There are multiple voluntary standards and frameworks for sustainability reporting. A standard is a specific quality requirement for reporting. It contains detailed criteria, or sustainability metrics, of “what” should be reported on a specific topic. A framework is a broader, contextual “frame” for information. It is a set of principles providing guidance and shaping understanding of a certain topic, defining the direction of information but not the methodology of collection or reporting itself.
Voluntary Standards & Frameworks
The following standards and frameworks are used by firms around the world to disclose firm-specific sustainability (not just climate) information that then informs investors and other stakeholders.
The International Sustainability Standards Board (ISSB) was established on 3 November 2021 at COP26 in Glasgow to develop a high-quality, comprehensive, global baseline of sustainability disclosures focused on the needs of investors and the financial markets. The ISSB consolidated several other standard setting organizations, including the Value Reporting Foundation (which itself was created by merging the Sustainability Accounting Standards Board and the international integrated reporting committee) and the Climate Disclosure Standards Board. The ISSB currently operates under the oversight of the IFRS Foundation.
In June 2023, the ISSB issued its inaugural standards. IFRS S1 applies to reporting on sustainability-related financial risks and opportunities for all sustainability issues, particularly those for which the IFRS Foundation has yet to publish issue-specific standards. IFRS S2 applies to reporting on climate-related financial risks and opportunities.
The industry-led Task Force on Climate-related Financial Disclosures was established by the Financial Stability Board to identify the information needed to appropriately assess and price climate-related risks and opportunities. The Task Force consults with a wide range of business and financial leaders and analyzes thousands of disclosure documents to assess current disclosure practices and develop a robust framework for climate change related disclosure.
In 2017, the TCFD released climate-related ﬁnancial disclosure recommendations designed to help companies provide better information to support informed capital allocation. The recommendations are structured around four thematic areas: governance, strategy, risk management, and metrics and targets. The four recommendations are interrelated and supported by 11 recommended disclosures that build out the framework with information that should help investors and others understand how reporting organizations think about and assess climate-related risks and opportunities.
The Global Reporting Initiative was established in 1997 as an independent international organization that establishes and proliferates sustainability reporting standards. The GRI reporting standards, available here, cover topics that range from biodiversity to tax, waste to emissions, diversity and equality to health and safety.. These standards help businesses and governments comprehend and communicate their impact on climate change, human rights, governance, and social well-being.
At the 2020 World Economic Forum (WEF) Annual Meeting in Davos, 120 of the world’s largest companies supported efforts to develop a core set of common metrics and disclosures on non-financial factors for their investors and other stakeholders. These “Stakeholder Capitalism Metrics” allow companies to align their mainstream reporting on performance against environmental, social and governance (ESG) indicators and track their contributions towards the Sustainable Development Goals (SDGs) on a consistent basis. The 21 core, and 34 expanded metrics cover four themes: People, Planet, Prosperity and Principles of Governance.
PCAF is a global partnership of financial institutions that work together to develop and implement a harmonized approach to assess and disclose the greenhouse gas (GHG) emissions associated with their loans and investments.
PCAF is open to any financial institution and therefore it has developed GHG accounting methodologies that apply to any financial institution. The following asset classes are currently covered by the methodology: listed equity & corporate bonds, business loans and unlisted equity, project finance, mortgages, commercial real estate and motor vehicle loans.
The European Financial Reporting Advisory Group (EFRAG) was established in 2001 by the European Commission. The group has two pillars—one focused on financial reporting and the other on sustainability reporting. In its financial reporting activities, EFRAG ensures that the European view is represented in the International Accounting Standards Board’s (IASB) standard-setting process and provides advice to the European Commission on the International Financial Reporting Standards (IFRS). EFRAG extended its mission in 2022 following the new role assigned to EFRAG in the Corporate Sustainability Reporting Directive (CSRD), providing Technical Advice to the European Commission in the form of fully prepared draft EU Sustainability Reporting Standards and/or draft amendments to these Standards. Its Member Organizations are European stakeholders and National Organizations and Civil Society Organizations.
The CDP is a not-for-profit organization that aims to study the implications of climate change for the world’s principal publicly traded companies. It runs a global disclosure platform for investors, companies, cities, states, and regions manage their environmental impacts by helping persuade companies throughout the world to measure, manage, disclose, and ultimately reduce their greenhouse gas (GHG) emissions. Each year, CDP takes the information supplied in its annual reporting process and scores companies and cities based on their journey through disclosure and towards environmental leadership.
The Principles for Responsible Investment (“PRI”) were developed by an international group of institutional investors convened by the United Nations Secretary General. There are six principles, all designed to incorporate ESG issues into the investment practice. Principle 3 states: “We will seek appropriate disclosure on ESG issues by the entities in which we invest.”
The PRI has close to 5,000 signatories with a total of $121.3 trillion in assets under management. The PRI’s goal is to support its international network of investor signatories in incorporating ESG factors into their investment and ownership decision and to encourage investors to use responsible investments to enhance returns and better manage risks. Note that beginning in 2020, TCFD-based reporting has become mandatory for all PRI signatories.