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Introduction:

The world is undergoing a transformative shift towards sustainable practices, and the corporate world is no exception. Over the past few years, there has been a wave of new sustainability standards and regulations aimed at enhancing environmental, social, and governance (ESG) disclosures. In this timeline, we’ll highlight key moments from over the last several years when significant sustainability standards and regulations were introduced.

April 2021:

The European Union (EU) made a significant move towards sustainability reporting by releasing the Corporate Sustainability Reporting Directive (CSRD). Aligned with the European Green Deal, this directive mandated ESG disclosure starting in 2024. The CSRD expanded on the existing Non-Financial Reporting Directive (NFRD) and substantially increased reporting requirements for a broader range of companies.

November 2021:

At the COP26 summit, the International Financial Reporting Standards (IFRS) Foundation Trustees announced the creation of the International Sustainability Standards Board (ISSB). This marked the beginning of a new era in sustainability-related disclosures on a global scale.

In the same month, the Hong Kong Stock Exchange issued mandatory climate disclosure guidance for listed issuers. Additionally, they analyzed IPO applicants’ corporate ESG practice disclosures, emphasizing the growing importance of climate considerations in financial markets.

December 2021:

Singapore Stock Exchange joined the sustainability movement by issuing mandatory disclosure recommendations on climate and board diversity, following the Task Force on Climate-related Financial Disclosures (TCFD) recommendations. All issuers were required to provide climate reporting on a ‘comply or explain’ basis, starting from the financial year commencing in 2022.

Also in December of 2021, the Office of the Comptroller of the Currency (OCC) in the United States announced draft climate-related financial risk principles for banks with over $100 billion in total consolidated assets.

February 2022:

The EU adopted a proposal for a Directive on Corporate Sustainability Due Diligence. This was accompanied by revisions to the CSRD proposal, aiming to ensure that businesses address the adverse impacts of their actions, both within and outside Europe.

March 2022:

The U.S. Securities and Exchange Commission (SEC) proposed a new set of rules on climate-related disclosures. These rules covered various aspects, from greenhouse gas emissions to expected climate risks and transition plans, signifying a significant move towards standardized climate reporting in the United States.

The ISSB also entered the scene by releasing exposure drafts, including IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and Exposure Draft IFRS S2 Climate-related Disclosures.

April 2022:

The European Financial Reporting Advisory Board issued a draft of the European Sustainability Reporting Standard (ESRS), inviting input from a wide spectrum of stakeholders through a two-part survey.

June 2022:

China introduced its Guidance for Enterprise ESG Disclosure, marking its ambition to create a definitive ESG disclosure standard. This guidance provided a framework for Chinese companies to report on environmental, social, and governance metrics.

In the same month, the Council of the European Union and the European Parliament reached an agreement on the CSRD, which aimed to address shortcomings in existing non-financial reporting rules and introduced more detailed reporting requirements.

September 2022:

The Federal Reserve Board (FRB) announced that six major U.S. banks would participate in a Climate Scenario Analysis Pilot, designed to assess the resilience of financial institutions under different climate scenarios. Importantly, there were no capital or supervisory implications from this pilot.

November 2022:

The EU Parliament announced the adoption of CSRD and ESRS standards, which became effective on January 5, 2023, officially replacing the existing NFRD rules.

Additionally, IFRS and the Carbon Disclosure Project (CDP) incorporated ISSB’s standards into the CDP disclosure platform, paving the way for over 17,000 voluntary users to disclose data structured according to IFRS S2 in the 2024 disclosure cycle.

June 2023:

The ISSB issued its inaugural global sustainability disclosure standards, marking a significant step towards the adoption of a worldwide sustainability reporting framework.

July 2023:

The ISSB announced its responsibility for monitoring companies’ progress in climate-related disclosures, taking over from the Task Force on Climate-related Financial Disclosures (TCFD).

Conclusion:

The timeline of sustainability standards and regulations demonstrates a global commitment to sustainability reporting and a gradual shift towards standardization of reporting. As we look into the future, there remain several landmark regulatory shifts that we expect to be implemented. Most notably, the final decision on the SEC’s climate disclosure rule of March 2022 is expected to be finalized by the end of 2023. If you have questions about recently passed or coming regulations in your jurisdiction, do not hesitate to reach out to contact our experts at https://esgiq.mzgroup.us/

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