Financial Advisors

Global Standard Setters Coalescing Around Sustainability Standards

Notable progress is being made toward establishing global environmental, social, and governance (ESG) disclosure standards as organizations around the world are coalescing to achieve this objective. Their efforts include a commitment to advocacy that will be a critical element of success for developing sustainability standards. Following are some important milestones achieved to date.

A global coalition has emerged from a recent Statement of Intent to Work Together Towards Comprehensive Corporate Reporting, put forth by five standard-setting institutions — CDP Global, Climate Disclosure Standards Board (CDSB), Global Reporting Initiative (GRI), International Integrated Reporting Council (IIRC), and Sustainability Accounting Standards Board (SASB). The coalition seeks to develop market-based and globally coherent solutions for sustainability disclosure standards.

As noted in a recent CFA comment letter, a common language that enables investors to distinguish between financial value-relevant and values-relevant disclosures is important to serve the needs of investors. It is also crucial to be clear on what investors need and what is material to their investment decision-making process, and then to consider separately the information needs of other stakeholders, including investors who invest based on values over value.

The Trustees of the International Financial Reporting Standards (IFRS) Foundation published a consultation paper to assess demand for global sustainability standards and to determine whether and to what extent the Foundation might contribute to the development of such standards.

As noted in the consultation paper, “It became clear that sustainability reporting is continuing to increase in importance for those stakeholders. Notwithstanding differences in scope and motivation, all stakeholders share a common message: there is an urgent need to improve the consistency and comparability in sustainability reporting.”

The IFRS consultation paper noted the organization might contribute to more consistent sustainability reporting using its experience in international standard-setting and its well- established governance structure. One possible option is to establish a new sustainability standards board, operating alongside the International Accounting Standards Board (IASB).

The World Economic Forum (WEF) and the International Business Council (IBC), published the joint report Measuring Stakeholder Capitalism, which utilizes standards issued by the SASB and the GRI to promote a framework for ESG reporting.

Brian Moynihan Chairman and Chief Executive Officer, Bank of America Chairman, International Business Council of the World Economic Forum and Klaus Schwab, Founder and Executive Chairman, World Economic Forum noted the collaboration “defines a core set of Stakeholder Capitalism Metrics (SCM) and disclosures that can be used by IBC members to align their mainstream reporting on performance against environmental, social and governance (ESG) indicators and track their contributions towards the Sustainable development Goals (SDGs) on a consistent basis. The metrics are deliberately based on existing standards, with the near-term objectives of accelerating convergence among the leading private standard-setters and bringing greater comparability and consistency to the reporting of ESG disclosures.”

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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Kurt Schacht

Kurt N. Schacht, JD, CFA is Managing Director for CFA Institute’s advocacy group. He has overseen CFA Institute policy research, standards and government relations area, and has been responsible for the CFA Institute Code of Ethics and Standards of Professional Conduct, the Global Investment Performance Standards (GIPS®), and the CFA Institute Asset Manager Code and one of its flagship publications, the Financial Analysts Journal. Prior to joining CFA Institute, he served as chief operating officer for a mutual fund complex, general counsel and COO for a Manhattan based hedge fund, and as deputy director/chief legal officer for the State of Wisconsin Investment Board (SWIB). He is an industry practice expert on investment management, corporate governance and financial service industry regulation, including Investment Company Act and Investment Advisers Act rules and practice.

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