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How EY can Help
The IMF, in its October 2021 Global Financial Stability Report, called on policymakers to, “urgently strengthen the climate information architecture both for firms and investment funds,” to align investment flows with climate goals.3 The ISSB has the potential to become a key pillar of this architecture and in the provision of relevant, decision-useful ESG information. As the global sustainability standard-setting process kicks into gear, three issues are key to keep on the policy agenda:
1. The need for specific social and corporate governance standards
We believe the ISSB is right to prioritize climate in its initial development of sustainability reporting standards and are pleased that its general requirements prototype will provide companies with disclosure guidance related to other ESG matters on an interim basis.
In the medium-term, however, the same urgency with which the board is approaching a specific climate standard is needed on a broader set of sustainability issues, including employee-related matters and human rights.
The need for action on these issues has become painstakingly clear amid the COVID-19 pandemic with research from the United Nations Conference on Trade and Development (UNCTAD) illustrating how the pandemic has reversed years of progress toward achieving the Sustainable Development Goals (SDGs).4
At the same time, disclosure mandates related to social and governance factors have emerged around the world. Examples include:
- The Corporate Sustainability Reporting Directive (CSRD) will require EU (and some non-EU headquartered companies) to report on human rights, among other workforce data.
- In the US, the Securities and Exchange Commission (SEC) recently approved new listing rules regarding board diversity and disclosure for NASDAQ-listed companies and is drafting a set of mandatory human capital-related disclosure rules that could include a number of metrics, such as workforce turnover, skills and development training, compensation, benefits, workforce demographics including diversity, and health and safety.
- India’s largest 1,000 listed companies will soon be mandated to file a Business Responsibility and Sustainability Report (BRSR) with information covering a broad range of ESG factors including welfare benefits and median wages, gender diversity, and resource usage.