Sustainability disclosure rules for corporates and financial services firms are being rolled out quickly, with the EU set to adopt the European Sustainability Reporting Standards (ESRS) in the coming months, and the US Securities and Exchange Commission looking to implement climate disclosure requirements by year-end.  The International Sustainability Standards Board (ISSB), which sets global standards, will release its sustainability and climate reporting standards in a matter of weeks. 

This is positive: it is only with disclosure of impacts, risks and transition plans from a wide variety of sectors that we can rapidly reduce our contribution to sustainability challenges including climate change.  

The wide array of standards and regulations, however, poses a problem. With growing divergence, firms with international operations and value chains will have to adhere to multiple fragmented, complex frameworks, and the resulting data may be incomparable. These divergences are wide-ranging, with jurisdictions potentially requiring the use of differing metrics on board expertise, carbon emissions and sector-specificity, as well as employing different assurance considerations.  

The banking and finance sector must play a leading role in financing the transition, but regulatory divergence risks acting as a distraction and resource-draw during this urgent decade of climate action. As both a user and provider of disclosures, this is an acute risk for banks. 

That is why UK Finance supports the work of the ISSB to develop a global baseline for sustainability reporting, and its adoption by a wide set of jurisdictions.  

Our support for global alignment 

In late 2022-early 2023, we worked with our members and partner organisations to devise clear asks for regulators and standards setters. These include: 

• maximising alignment of disclosure requirements with the global baseline  

• using the same language across jurisdictions where disclosures are intended for the same purposes 

• setting out where initiatives are aligned or where differences exist, so that users, preparers and regulators have a shared understanding of the comparability of the information; and 

• collaborating in good faith through institutions like the ISSB’s Jurisdictional Working Group to achieve coherence over time. 

In addition to delivering these asks to key regulators in the UK and policymakers overseas, UK Finance was delighted to host ISSB member Richard Barker at two roundtables with members and UK authorities on 24 May, ahead of the publication of its sustainability and climate reporting standards in the coming weeks. The roundtables offered an opportunity to hear directly from the ISSB on their plans for the standards and emphasise our support to a wide range of UK authorities.  

We are pleased that some of these asks are being listened to. The UK government reiterated its support for the ISSB in March, and the European Commission and ISSB have continued to work together to address divergences. 

The UK role and next steps 

The UK has real leadership to offer. The government has a commitment to one of the most rigorous disclosure regimes globally, encompassing reporting on risks, impacts, opportunities and transition plans. In implementing this regime and adopting the ISSB standards as one of the key building blocks, it demonstrates that it is possible to develop an ambitious framework in a globally coherent manner.  

It can and should extend this leadership. The Transition Plan Taskforce has placed the UK as the global leader on transition plan disclosure. The government and regulators have demonstrated a pragmatic approach to disclosure rules, including sequencing corporate disclosures before financial ones, so that financial services firms have the data they need. Transmitting the lessons learned and advocating for similar approaches elsewhere could place the UK as a credible rule-giver rather than -taker. 

UK Finance will continue to support the UK and the ISSB as they advocate for an ambitious, globally aligned sustainability reporting regime.