The Impact of International Sustainability Standards
In recent years, Environmental, Social, and Governance (ESG) considerations have become increasingly important for investor-focused companies. The growing awareness of climate change, social justice issues, and corporate responsibility has led investors to demand more transparency and accountability from the companies in which they choose to invest. As a result, ESG and sustainability have become key factors in investment decisions, with many investors considering a company’s sustainability performance alongside traditional financial metrics.
The International Sustainability Standards Board (ISSB) is an important initiative in this space. Launched by the International Financial Reporting Standards (IFRS) Foundation on November 3rd, 2021 at the UN Climate Change Conference (COP26), the ISSB has established and continues to improve upon a set of global sustainability reporting standards that provide investors with consistent and comparable information on a company’s ESG performance1. This enables investors to make more informed investment decisions, and actively drives better ESG performance from public companies.
The ISSB’s standards cover a wide range of ESG issues, including climate change, biodiversity, human rights, and social justice. These standards build upon pre-existing investor-focused reporting initiatives that have become common-place in the market.
The ISSB draws from established standards such as
- The Climate Disclosure Standards Board (CDSB),
- The Task Force for Climate-related Financial Disclosures (TCFD),
- The SASB Standards developed for specific industries,
- The Integrated Reporting Framework developed by the Value Reporting Foundation,
- as well as the Stakeholder Capitalism Metrics developed by the World Economic Forum2.
By providing a comprehensive framework for reporting on ESG and sustainability issues, the ISSB helps to ensure that companies are addressing the most important ESG concerns in a consistent and transparent manner. Beyond the clear advantage to inquisitive investors, this standardized reporting also helps to create a level playing field for companies operating in different regions and sectors.
Companies that are proactive in addressing ESG concerns are more likely to attract and retain customers, employees, and investors who share their values. They are also more likely to be able to identify and manage ESG risks and opportunities, which can have a significant impact on their long-term financial performance3.
At 5Q, we recognize the role that sustainability reporting plays in enhancing transparency and engagement with shareholders. As experts in sustainability reporting and investor relations, we leverage our knowledge and experience to help clients meet the demands of their investors and stakeholders at a level or degree that is appropriate for the size of the company. We recognize that there is variability in how much or how little companies may wish to present around their sustainability performance, and as such, we work closely with clients to achieve an optimal and transparent balance in reporting, which can lead to improved investor confidence and long-term financial success.
1 https://www.ifrs.org/groups/international-sustainability-standards-board/
2 https://www.ifrs.org/groups/international-sustainability-standards-board/
3 https://www.esgthereport.com/what-are-the-benefits-of-esg-for-companies/#:~:text=ESG%20provides%20investors%20with%20insight,most%20critical%20and%20influential%20factor.
