It is very likely that you will have seen or heard of one if not more of the many sustainability reporting standards and frameworks that form the current landscape (eg. CDP, CDSB, GRI, IR or SASB).
When you have encountered these standards, it is not unlikely that you may also query what differentiates all of these acronyms from one another and wonder whether any of the standards hold any actual meaning. This is not an unusual reaction to the current state of the climate reporting, with both experts and laypeople finding equal relation to the term ‘alphabet soup’ when referring to the numerous acronyms. It therefore comes as no surprise that there is a huge demand from businesses and their stakeholders for an alignment of these standards to increase comparability and ease of use.
As of the 31st of October, the 26th United Nations Climate Change Conference of the Parties (COP26) will begin in Glasgow. Lasting two weeks, the conference marks the coming together of over 190 world leaders, tens of thousands of negotiators, government representatives, businesses and citizens in order to reach agreement on how to tackle climate change.
This year’s conference is likely to have particular poignancy. In the recovery following the COVID-19 pandemic, the world has woken up to its vulnerability global-scale emergencies. Although the COVID-19 pandemic and climate change have vastly differing risk signatures, a briefing paper from the Climate Change and Social Transformations centre (CAST) found that concern for climate change has gone up, not down during the COVID-19 outbreak in the UK. This concern is not limited to the general populous but the business and financial sectors alike. The increasing demand from investors and stakeholders for aligned climate disclosure is stipulated to come into fruition at COP26.
Going back to December of last year (2020), a prototype climate-related financial disclosure paper was published. This paper differed from the usual as it was the first step towards a comprehensive corporate reporting system. Facilitated by the Impact Management Project, The World Economic Forum and Deloitte, the report brings together the CDP, the CDSB, the GRI, the IR and SASB in the creation of a standard which aligns with the recommendations of the FCA backed TCFD.
Under one of the main topics of discussion at COP26 – Mobilising Finance, it is anticipated that the International Financial Reporting Standards (IFRS) will announce the establishment of a sustainability standards board and subsequent disclosure standard that is built upon the foundation of the 2020 prototype paper and aligns with the TCFD. This announcement will be a large step towards the consolidation and comparability of sustainability standards globally and will vastly improve the accessibility of the information markets require on climate-related financial disclosures. Subsequently this will aid in the mobilisation of the trillions of dollars in private and public sector finance required to secure global net zero, through the promotion of capital allocation into truly sustainable business.