Sustainability launch will drive new reporting regulations – FCA

Financial services firms have been able to get their first look at new proposals around sustainability-related reporting standards.

The International Sustainability Standards Board (ISSB) has launched its first sustainability-related reporting standards with backing from a range of major regulatory bodies such as the Financial Conduct Authority (FCA).

The newly released standards are named the General Requirements for Disclosure of Sustainability-related financial information (IFRS S1), and the requirements for Climate-related Disclosures (IFRS S2) are described as responses to the clear market demand for complete, comparable and reliable corporate sustainability disclosures.

Sacha Sadan, director of environmental, social & governance, at the Financial Conduct Authority said: “At its launch at COP26 in November 2021, our CEO, Nikhil Rathi, referred to the ISSB as a ‘game-changer’, and what we’ve seen over the past 18 months or so is that he was absolutely right. We have been working closely with the ISSB since the start and are hugely supportive of its mission to create a common, global language for companies around the world to communicate their sustainability stories in a consistent and comparable way. That is why we are delighted to see the final standards launched.”

The UK Government has also signalled support for the ISSB and announced that it would be establishing a mechanism for formal endorsement and adoption of the standards in the near future.

Once available for use in the UK, the FCA has intentions to update their climate-related disclosure rules to reference the ISSB standards.

Laimonas Noreika, co-founder of HeavyFinance, explained: “It is great to see that the ISSB standards are finally being introduced as sustainability factors become a more mainstream part of investment decision-making. Such standards will help facilitate and promote the efficiency of capital markets, their transparency and accountability in turn building trust, and will enable them to reduce risks across their supply chain. Sustainability reporting yields significant cost savings, and highlights where many organisations may lack, bringing ESG higher on their agendas.

“As the FCA are key influencers in regulatory decisions to help meet the needs of capital markets and public interest, their support will overall aid in the ISSB’s adoption around the world and play a significant step in the fight toward net zero.”

The FCA said the standards build upon the UK government’s commitment toward ESG as part of the Edinburgh reforms in December 2022, the Chancellor announced the UK government’s plans to ensure improved transparency and better conduct in the ESG ratings market, and so HM Treasury committed to consultations on potential regulatory regime for their providers.

Consultations on the consultation paper, which set out proposals for the scope of such a regulatory regime opened on 30 March and are set to close at the end of this week.