New global rules backed by the G20 aim to crack down on corporate greenwashing

Companies will face increased pressure to disclose how their businesses affect climate change under a new set of global rules backed by the G20, designed to help regulators crack down on so-called ‘greenwashing’, which consists of create a false appearance of sustainability.

The standards released on Monday were written by the International Sustainability Standards Board (ISSB), as trillions of dollars are earmarked for investments that further its environmental, social and governance (ESG) credentials.

It will be up to each country to decide whether to require listed companies to apply the standards, ISSB president Emmanuel Faber said, adding that the standards could be used in annual reports from 2024 onwards.

Brazil, Canada, the UK, Japan, Singapore, Nigeria, Chile, Malaysia, Egypt, Kenya and South Africa are considering using it, Faber told Reuters.

The ISSB standards are based on the voluntary standards of the G20 Task Force on Climate-Related Financial Disclosure (TCFD).

The ISSB is part of the IFRS, an independent foundation that also writes accounting rules used in over 100 countries, while Iosco, a global securities regulator, is expected to “endorse” the new standards.

“It just brings more rigor, it’s much more in line with financial reporting,” said David Harris, head of sustainable finance strategic initiatives at the London Stock Exchange Group, which oversees the London Stock Exchange.

Harris said 42% of the world’s 4,000 largest companies currently do not provide data on their Scope 1 and 2 carbon emissions.

“That means capital markets are much less effective because you don’t have the full picture,” Harris said. Under the new rules, companies would have to make material emissions public, with verification by external auditors.

The European Union will finalize its disclosure rules next month, and both the EU and the ISSB have sought to make their standards “interoperable” to avoid duplication for global companies.

Source: Terra

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