Asia is emerging as a frontrunner in adopting global sustainability reporting norms, with Hong Kong, Japan and Malaysia among those that have fully aligned with the International Sustainability Standards Board (ISSB)’s rules.
To continue reading, subscribe to Eco‑Business.
There's something for everyone. We offer a range of subscription plans.
- Access our stories and receive our Insights Weekly newsletter with the free EB Member plan.
- Unlock unlimited access to our content and archive with EB Circle.
- Publish your content with EB Premium.
The ISSB published its first batch of jurisdictional profiles and snapshots last week, revealing that the region made up over a third of the 36 countries that are in the process of adopting its standards.
Of the 17 jurisdictions that have finalised their approaches, 14 are on track to fully adopt ISSB’s standards, which cover both general sustainability concerns (IFRS S1) and climate disclosures (IFRS S2), including Hong Kong and Malaysia. Bangladesh, meanwhile, is limiting disclosures to the financial sector.
Another 16 jurisdictions, including Japan, Singapore and South Korea, are in the process of finalising their approaches. Of these countries, Japan and 11 others have proposed standards that are fully aligned with the ISSB’s rules, either in terms of the disclosure requirements.
Qatar and Panama were excluded from the ISSB’s analysis as they have only made their announcements to propose their standards relatively recently, said ISSB vice-chair Sue Lloyd during a media briefing held on Monday. The European Union was also left out as it remains uncertain how the ongoing simplification of its sustainability reporting rules to boost the competitiveness of European companies might impact their interoperability with ISSB standards.
While Lloyd told Eco-Business there is “a lot of commonality” in reporting rules being proposed globally with ISSB standards so far, she is also seeing some key differences emerge.
For instance, Singapore and Australia to date are focused only on adopting ISSB’s requirements for climate disclosures, while South Korea has opted not to require industry-specific reporting – a slight deviation from the standard body’s recommendations.
“Often that’s because of government or policy decisions in a jurisdiction that apply beyond just the reporting considerations,” said Lloyd. ISSB’s director of regulatory affairs Jonathan Bravo added that while Australia and Singapore have so far limited their reporting to climate-related issues, they have announced intentions to expand this scope later on.
The release of these profiles is part of the ISSB’s efforts to provide transparency to investors, banks and insurers on which jurisdictions are adopting comparable standards, to better inform their financing decisions and the ability of companies to attract capital, said ISSB chair Emmauel Faber. The body said that the 36 jurisdictions represent a significant share of global market capitalisation.
In parallel, the ISSB has proposed easing its requirements for Scope 3 reporting, which covers indirect value chain emissions – typically the bulk of a firm’s carbon footprint. ISSB is currently consulting on amendments to exclude the disclosures of facilitated and insurance-based emissions from financial institutions, such as those from lending or underwriting.
Lloyd clarified that the proposed dropping of Scope 3 reporting related to derivatives, facilitated transactions and insurance activities simply confirms ISSB’s decision at the point of publishing its inaugural disclosure standards to exclude these more nascent areas of carbon accounting until the market matures. Currently, the ISSB only offers a one-year relief from Scope 3 reporting.
“[We are] always trying to get this balance right to make sure we’ve got good decision-useful information out there, while the ask that we’re making of companies is a reasonable one given the state of the market,” she said.
ISSB’s announcement coincides with other standard-setters softening Scope 3 reporting requirements, such as the Science Based Targets initiative, which has proposed greater flexibility for smaller companies from lower-income countries. Singapore also abandoned its fixed timeline for Scope 3 reporting for listed firms last September. Meanwhile, the EU could be exempting some large firms from Scope 3 reporting for three years, according to a leaked draft proposal.