Asia-Pacific markets make up majority of pioneer group to adopt sustainability disclosure standards
The group of 21 jurisdictions make up nearly 55 per cent of global gross domestic product, and more than half of global greenhouse-gas emissions
OUT of 21 jurisdictions that have publicly made commitments to introduce sustainability disclosure standards into their regulatory frameworks, 12 are in the Asia-Pacific.
The 12 markets are: Australia, Bangladesh, China, Hong Kong, Japan, Malaysia, Pakistan, the Philippines, Singapore, South Korea, Sri Lanka and Taiwan.
Including the other nine markets, which are Bolivia, Brazil, Canada, Costa Rica, the European Union, Kenya, Nigeria, Turkey and the UK, this pioneer group of regulators that has agreed to adopt the International Sustainability Standards Board’s (ISSB) standards, make up nearly 55 per cent of global gross domestic product, and more than half of global greenhouse-gas emissions.
The group also accounts for more than 40 per cent of global market capitalisation, said a media statement released on Tuesday (May 28) by the International Financial Reporting Standards (IFRS) Foundation and the International Organization of Securities Commissions (IOSCO).
Excluding market capitalisation of the US stock market, these 21 jurisdictions make up around 75 per cent of the remaining market capitalisation.
The US Securities and Exchange Commission said in March that it declined to recognise the ISSB standards as an alternative to its current disclosure rules for US-listed companies, even though it acknowledged that there are similarities in both.
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These standards, which were finally launched by the ISSB in June last year after more than a year of discussions and meetings, are meant to help unify the way companies report on their environmental and social impact, and improve the quality of information for investors.
However, given that these markets vary in their sophistication in sustainability reporting, ISSB has designed the disclosure requirements to be applied proportionately to a company’s capabilities and resources.
To support these markets, the IFRS Foundation also released a guide to help regulators design and plan their own journey on how they wish to adopt the ISSB standards. The guide describes various jurisdictional approaches to the full or partial adoption of ISSB standards or other uses.
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Given that many jurisdictions in Asia-Pacific are emerging markets, Jean-Paul Servais, who is chair of the IOSCO board, said that it is not realistic to expect all countries to travel with the same speed.
“The danger would be to think that we can be perfect in one day. We have to accept that while companies can speak the same language, they will have different accents,” he said.
While Asian markets are adopting the ISSB standards at a speedy pace, Mohamed Farid Saleh, who is chair of the growth and emerging markets committee in IOSCO, said that the companies in emerging Asia may find it a challenge to understand the framework itself, and what they will have to do to comply with it.
External support to identify the carbon footprint of these companies would probably be needed.
Given that many companies in Asia-Pacific are already reporting their sustainability information according to standards by the Global Reporting Initiative, Emmanuel Faber, chair of ISSB, said that the recent announcement by both organisations to work together to align common disclosures would eventually be a “seamless solution” for many companies in the region.
“Those standards are going to be profitable for the jurisdictions in terms of attracting the capital that’s needed to consolidate more resilient business models locally. This will improve the tradeability, the trade capacities of those jurisdictions, because there will be more traceability in the supply chains, and they will have a better measurement of carbon footprint,” said Faber.
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