Global sustainability board hands down proposed rules for climate risk reporting

Accounting rule makers across the world, including the Australian Accounting Standards Board, now have proposed rules on climate reporting and general narrative disclosure to respond to as part of a process to create one set of standards for sustainability reporting.

A London-based body known as the International Sustainability Standards Board has issued two exposure drafts, which are proposed pronouncements, to gather views before it finalises the pronouncements.

Both documents were released on March 31 and have an international submission deadline of July 29, 2022.

Australia’s local standard setter has said that the Australian Accounting Standards Board intends to respond to the proposals, and it has flagged that it will publish the same documents on its website to seek local feedback.

These standards will become reporting requirements in Australia in the same way as the standards issued by another London-based body called the International Accounting Standards Board.

This new body of disclosure standards is also supported by global regulators that are members of the International Organisation of Securities Commissions (IOSCO).

The first of the two standards out for consultation deals with general sustainability-related disclosures and these proposals go beyond what would traditionally be seen by readers of financial reports.

“The proposals include requirements to disclose information about a company’s governance of sustainability‑related risks and opportunities and its strategy for addressing them. The company’s reputation, performance and prospects are affected by the actions it takes,” the International Sustainability Standards Board said.

“The proposals would require disclosure of information about an entity’s impacts and dependencies on people, the planet and the economy when relevant to the assessment of the entity’s enterprise value.”

The second of the proposals deals with climate reporting and that would require an entity to report on the impact of climate risks on its enterprise value.

“The Climate Exposure Draft would require a company to centre its disclosures on the consideration of the governance, strategy and risk management of a business, and the metrics and targets it uses to measure, monitor and manage its significant climate-related risks and opportunities,” the ISSB said.

“The Exposure Draft includes a requirement for companies to disclose information about climate-related physical and transition risks and climate-related opportunities.”

This article was first published by The Mandarin.