There have been many significant developments in the process to develop increased disclosures of climate-related and other sustainability, or ESG information. One of the significant developments was the response to the Open Letter that the Group of Five sent to the chair of the International Organization of Securities Commissions (IOSCO) offering to support IOSCO efforts in the arena, which welcomed the Statement of Intent and the Open Letter.8 The response acknowledged alignment with these efforts, citing the publication of a report and the creation of a board-level Sustainable Task Force (STF) to address areas of improvement for sustainability-related disclosures.
Other key highlights along this journey have included:
IFRS Foundation Consultation Paper on Sustainability Reporting — The response to this consultation paper issued by the IFRS Trustees about whether the IFRS should create a ‘Sustainability Standards Board’ was an overwhelming yes. Many respondents also expressed concern about the need for broader sustainability standards beyond the initial focus on climate disclosures.9
U.S. Securities and Exchange Commission (SEC) Climate Change Consultation — Recognizing the increased demand for more extensive disclosures than had been provided under 2010 Climate Change Guidance, the SEC issued a public request for input on how the SEC could best regulate and monitor increased disclosures. The rules proposed by the SEC in March 2022 are largely in line with the disclosures that companies are already providing under the recommendations of the TCFD.10
U.K. Climate-related Financial Disclosure (CFD) regulations — Among initiatives that are part of the UK Green Finance Strategy include the policy paper: Greening Finance: A Roadmap to Sustainable Investing, proposing U.K. Sustainability Disclosure Requirements (SDRs) which build on TCFD reporting recommendations. Following an announcement at COP 26 in November 2021, the U.K. government has imposed requirements on large companies to disclose climate-related information, beginning for years ending December 2023.11
EU Corporate Sustainability Directive (CSRD) — In April 2021, based on a determination that the EU Non-financial Reporting Directive (NFRD) did not meet the needs of investors and stakeholders, creation of the CSRD was proposed to extend the scope and detail of sustainability reporting requirements which will go into effect in 2023.12 These disclosures would be made according to standards to be developed by the European Financial Reporting Advisory Group (EFRAG) with a target date of October 2022. A Sustainable Finance Disclosure Regulation (SFDR) was also created that imposes disclosure requirements on EU Institutional Investors.13
GRI Standards update and Alliance with EFRAG — In July 2021, GRI launched an updated version of its GRI Standards, which eliminates the previous option of reporting more limited or more extensive disclosures.14 The 2021 version requires companies reporting in accordance with the GRI Standards to determine all material topics, defined as ‘topics that represent the organization’s most significant impacts on the economy, environment, and people, including impacts on their human rights’. GRI also announced it was working with the European Financial Reporting Advisory Group (EFRAG) in the role of ‘co-constructor’ of new EU sustainability reporting standards in connection with the Corporate Sustainability Reporting Directive (CSRD) proposal.15
