The following details framework updates that occurred in July, as well as highlighting some key updates and releases to be aware of in the coming few years. Frameworks such as those explored in this report can help stakeholders understand how an organisation manages risks and opportunities around such sustainability issues. Often used as a communication tool, it can play an important role in demonstrating the sincerity of a company’s actions as well as ensuring good governance.
In June, global ESG regulations were found to have increased by 155% in the last 10 years, with 1,255 ESG regulations introduced worldwide since 2011. To compare, only 493 regulations were published in the 9 years from 2001 to 2010. However, since the start of the 21st century, there has been a 647% increase in ESG regulations.
July 2023 Update
The general observed trends within frameworks include a growing focus on disclosure, regarding both data and strategy, as well as an increased engagement of supply chains. Climate impacts are also seeing greater levels of inclusion into regulations and policies.
|The ISSB has been formally requested to take over the monitoring and responsibilities of the TCFD from 2024, at the same time the ISSB Standard is applied across the globe.
|11 July 2023
|GHG Protocol has released a draft summary report containing a detailed overview of stakeholder feedback from the Scope 2 Guidance survey.
|25 July 2023
|The ISSB has published the Proposed IFRS Sustainability Disclosure Taxonomy for public comment, reflecting the disclosure requirements in the ISSB’s standards, S1 and S2. The consultation is open for comment until 26 September.
|27 July 2023
Non-Financial Reporting Consultation
The has opened a consultation for feedback on the non-financial reporting requirements which will set the scene for a consultation next year for the implementation of ISSB. This will review the reporting requirements UK companies need to comply with to produce their annual report and to meet broader requirements that sit outside of the Companies Act. The review will also consider if current company size thresholds that determine certain non-financial reporting requirements, and the preparation and filing of accounts with Companies House, remain fit for purpose. See the survey questions to support this call for evidence.
European Securities and Markets Authority
The European Securities and Markets Authority issued a public statement on the sustainability disclosure expected to be included in the prospectuses. The statement sets out their expectations on how the specific disclosure requirements relate to sustainability-related matters in equity and non-equity prospectuses should be satisfied considering the ESG transition.
EU Nature Restoration Law
On 12th July, MEPs (Member of the European Parliament) passed the Nature Restoration Law, which will place recovery measures in 20% of land and oceans within the EU.
Green Finance Institute and nature restoration
The Green Finance Institute has launched a new initiative aimed at facilitation collaboration on nature restoration between some of the UK’s biggest financial institutions.
MEES legislation concerns
Without investment, nearly 20% of office space is unlikely to be fit for purpose, and thus unlettable. This is in terms of meeting the needs of occupiers and complying with MEES legislation.
DEFRA’s Third National Adaptation Plan
The launch of NAP3 outlined the steps it will take to adapt and increase resilience to various shocks and developments caused by climate change and biodiversity loss. The approach will align with the fourth Climate Change Risk Assessment due in 2027, via streamlining requirements to shorten timeframes.
Renewables and fossil fuels failed agreement ahead of COP28
A Clean Energy Ministerial meeting was hosted in India ahead of COP28, with the aim to consolidate international agreements on shared goals and plans for decarbonising energy systems whilst also meeting growing electricity demands. While the energy efficiency goals was widely supported, observers noted disagreements over the renewable energy goal, resulting in no communique from the meeting, which requires agreement from all parties on all paragraphs.
Iosco endorses the ISSB’s two new standards, S1 and S2
The International Organisation of Securities Commissions (Iosco) has endorsed the ISSB’s two new standards on sustainability and climate-related disclosures, S1 and S2. Iosco has called on jurisdictions to make their application compulsory, or at the very least, allow companies to use them on a voluntary basis.
The Transition Plan Taskforce
The Transition Plan Taskforce has announced the seven sectors for which it is developing the guidance: asset management, asset owners, banking, electric utilities and power generators, food and agriculture, metals and mining, and oil and gas. The final Disclosure Frameworks are expected in October.
|Planned policy statement confirming SDR rules
|New GRI Biodiversity Standards expected to be published
|SEC’s climate-related disclosures
|Issuance of a finalised Climate Disclosure rule delayed until ‘fall’
|Final draft of “Land Sector and Guidance” document to be released in September 2023, along with associated data collection templates and calculation guidance.
|Final version of the TNFD’s framework expected
|Transition Plan Taskforce
|Final Disclosure Frameworks expected for the seven selected sectors guidance.
|EFRAG to propose a second draft of ESRS to the Commission that will include standards for sectors, non-EU companies, and listed SMEs; voluntary guidance for non-listed SMEs; amendment to the first draft to implement a cap on value chain emissions
|New questions to be released on biodiversity, requesting Board level oversight, public commitments, the impact of the value chain, actions to progress the topic, indicators and related publications
|Anticipated adoption of the second draft of ESRS
|Due to supersede NFRD in 2024. Large companies already subject to NFRD must begin reporting on the fiscal year 2024
|Expected to release drafts of revised text
|Final standards and guidance to be released
Looking ahead, alignment of regulatory initiatives, harmonisation of targets and more standardised data will be needed to help improve transparency and enable companies to achieve their decarbonisation targets. The underlying principles new regulations and ratings due to align to are the ESRS and ISSB.
As a result, companies should be reviewing and aligning to the ISSB’s Standards and the ESRS. Initially, a gap analysis should be conducted to identify missing data and information as well as giving an opportunity to make roles and responsibilities clear to all personnel involved – upskilling may be required. Ensuing this, improving the accuracy of data should occur, accompanied by an internal report in preparation for public reporting once UK compliance requirements have been released.
How we can help
We can support you and your organisation navigate the complexities of voluntary and mandatory reporting, as well as the regulatory frameworks around sustainability. Please contact us to speak to one of our experts.
- CDP – (formally) Carbon Disclosure Project
- CSRD – Corporate Sustainability Reporting Directive
- ESRS – European Sustainability Reporting Standards
- GHG Protocol – Greenhouse Gas Protocol
- GRI – Global Reporting Initiative
- ISSB – International Sustainability Standards Board
- MEES – Minimum Energy Efficiency Standard
- SDR – Sustainability Disclosure Requirements
- TNFD – Taskforce for Nature Related Disclosure