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Proposed Sustainability Disclosure Rule Draws Out Comments and Concerns

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Two proposed rules on sustainability and climate-related disclosures gathered responses from more than 100 companies, highlighting the benefits of a global disclosure baseline and the potential for putting companies at a competitive disadvantage. You have highlighted the shortcomings of revealing certain information.

The International Sustainability Standards Board, which sets climate disclosure rules, is considering two proposals to require companies to disclose sustainability and climate-related risks. These proposals received more than 1,300 comments from him, including Caterpillar’s Chief Financial Officer. Ltd,

intel Ltd.

Levi Strauss & Co., Verizon Communications Ltd.

A letter signed by more than 80 CFOs should focus the ISSB on aligning its standards with existing and developing reporting standards, and encourage boards to address non-climate sustainability issues such as social issues. He stressed the need to move quickly to the topic of sex as well.

Some executives questioned how the ISSB’s rules relate to the US Securities and Exchange Commission’s proposal to require companies to report on their greenhouse gas emissions and climate risks.Tobacco Company Philip Morris International Ltd,

First, it raised concerns about the threshold for including information in the ISSB’s proposal. Emmanuel Babo, his CFO at Philip Morris, said his SEC proposal, which is limited to climate-related data, is likely narrower than the broader sustainability issues the ISSB is considering. says.

“If information corresponding to ISSB requirements is intended to be included in or linked from a regulated filing, the threshold (significant risks and opportunities) for inclusion The definition could be confusing and inconsistent with the SEC’s inclusion criteria,” he said. In a letter dated July 29th. This means it may not be practical for a U.S.-listed company to include disclosures in its financial statements, said a comment co-signed by Jennifer Mottles, the company’s Chief Sustainability Officer. Mr Babo pointed out.

Even where such disclosures are not prohibited, concerns about litigation may cause companies to exclude them from their financial reports, he added.

However, the SEC’s proposed rule was not received so calmly during its comment period, which ended in June and received about 3,400 letters. Companies distorted the proposal by saying it would be costly to comply and that the standards for disclosure were not clear.

Last week, ISSB Chairman Emmanuel Faber said the board was actively considering actions by the SEC and others. The ISSB and its working group, which includes authorities from five jurisdictions – the United States, China, Japan, the European Union and the United Kingdom – meet regularly to coordinate and understand their respective disclosure expectations.

“We cannot achieve the goal of a global baseline where companies and investors can use comparable and reliable information without looking at what the very important jurisdictions are doing,” said Faber. said. This includes the SEC, he added.

The SEC did not respond to requests for comment.

Faber said the ISSB board will consider the feedback provided during the comment period, which closed on 29 July, at its September meeting. He said he expects new rules to be issued early next year to give businesses more time to implement the requirements. Previously, the rule was due by the end of the year.

One of the ISSB’s proposals would require companies to disclose significant climate-related risks, such as floods and other extreme weather events. The other requires that companies share information about their sustainability risks more broadly and implement processes to manage them.

The ISSB’s proposals are intended to set a disclosure baseline as companies grapple with various frameworks, standards and regulatory disclosure requirements around the world. The IFRS Foundation, which oversees the International Accounting Standards Board, launched the ISSB last year to develop global sustainability disclosure standards. Jurisdictions may choose to adopt the ISSB’s standards. This would bind companies in those regions. Companies can also adopt standards on a voluntary basis.

In fact, more companies are using multiple frameworks, with 80% of companies using them in 2020 compared to 68% in 2019, according to research firm Audit Analytics. The data shows that the number of global companies reporting in the four frameworks has increased from 8 in 2019 to 255 in 2019. Last year’s data, which appears in this year’s corporate environmental, social and governance report, is not yet available, the company said.

“We try to be as close to one version of the truth as possible,” said Andrew Bonfield, CFO of Caterpillar, referring to efforts to create a baseline standard. “Because, ultimately, we’re giving investors this information. And without comparability, it’s very difficult.” was one of his signatories to the group letter of

Caterpillar currently shares ESG information in accordance with the standards of the Sustainability Accounting Standards Board and the Global Reporting Initiative. Next year, we plan to incorporate a Task Force on Climate-related Financial Disclosures.

However, finance executives say the ISSB’s standards could be improved.

bank of america of the corporation

Chief Accounting Officer Rudolf Bress said in a July 29 letter that reports on sustainability and climate-related opportunities and risks may contain sensitive information, putting companies at a competitive disadvantage. This could include acquisitions, business transformations or disclosure of new business areas, he said.

Providing such information would likely require speculative assumptions rather than useful information, according to Breth, who argued that companies would benefit from a common set of disclosure practices. He also said he would get it.

George Quinn, group chief financial officer of Swiss insurer Zurich Insurance Group, said the ISSB would also allow companies to tell stories in their disclosures rather than ticking boxes to meet standards. He said it should be ensured..

“A, B, C, and D don’t drive my earnings or profits up or down by X or Y,” he said. Instead, disclosures will focus on the impact a company’s operations have on the planet, he added.

Money is a roadblock in climate change negotiations around the world. Economists warn that limiting global warming to 1.5 degrees Celsius will cost much more than expected. Illustrated by Preston Jesse/WSJ

write destination Jennifer Williams Alvarez (jennifer.williams-alvarez@wsj.com)

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