Huw Jones

LONDON, (Reuters) – Companies who want to boost their environmental credentials or appeal to ethical investors are now being scrutinized by the establishment of a standard body that aims to eliminate unjustified climate claims.

International Sustainability Standards Board (ISSB), which seeks to replace a variety of voluntary disclosure practices that have not had much success with “baseline global standards” which can be used by companies to inform investors about the effects of climate change.

Companies are encouraged to present a favorable picture of climate policies and practices to investors. This will help them to be more responsive to investor demands in an increasingly global environment-, social, and governance (ESG), targeted fund market that has grown to multi-trillion dollars.

Ashley Alder is chair of IOSCO (the global umbrella for securities regulators, which created the ISSB), and stated that “we are really focused upon greenwashing.” “It is super important. If you don’t have basic data on a global comparable basis then it increases the risk of greenwashing tremendously.”

Alder also leads Hong Kong’s Securities Watchdog.

The ISSB, unveiled at the UN’s COP26 global climate summit https://www.reuters.com/business/cop in Glasgow and whose board and chair will be based in Frankfurt, will publish its first batch of global norms for climate-related company disclosures next year.

The IFRS Foundation is the parent body of this new body. They published prototype standards of climate disclosure that the ISSB can review and make available for public consultation before adoption in 2022’s second half.

Alder indicated that IOSCO was examining a potential assurance framework in order to verify whether the ISSB standards were properly used by companies. Similar arrangements are already made for financial reporting. Outside auditors inspect accounting rules.

Alder stated, “We see that assurance can be one of the legs that are necessary to ensure that there is maximum trust around reporting according to these standards.”

IOSCO could endorse the new standards. It would mean its 95% members in the global securities market will be bound to follow them.

Success of ISSB depends on support from large countries. However, the European Union already has its disclosures in place. These are much more ambitious and require that companies also disclose how they affect climate change.