I was really hoping to lead with something other than an ESG-related topic this morning, but thanks to Acting Corp Fin Director John Coates, that’s not going to happen. Coates issued a statement on Thursday setting forth his views on ESG disclosure, and he had a lot to say. He addressed some of the key considerations in developing an ESG disclosure system, the costs of non-disclosure of ESG information, and, in this excerpt, called for the development of global disclosure standards:
On the issue of global comparability, in the first instance, arguments in favor of a single global ESG reporting framework are persuasive. ESG issues are global issues. ESG problems are global problems that need global solutions for our global markets. It would be unhelpful for multiple standards to apply to the same risks faced by the same companies that happen to raise capital or operate in multiple markets. In this regard, the work of the IFRS Foundation to establish a sustainability standards board appears promising.
A Davis Polk blog on the statement provides some additional color on the efforts to establish the sustainability standards board to which John Coates referred:
The IFRS is an international non-profit organization that has been steadily working on creating global sustainability reporting standards. By the end of September 2021, IFRS plans to release its definitive proposal, complete with a roadmap and timeline, on whether it will create a sustainable standards board to sit beside the International Accounting Standards Board, IFRS’s accounting standard-setting body.
In February 2021, the International Organization of Securities Commissions, or IOSCO, issued a public statement in support of IFRS’s work. IOSCO’s members include 34 international securities regulators, including the SEC and the CFTC, and the securities regulators of Brazil, China, France, Hong Kong, Spain and the UK, among others.
IOSCO said that it “sees an urgent need for globally consistent, comparable, and reliable sustainability disclosure standards and announces its priorities and vision for a Sustainability Standards Board under the IFRS Foundation.” However, despite the apparent consensus, the blog notes one particular challenge that needs to be confronted – getting all parties to agree upon a definition of “materiality” in the ESG context.
-John Jenkins, TheCorporateCounsel.net March 15, 2021