ESG Changes: Beyond the SEC

Companies and investors have been calling for a single set of international standards to cut through competing climate-related reporting standards and provide more consistent financial data. Now the SEC, the International Sustainability Standards Board (ISSB) and the EU have released proposals that would enhance and standardize public companies’ climate-related disclosures. All three proposals would provide more reliable details about greenhouse gas emissions and the steps companies are taking to avoid risks. 

The U.S. proposal, under the SEC draft rules released in March, would compel publicly traded companies to give investors more details about the sources of their greenhouse gas pollution and describe the potential risks to their business and financial results. The ISSB plans to create a baseline set of ESG reporting requirements similar to international financial accounting standards. The EU is looking at legislation that would require companies to report on the damage they are doing to society, as well ESG-related threats. Both ISSB and the EU proposals go beyond climate-related reporting and are taking into account a wide range of disclosures — from clean water to biodiversity to human rights. 

Designed to be complementary, the ISSB and EU proposals would align with the SEC’s draft rules. The U.S. proposal, while separate, is open to accepting climate reporting based on international sustainability standards. Adoption of all three proposals is projected for 2023.