confirmed that UK firms must divulge their climate change information using the International Sustainability Standards Board baseline.
The British government has declared that it will use the climate-related disclosure guidelines from the International Sustainability Standards Board (ISSB) to regulate and monitor corporate sustainability-linked risks and opportunities in its reporting.
Yesterday, the Department for Business and Trade declared that the UK Sustainability Disclosure Standards (UK SDS) they are designing would be modelled on the International Financial Reporting Standards (IFRS) Sustainability Disclosure Standards, released by the ISSB this past summer.
The UK has previously mandated the country's biggest listed companies, plus private firms with more than 500 staff and a turnover of £500m, to disclose information on climate-related financial risks and potentials through the utilization of the Task Force on Climate-related Financial Disclosures (TCFD) guidelines.
The ISSB standards, finalized during the summer, were built upon the TCFD recommendations.
The International Financial Reporting Standards (IFRS) Sustainability Disclosure Standards are anticipated to provide a more uniform approach to investors when judging the environmental exposure of companies, making it easier to make informed decisions, allocating capital more efficiently, and ensuring the UK's capital markets function correctly.
The government plans to have a tailored version of the international standards available by July 2024. They stated, "Any alterations to the global baseline will only be made if necessary for matters specific to the UK."
The Department for Business and Trade declared that they had formed Technical Advisory and Policy and Implementation Committees to aid in applying the UK SDS that was created.
It is anticipated that complying with International Sustainability and Social Board climate-related disclosure regulations will help sustain London's status as a prime international financial hub.
Alexis Normand, head of Greenly, the carbon accounting firm, noted that the UK's approval of the ISSB climate-disclosure standards is a significant advancement in the international effort to unify the various climate risk disclosure frameworks.
He commented that if the rules were accepted and adopted broadly, it would result in better quality information that market participants can access. Investors would be supplied with essential data that would aid them in determining where to invest. Although the way to enforce the rules will be revealed in due course, this would still be a significant step forward.
The expectation is that, in the same way, financial reporting is, sustainability reporting will factor into decisions on allocating resources. Investment supervisors are usually evaluated based on their capacity to generate reliable returns with acceptable risk.
Adopting these standards would assist capital allocators to make more knowledgeable decisions in the future to discover businesses that can offer long-term benefits.
The EU and the US are collaborating to create regulations that will ensure accurate reporting of climate risk by companies and prevent them from making false green claims.
On 31 July, the European Commission declared the arrival of their novel European Sustainability Reporting Standards, expecting that the regulations will influence over 50,000 firms subject to the bloc's Corporate Sustainability Reporting Directive.
This week, the UK has embraced the ISSB standards while the IAASB (International Auditing and Assurance Standards Board) has proposed its International Standard on Sustainability Assurance (ISSA) 5000 standard.