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Frank Bold’s comment letter to the ISSB consultation on draft global standards

International Sustainability Standards Board (ISSB)
Emmanuel Faber, ISSB Chair
Sue Lloyd, ISSB Vice-Chair
ISSB’s Exposure Drafts IFRS S1 General Requirements for Disclosure of Sustainability-Related Financial Information and IFRS S2 Climate-Related Disclosures

We highly appreciate the ISSB commitment to transparency and due process, which is of critical importance for your mission to develop a global baseline of sustainability reporting standards.

We would like to offer our comments on how the Exposure drafts can most effectively contribute to the ISSB’s ambition to ensure that financial markets all over the world have access to reliable, comparable and decision-useful sustainability information, which we fully support.

Frank Bold is an expert group bringing together an international team of more than one hundred professionals, combining legal expertise on green finance, clean energy, responsible corporate governance and sustainability. We coordinate the Alliance for Corporate Transparency, which brings together over 20 leading civil society organisations with both European and international focus and presence around the globe. We have carried out an in-depth assessment of the sustainability statements of 1000 European companies based on over 500 data points, which served as input into the EU reform. Frank Bold participated in the EFRAG Project Task Force on European Sustainability Reporting Standards, the European Commission's Expert Group on non-financial reporting and is currently a member of the EFRAG General Assembly. Frank Bold staff serves as an appointed representative of the Civil Society Chapter in the EFRAG Sustainability Reporting Board, as well as in EFRAG’s Sustainability Reporting Technical Expert Group

In line with the global baseline approach, the jurisdictional sustainability reporting systems need to be interoperable with the international standards. A meaningful interoperability must also ensure compatibility of results. We appreciate the fact that while the EU, or indeed any individual jurisdiction’s approach, can reflect certain policy choices, the international standards must remain neutral in this regard. At the same time, it is of critical importance that the international standards define an objective common ground derived from international agreements, science and investors’ needs on key definitions, internationally accepted baselines, and level of transparency. Divergences on the fundamental aspects would beat the purpose of international standardisation, and at worst facilitate greenwashing.

In this regard, we support the choice of integrating the TCFD’s reporting areas and its general approach. This architecture is applicable to other ESG topics, and is compatible with the European double materiality approach, and therefore is a keystone to the future interoperability. 

We also fully support the requirements concerning transparency in the governance area, in particular as regards considerations and decisions of the governance bodies and how they oversee sustainability targets, the disclosures of the nature of the climate targets, the use of internal carbon pricing, and the requirements to disclose Scope 1, 2 and 3 absolute emissions.

We see two main areas where the drafts should be improved in order to ensure that investors have access to information required to make informed decisions.

1. Transparency on impacts

We agree with the analysis reflected in the exposure drafts, as well as by the TCFD and CDSB, that sustainability-related risks and opportunities in relation to enterprise value arise both from an entity’s impacts and dependencies on people and the planet.

Therefore, transparency on impacts is necessary regardless of whether the philosophy of the standards is guided by double or dynamic materiality, in order to allow investors to carry out their own assessments in this regard. 

We recommend adapting the exposure drafts to require disclosures of impacts alongside risks and opportunities, including a description of the processes implemented to identify, assess and address impacts, in line with sustainability due diligence. Together with the already included standardised impact indicators, such as GHG emissions, this would provide investors with a comprehensive picture, allowing them to assess companies’ exposures to risk, as well as their capacity to manage impacts in general, and prevent and mitigate risks in a timely manner.

2.  Climate transition plans and targets

The ISSB rightly identifies the central role of companies' transition plan disclosures “towards a lower-carbon economy” to enable users to “assess the entity’s current and planned responses to the decarbonisation-related risks and opportunities that can reasonably be expected to affect its enterprise value”. The need for such information is further reinforced by the increasing adoption by investors of their own climate alignment or carbon neutrality pledges. 

In this regard, the exposure draft doesn’t include several critical elements needed to address problems in current practice, namely the lack of specificity and often misleading nature of disclosures. The following improvements are essential for a comprehensive understanding of a company’s management of risks and impacts: 

  • The company’s transition plan should be explained with regard to compatibility with the Paris Agreement goals to limit global warming to 1.5°C. Regardless of the various policy choices which the parties to the Paris Agreement will implement, failing to adapt business models with the global goals will expose companies to major transition risks. Furthermore, this information is considered material by investors due to their concerns of catastrophic systemic risks if the Paris Agreement goals are not met.

  • Companies should explain how locked-in GHG emissions can jeopardise the achievement of GHG emission targets. This information is connected to, but separate from critical assumptions for legacy assets.

  • IFRS S2 should more directly require the disclosure of the absolute GHG emission reduction targets in the context of transition plans. We concur with the European Securities and Markets Authority comment letter to the ISSB which recommends more clearly distinguishing between emission reduction targets and GHG neutrality targets, and requiring that they should be presented separately in addition to the current, more flexibly formulated requirements on explanation of carbon offsets.

  • IFRS S2 would benefit from separating the disclosures concerning the transition plan in a stand-alone category which would better facilitate descriptions of the characteristics of the transition plan, and distinguish the purpose of these disclosures from the descriptions of the effects of significant climate-related risks and opportunities on its strategy and decision-making, whilst not breaking the connection between the two. This change would result in clearer and better structured analysis provided by the preparers. In this regard, we believe the structure adopted in ESRS E1 serves well.

Lastly, given the goal of the ISSB to provide global baseline standards, we recommend reviewing the rules concerning the ISSB’s composition, to ensure a balanced representation of all the world’s economic regions, taking into account the exposure of these regions to sustainability risks and opportunities.


Susanna Arus

Communications and Events Officer