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This week, the International Financial Reporting Standards (IFRS) organization published the first two Sustainability Disclosure Standards. Developed by the International Sustainability Standards Board (ISSB), the new standards provide a comprehensive global baseline centered on financial materiality. The focus on financial materiality addresses a critical issue: the need for market participants to accurately assess the enterprise value of individual companies with information on sustainability topics most relevant to financial outcomes, industry by industry.
Accurate, comparable information about corporate enterprise value is essential to our ability to make informed investment decisions on behalf of our clients. For too long, investors have lacked the data necessary to price sustainability-related risks and opportunities, which can feed directly into the assessment of enterprise value. Without this information, investors run the risk of paying too high or low a price for an issuer’s securities. The ISSB’s efforts to standardize sustainability-related financial disclosures should improve data quality and enable national securities regulators and industry groups to adopt and support internationally comparable reporting.
Some Wellington investment teams have already seen the value of these disclosures, where they are available. For example, climate-related information has been a key input to several recent investment recommendations:
Establishing a baseline for sustainability disclosures will also help companies, which currently face a barrage of demands for reporting amid a fragmented, complex, and confusing landscape of disclosure expectations. By homing in on the issues most pertinent to investors, the new ISSB standards should provide clarity for companies and allow them to disclose material information with greater efficiency and accuracy. The interoperability of the ISSB standards with others, including the anticipated climate-disclosure framework from the US Securities and Exchange Commission and the EU’s Corporate Sustainability Reporting Directive (CSRD), should reinforce the role of the ISSB standards as the global baseline for sustainability disclosure for capital markets.
We encourage companies to adopt these standards voluntarily, even if their securities market regulators do not yet require them. While meeting these disclosure expectations will require reporting entities to deepen their knowledge of the sustainability topics most material to their business, we believe greater transparency will have significant long-term benefits for financial markets, including for the issuers of securities themselves, investors, and the millions of beneficiaries who rely on them.
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Impact measurement and management: addressing key challenges
Our IMM practice leader describes common impact investing challenges and suggests ways to overcome them.
2023 Climate Report
Aligned with TCFD recommendations, this report describes how we manage climate-related risks and opportunities, engage with companies on climate change, and reduce our own carbon footprint.
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We appreciate the opportunity to share our approach to advancing sustainable practices across our investment, client, and infrastructure platforms.
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The need for systemic climate change resilience is becoming clear. We present a practical framework to help companies enhance resilience in their own operations.
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