ISSB – preparing for the new wave of reporting standards

At Arrow, we value transparent communication with our stakeholders, as evidenced by our recent annual ESG report, “We Are Accelerating Our Progress”. This report highlights our significant strides in integrating ESG principles into our operations, empowering our teams to incorporate sustainability, identifying areas for positive impact, and enhancing our measurement and reporting capabilities.

The ESG landscape has evolved rapidly over recent years, with regulation and reporting standards striving to keep pace. Aligning with a recognised reporting framework is crucial to increase transparency and provide a more detailed focus on relevant data and KPIs. This is why we’re enthusiastic about the International Sustainability Standards Board’s (ISSB) inaugural ESG standards.

The ISSB’s ESG standards offer several advantages. They establish a global set of sustainability disclosures, creating a common baseline for issuers of all sizes, sectors, or locations. This uniformity in communication drives convergence with other reporting requirements and efficiencies in data capture across geographies. It enables companies to deliver robust reporting efficiently and cost-effectively, particularly beneficial for businesses operating in multiple jurisdictions. The ISSB standards also facilitate companies to communicate their sustainability disclosures in a common language with their global investor base, enhancing transparency and enabling informed decision-making. They also promote greater comparability between asset managers, encouraging them to improve their ESG strategy.

From a risk management perspective, the ISSB standards mandate companies to identify and report on sustainability-related and climate-related risks affecting their assets. This ensures comprehensive risk management and, coupled with the increased transparency and comparability of ISSB disclosures, guides asset managers and investors on capital allocation, reducing portfolio risk and boosting sustainable investment. This is pivotal in driving the change needed to meet the Paris Agreement’s objectives.

However, the adoption of the ISSB’s ESG standards could still present potential challenges. The global applicability of the ISSB’s standards depends on individual countries and companies’ willingness to implement them, which could be challenging due to varying regulatory landscapes and enforcement mechanisms. The standards demand high transparency and detailed reporting, posing a challenge for companies lacking the necessary systems or processes. Meeting these requirements may necessitate investment in new technologies or processes, which could be costly and time-consuming. The introduction of the ISSB’s standards could also lead to a polarisation of reporting frameworks, causing inconsistencies and complicating comparisons.

Despite these potential challenges, the ISSB’s standards offer a streamlined, universal approach built upon existing standards via SASB and the International Financial Reporting Standards (IFRS) Foundation. This increases credibility and complements other reporting frameworks, including those aimed at broader stakeholder groups or jurisdiction-specific ones. As a leading European vertically integrated asset manager operating in 5 jurisdictions with 19 asset management and servicing platforms, we support calls from the likes of the PRI for global policymakers to make ISSB mandatory by 2025 (Responsible Investor, June 2023). This will drive convergence with other reporting requirements and enhance efficiency for businesses operating in multiple jurisdictions.

The ISSB standards will enable the communication of sustainability disclosures in a common language with across a wide range of global investors, driving transparency and enabling informed decisions. They will also promote greater comparability between asset managers, encouraging them to improve their ESG strategy and performance. The transparency requirements of ISSB mean there will be nowhere to hide – you will have to identify and report on sustainability-related and climate-related risks affecting assets.

Reporting on sustainability and climate-related opportunities is equally important. The increased transparency and comparability of ISSB disclosures will guide asset managers and investors on capital allocation, reducing risk and increasing sustainable investment. This will help drive the change needed to meet the Paris Agreement’s goals. Despite the potential challenges, we at Arrow are committed to embracing the ISSB’s standards as another significant step forward in our sustainability journey.

Reference:
Responsible Investor (June 2023) PRI’s CEO calls on global policymakers to make ISSB mandatory by 2025 (responsible-investor.com)