Government to endorse and implement the International Sustainability Standards Board (ISSB) standards as soon as possible. The UK should lead by example, launching a formal adoption mechanism as soon as the ISSB standards are published and moving swiftly to assess and endorse the standards for use in the UK. The UK should aim for 2024/25 as the first sustainability reporting cycle for companies in scope, encouraging companies to apply the ISSB's standards voluntarily in 2023/24. |
143. To unlock finance, and ensure it is directed towards transition activities in the most effective way, financial actors need information. As well as information on the direction of policy (see "certainty" above), investors need high-quality and consistent information on companies' and other financial institutions' sustainability-related risks and opportunities to help them make informed decisions, a clear policy ask from investors across the Review's engagement.
144. For the information to be useful for financial decision making, it needs to be comparable across firms (and geographies), economy-wide, and it must be forward-looking. Doing so will ensure investment decisions take into account not only a firm's current carbon footprint but its plans to reduce that carbon footprint. Several initiatives have led to considerable progress in this area, most notably the framework set out by the Taskforce for Climate-Related Financial Disclosures (TCFD). The UK has taken several steps towards making these requirements mandatory, in 2021 becoming the first G20 country to make TCFD-aligned climate-related financial disclosures fully mandatory across the economy, a crucial step toward achieving high- quality and comparable disclosure.134
145. Building on TCFD and other leading sustainability reporting initiatives, the International Financial Reporting Standards (IFRS) Foundation has established an International Sustainability Standards Board (ISSB) to set a comprehensive global baseline of sustainability- related disclosure standards. The international character of finance means that finance competes for investment opportunities globally. Aligning reporting requirements in the UK with standards established globally and playing an active role in shaping global reporting requirements will put the UK in a strong position to attract international finance into the UK. Clear direction over how international standards apply to UK markets will provide certainty for financial decision makers. In the Green Finance Roadmap135 government set out the Sustainable Disclosure Requirements (SDRs) - an integrated framework for decision-useful disclosures on sustainability across the economy, building on leading global standards and best practice. In line with these commitments, we therefore recommend that Government endorse and implement the ISSB standards as soon as possible.
"It is important that the government proceeds with the Sustainable Disclosure Requirements in a timely manner to provide investors and capital markets with sustainability data that enables the growth of investment and financing of sustainable investments." - Association for Financial Markets in Europe136
146. Ultimately, international sustainability reporting standards need to be on a par with financial reporting requirements and connected to them, without any major deviation from international standards. This will serve to create a level-playing field and a reliable information set for investment decisions. And climate-related disclosure requirements will need to expand beyond corporate reporting to support the information needs of capital providers across asset classes.