Stock Exchange Regulators to Support Global Climate Reporting Rules

Regulators from the world's leading stock exchanges have given their official support to the international climate-reporting standards framework, providing momentum to establish the rules as the global baseline. The International Organization of Securities Commissions (Iosco) endorsed the International Sustainability Standards Board's (ISSB) recently published climate reporting standard, which includes requirements for reporting Scope 3 emissions in the supply chain and material information on climate-related risks and opportunities.

Key Points

• Iosco's board of 35 securities regulators, including the U.S. Commodity Futures Trading Commission and Securities and Exchange Commission, endorsed the ISSB's climate reporting framework as fit for purpose for capital markets.
• This endorsement is a crucial step in efforts to streamline voluntary climate-reporting standards and provide investors and stakeholders with comparable and reliable information on companies' climate risks and opportunities.
• Iosco's 130 member jurisdictions oversee over 95% of the global market capitalization, making this endorsement significant in promoting uniformity in climate reporting worldwide.
• The ISSB aims to become the global baseline for reporting sustainability information, and its standards have received interest or commitment from about 20 countries, including Australia, Canada, Japan, Hong Kong, Malaysia, New Zealand, Nigeria, Singapore, and the U.K. Reporting could begin as early as 2025.
• The SEC is working on its own set of requirements for U.S.-listed companies, expected in the second half of this year, which may differ from the ISSB's recommendations. Similarly, the EU's new standards demand more information from EU-based companies and some international businesses with local operations.
• Japan, China, Britain, the EU, and the U.S. are working with the ISSB to make the standards as interoperable as possible, but differences are anticipated.

Implications for Compliance and GRC Professionals

The endorsement of the ISSB's climate reporting standards by Iosco has significant implications for compliance and governance, risk, and compliance (GRC) professionals:

1. Standardization and Global Adoption: Compliance professionals should be prepared for potential widespread adoption of the ISSB's sustainability standards by countries and jurisdictions around the world. Understanding and implementing these standards will be essential for companies operating internationally.
2. Reporting Requirements: Compliance professionals and data privacy teams need to familiarize themselves with the ISSB's reporting requirements to ensure accurate and comprehensive climate-related disclosures in financial reports. Companies operating in multiple jurisdictions may face varying compliance obligations.
3. Interoperability with Local Regulations: GRC professionals should assess how the ISSB's standards align with local regulations in different countries and regions. Understanding potential differences and incorporating them into reporting practices will be essential for multinational companies.
4. Investor Expectations: Compliance professionals must be aware of investors' growing interest in climate-related disclosures. Meeting investor demands for transparent and reliable climate information will be critical for maintaining trust and attracting investment.
5. Environmental, Social, and Governance (ESG) Integration: GRC professionals should collaborate with sustainability and ESG teams to ensure that climate reporting aligns with broader sustainability initiatives and goals. Integrating ESG considerations into financial reporting will enhance companies' credibility and reputation.
6. Data Collection and Verification: Compliance professionals need to establish robust data collection and verification processes to ensure the accuracy and reliability of climate-related data. This includes monitoring and tracking Scope 3 emissions and climate risks in the supply chain.
7. Continuous Monitoring and Improvement: Compliance and GRC teams should adopt a proactive approach to monitor evolving climate reporting regulations and standards. Staying ahead of changes and improvements in reporting practices will be essential to remain compliant and competitive.

The endorsement of the ISSB's climate reporting standards by Iosco signals a crucial step towards global consistency in sustainability reporting. Compliance and GRC professionals must be proactive in adapting to these evolving standards to meet regulatory requirements, investor expectations, and growing demands for transparent climate-related disclosures. As more countries express interest in adopting the ISSB standards, companies should be prepared to align their reporting practices with the global baseline to demonstrate their commitment to sustainability and environmental responsibility.