Launch of Prototype Climate-related Financial Disclosure Standard
Five leading organisations in sustainability and integrated reporting, who published a shared vision for a comprehensive corporate reporting system earlier this year, have taken a next practical step together. Today, coinciding with the fifth anniversary of the Paris Agreement on 12th December, the group published a paper that addresses one part of this system: standards for reporting on enterprise value, brought to life with a prototype climate-related financial disclosure standard.
CDP, the Climate Disclosure Standards Board (CDSB), the Global Reporting Initiative (GRI), the International Integrated Reporting Council (IIRC) and the Sustainability Accounting Standards Board (SASB), have co-authored an illustration of how their current frameworks, standards and platforms, along with the elements set out by the Task Force on Climate-related Financial Disclosures (TCFD), can be used together to provide a running start for development of global standards that enable disclosure of how sustainability matters create or erode enterprise value.
The collaboration between these organisations comes at a pivotal moment when global stakeholders are recognising the need for transparent measurement and disclosure of information about sustainability performance, as a fundamental part of effective business management. Since the group published a joint statement of intent in September 2020, the group of five wrote an open letter to Erik Thedéen, Chair of IOSCO’s Sustainable Finance Task Force, to reiterate their shared commitment to contribute to the achievement of a globally accepted comprehensive corporate reporting system. The letter and response from Mr Thedéen also welcomed the consultation by the Trustees of the International Financial Reporting Standards (IFRS) Foundation about possible ways the Foundation might contribute to this development, by broadening its current remit beyond the development of financial reporting standards.
In light of these developments, the paper demonstrates that standard-setting for sustainability-related financial disclosure is a natural extension of the IFRS Foundation’s current role, and provides insight into how such an ambition can be achieved by building on content that already exists. It also offers this content in the form of prototypes, so that it can serve as a running start for any standards development that the IFRS Foundation might choose to undertake.
In the paper, the group of five explain that enterprise value reporting – in other words, disclosure of how sustainability matters create or erode enterprise value – “is not therefore a replacement for sustainability reporting, which serves a broad range of stakeholders, can offer input to public policy design and reveals issues that may emerge as material for economic decision-making over time.” They believe, however, that consistent communication of how sustainability matters affect drivers of enterprise value can be a “complementary enabler of change, since it creates a financial incentive for companies and their investors to improve performance on some sustainability matters as much and as quickly as they can”.
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