Stock Exchange Regulators Back Global Climate-Reporting Rules - The Wall Street Journal
Stock Exchange Regulators Back Global Climate-Reporting Rules - WSJ
Stock Exchange Regulators Back Global Climate-Reporting Rules
Association representing over 95% of market capitalization endorses international rules that include Scope 3 emissions reporting
U.S. Securities and Exchange Commission headquarters in Washington. The agency is among the 35 regulators on the board of the International Organization of Securities Commissions, which endorsed the climate-reporting framework. Photo: ANDREW KELLY/REUTERS
Regulators of the world’s top stock exchanges gave their backing to the international climate-reporting standards framework Tuesday, adding momentum to efforts to establish the rules as the global baseline.
The International Organization of Securities Commissions, known as Iosco, endorsed the International Sustainability Standards Board’s recently published climate reporting standard. Iosco’s board of 35 securities regulators—which includes the U.S. Commodity Futures Trading Commission and Securities and Exchange Commission—endorsed the reporting framework which includes requirements to report so-called Scope 3 emissions in the supply chain and material information on climate-related risks and opportunities.
Jean-Paul Servais, chair of Iosco, in a 2019 picture. Photo: Benoit Doppagne/Zuma Press
“Iosco has done a thorough analysis of the final standards proposed by the ISSB and has decided to endorse those standards as fit for purpose for capital markets,” said Jean-Paul Servais, chair of Iosco.
While not surprising, the official endorsement marks an important milestone in efforts to reduce the alphabet soup of voluntary climate-reporting standards and instead provide investors and other stakeholders comparable, reliable information on companies’ material climate risks and opportunities. Iosco’s more than 130 member jurisdictions oversee a total of more than 95% of global market capitalization.
The SEC is completing its own set of requirements for U.S.-listed companies which are expected to come in the second half of this year and to require less disclosure than the ISSB’s recommendations. Meanwhile, the EU’s new standards require more information from both EU-based companies and some international businesses with local operations.
Officials from Japan, China, Britain, the EU and U.S. have been working with the ISSB to make the standards as interoperable as possible, but differences are expected.
The ISSB hopes to become a global baseline for reporting sustainability information. While some businesses may be waiting to see the completed SEC climate reporting rules, it hopes the advantages of using a single standard worldwide outweigh any disadvantages of being more demanding than the SEC’s coming climate reporting rules.
“Iosco’s support for ISSB standards had been expected, but the significance of the announcement shouldn’t be underplayed—a similar announcement was the key driver for the global acceptance of IASB (International Accounting Standards Board) standards 20 years ago,” said Larry Bradley, global head of audit at KPMG.
International Financial Reporting Standards were launched by the IASB early this millennium to create a global set of accounting standards, which Iosco endorsed early on. Around 160 jurisdictions around the world have committed to using that framework, and it is required in 146 of those. One notable exception is the U.S., which maintains its own Generally Accepted Accounting Principles.
Despite the differences, being conversant in both sets of accounting standards is important for U.S. capital-markets participants because of the IFRS reporting needs of multinational companies and cross-border mergers and acquisitions, according to a recent report from accountants PwC.
Iosco Chair Servais expects between 100,000 and 130,000 companies to be using the ISSB’s sustainability standards eventually.
It is now up to individual countries and jurisdictions to decide if and when they adopt the ISSB standards. So far, about 20 countries have declared their interest or commitment to applying and using the ISSB standards including Australia, Canada, Japan, Hong Kong, Malaysia, New Zealand, Nigeria, Singapore and the U.K. Reporting could start from 2025.
The ISSB was created at the COP26 climate summit in Glasgow in response to calls from the Group of 20 advanced and developing economies, the Financial Stability Board—which oversees the G-20 global financial system—and Iosco, as well as business leaders and investors.
“This is a hugely significant step towards a global baseline of sustainability reporting. It is paving the road for regulators to have the confidence to endorse the standards,” said KPMG’s Bradley. “However, it remains to be seen whether regulators adopt the standards as they are, or instead choose to incorporate parts or make changes.”
Write to Rochelle Toplensky at rochelle.toplensky@wsj.com
Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8
Most Popular News
- A Soap Maker Cracks the Code to ‘Made in America’
- Bronny James, Son of LeBron, Suffers Cardiac Arrest During Workout in L.A.
- Parents Hire $4,000 Sorority Consultants to Help Daughters Dress and Impress During Rush
- Stuck on a Flight? Know Your Rights During a Tarmac Delay
- Stock Market Shrugs Off Recession Signals as Rally Builds
Related Knowledge Center: Climate economics
Climate change is now a driver of the world’s economy. The impact is profound:
- Catastrophic weather events — hurricanes, floods, droughts, high temperatures — are more frequent and more extreme. The cost can be measured in both the initial damage caused and the longer-term impact on the economy.
- Vulnerable communities are increasing climate-related investments, hardening infrastructure and taking other protective measures.
- Investment in carbon capture and storage technologies is increasingly rapidly.
- Governments are making investments and crafting regulations to reduce emissions of carbon dioxide and other greenhouse gases.
On top of all of this is the cost of uncertainty. As the Fourth National Climate Assessment, released in 2018 by the U.S. Global Change Research Program, says, “The assumption that current and future climate conditions will resemble the recent past is no longer valid.”