Dive Brief:

• The International Sustainability Standards Board plans to widen its focus beyond climate risk and consider creating guidelines for corporate reporting on human capital, biodiversity, human rights and ecosystems.
• The ISSB, a panel backed by the Group of 20 advanced and developing countries, will release next month a request for feedback about its future priorities with a 120-day comment period, the board said in a statement.
• The panel identified the new topics for standard-setting “based on the information needs of investors,” it said. While widening its agenda, the ISSB is also preparing to release in June guidelines for reporting on climate risk and sustainability, with a proposed enactment date by regulators across the global of Jan. 1, 2024.

Dive Insight:

The Securities and Exchange Commission has indicated that it plans to precede ISSB standard-setting by releasing before May a final rule mandating that companies describe on Form 10-K their levels of greenhouse gas emissions and strategy toward reducing climate risk.

During testimony before the House Financial Services Committee on Tuesday, SEC Chair Gary Gensler did not say whether the agency will stick to that timeline or postpone release of the rules a second time.

The climate risk reporting standards put CFOs and their C-suite colleagues in the middle of a clash between activists for improved corporate performance on environmental, social and governance issues and their opponents.

“Companies should be prepared to deal with ESG backlash during this proxy season,” the Conference Board said in its 2023 Proxy Season Preview entitled “Compromise and Conflict Ahead.” It predicted an increase in “anti-ESG proposals” compared with last year.

“Companies are now considering making fewer public pronouncements on social issues, focusing more on actions and internal communications, and tying their stands on social issues more closely to business strategy,” the Conference Board said.

“Shareholder proposals, however, may force companies to take a public stand that can serve as fodder for anti-ESG activists,” it said, predicting an increase in the number of proposals on biodiversity, plastic pollution and deforestation.”

Gensler during his testimony faced criticism from several Republican lawmakers who said that by releasing a final rule on climate risk disclosure the SEC would impose a costly reporting burden on publicly-traded companies and overstep its congressional mandate.

“American presidents are not supposed to brazenly weaponize the SEC to push through radical climate change policies that they are unable to pass through Congress,” Rep. Alexander Mooney, R-W.Va., told Gensler. The SEC proposal is aimed at “naming and shaming fossil fuel companies.”

“We’re not a climate policy agency,” Gensler replied. “We’re a market regulator, and it’s about full and fair and truthful disclosure.”

The ISSB, the sister organization to an accounting rulemaker recognized by 167 regulatory jurisdictions worldwide, aims to align dozens of the inconsistent frameworks for corporate ESG disclosures used worldwide.

While writing sustainability guidelines, the ISSB has drawn from some of the existing standards, including those created by the Sustainability Accounting Standards Board.