The UN-convened Net Zero Asset Owners Alliance (NZAOA) has called for more stringent standards to be incorporated into the International Sustainability Standards Board (ISSB), the global baseline for climate disclosures, including different criteria for the highest polluters and transparency on near-term actions.
The ISSB is closing its consultation tomorrow after inviting industry feedback on its exposure draft on climate-related disclosures released on 1 April 2022. It will review the feedback in the second half of 2022 and aims to issue the new standards by the end of the year giving corporates around the world a common framework to follow.
This morning, the NZAOA made public its consultation response praising the ISSB for acting in a timely manner, and said the ISSB has a “landmark opportunity” to improve the comparability and granularity of climate-related disclosures.
However, it also outlined a number of areas where the ISSB needs to go further to “ensure the consistency and appropriate granularity of disclosures, even for a global baseline”.
Among the key pointers from the Alliance were for the ISSB to incorporate additional disclosure requirements around transition plans.
Specifically, it said near-term actions to deliver on the underlying strategy, alignment of engagement activities, information on financing the transition and details on individuals and governance structures responsible for implementation should all be incorporated into disclosures.
NZAOA also asked for climate scenario analysis to be included in company reporting and recommended the use of a common target-setting template.
Also on targets, the Alliance said the ISSB should require different disclosures of industry metrics for the 12 most energy-intensive sectors and for all companies methane emissions should be reported separately to Scope 1, 2 and 3.
Additionally, the Alliance also asked the ISSB to remove or define the word “significant” for being at risk of being misinterpreted.
“This term is not used in existing climate reporting frameworks and …is not consistent with previous IFRS guidance; a 2018 IFRS staff memo, for example, recommended … “materiality” instead of “significant” as this would better guide decision-making on what should be disclosed,” the statement said.
The Alliance made a final point on the need for globally consistent, comparable, and reliable reporting to provide clear pictures of organisations’ progress.
“The Alliance strongly supports the ISSB’s mission to deliver a high-quality global baseline of climate-related financial disclosures and encourages continued engagement between ISSB and national and regional regulators to ensure interoperability of sustainability-related reporting standards. This should limit the reporting burdens on organisations and lead to the alignment of key concepts, terminologies and metrics on which disclosure requirements are built.”
NZAOA is a group of 74 leading institutional investors managing $10.6trn in assets, have publicly committed – at the CEO level – to decarbonising their investment portfolios in line with a 1.5°C pathway and to achieving net-zero greenhouse gas emissions by 2050 at the latest.
