Hope springs eternal - part 2

Highlights of COP15 on Biodiversity

The 15th Conference of Parties to the UN Convention on Biological Diversity (COP15) ended with the adoption of the “Kunming-Montreal Global Biodiversity Framework” (GBF), with four global goals for 2050 and 23 targets for achievement by 2030. The “30x30” commitment often cited refers to the target of protecting 30% of lands, oceans, coastal areas, inland waters and restoring 30% of degraded ecosystems by 2030. The four long-term goals related to the 2050 Vision for Biodiversity include:

1. Halting human-induced extinction of threatened species and reducing the rate of extinction of all species tenfold by 2050
2. Sustainable use and management of biodiversity to ensure that nature’s contributions to people are valued, maintained and enhanced
3. Fair sharing of the benefits from the utilization of genetic resources, and digital sequence information on genetic resources
4. That adequate means of implementing the framework be accessible to all Parties, particularly Least Developed Countries and Small Island Developing States

Also of particular interest for this audience is Target 15, which is to “take legal, administrative or policy measures to encourage and enable business, and in particular to ensure that large and transnational companies and financial institutions: (a) regularly monitor, assess, and transparently disclose their risks, dependencies and impacts on biodiversity, including with requirements for all large as well as transnational companies and financial institutions along their operations, supply and value chains and portfolios; (b) provide information needed to consumers to promote sustainable consumption patterns; (c) report on compliance with access and benefit-sharing regulations and measures, as applicable, in order to progressively reduce negative impacts on biodiversity, increase positive impacts, reduce biodiversity-related risks to business and financial institutions, and promote actions to ensure sustainable patterns of production.” (Find the full text here.) The outcome of the COP15 conference has been touted as a landmark agreement, giving many people hope that it will indeed provide a unifying framework for prompt action from all countries and all constituents – governments, capital providers, companies, and citizens. The proof, as they say, will be in the pudding.

ISLP Guide: ESG Standards, Regulations, and Implementation

Every once in a while, a foundational resource comes along that takes stock of what’s happening in the global corporate sustainability reporting landscape and allows us to level-set our collective knowledge. This is one of them. The International Senior Lawyers Project (ISLP), a non-profit organization that "provides pro bono legal assistance to governments and civil society organizations in the Global South and in countries transitioning to democracy and market-based economies to support just, accountable, and inclusive development", has published a Guide to Environmental, Social, and Governance (ESG) Standards, Regulations, and Implementation: Reference Guide on Australia, Brazil, Canada, Colombia, the European Union, Peru, the United Kingdom, and the United States. For each jurisdiction, the guide offers key environmental, social, and governance topics of interest, current and expected ESG disclosure practices, and legal challenges and enforcement for disclosure breaches. Perhaps most relevant is the overarching perspective gained by the authors, who conclude that the general public in all of these countries supports ESG principles, and that more uniformity in how nations measure ESG progress is happening. As can be expected for this type of document, the value of its contents is matched by that of what one can find at the end: the bibliography, glossary, compilation of organizations, and list of valuable resources. Given the pace of change in this field, it will soon be outdated, but that’s ok.

“Companies increasingly are under pressure from shareholders and the public at large to go above and beyond regulatory requirements. As instances of greenwashing and faux ESG measures are exposed, public pressure with regards to compliance with ESG commitments will only increase.”        

Ontario Securities Commission disclosure review finding

Speaking of regulated disclosures and enforcement actions, it is standard practice for securities regulators to conduct a review of reporting issuers’ disclosure documents – sometimes this results in a comment letter to the companies presenting material deficiencies or errors, which the companies must respond to. In its CSA Staff Notice 51-364 Continuous Disclosure Review Program Activities, the Ontario Securities Commission found “a number of instances where issuers provided inconsistent disclosure between documents that are required to be filed under securities legislation and voluntary disclosures”, reminding issuers that:

• “Information should be consistently disclosed in all public documents, including voluntary disclosures. Voluntary disclosure documents are typically published on an issuer’s website or on a social media platform and include documents such as presentations, sustainability reports, and public surveys.
• Including material information in voluntary disclosure but omitting it from continuous disclosure documents may indicate that the issuer has failed to provide the disclosure required in the continuous disclosure documents.
• Disclosures should be factual and balanced. For example, unfavourable news must be disclosed just as promptly and completely as favourable news.”

It also observed “an increase in issuers making potentially misleading, unsubstantiated, or otherwise incomplete claims about business operations or the sustainability of a product or service being offered, conveying a false impression commonly referred to as ‘greenwashing’”, again reminding issuers that:

• “With increased access to data and information online, it is important to ensure that all public disclosures, whether voluntary or required are factual and balanced.”

May this serve as a helpful reminder that reporting contents must be consistent, accurate, and balanced, and if information matters to investors (i.e., they want and need it) it can be considered material and should probably find its way into continuous disclosure documents. We can expect regulations to change to that effect.

ISSB China office

Pursuing its objective to establish a global presence for the International Sustainability Standards Board (ISSB) through a multi-location model, the IFRS Foundation has signed a three-year Memorandum of Understanding with the Ministry of Finance of China to establish a Beijing office, focused on leading and executing the ISSB’s strategy for emerging and developing economies, acting as a hub for stakeholder engagement in Asia, facilitating deeper co-operation and engagement with stakeholders, and undertaking capacity-building activities for emerging economies, developing countries, and small and medium enterprises. The Beijing office is expected to open in mid-2023. This is clearly a significant step forward in the global adoption of a common set of sustainability disclosure standards.

PwC’s Global Investor Survey 2022

The latest PwC institutional investor survey provides empirical evidence that companies should integrate sustainability to their business model and strategy, as investors want and need to understand the ‘relevance of sustainability factors to the company’s business model’ and their financial connection, including the ‘cost to meet the sustainability commitments the company has set’ – this may be when the chickens come home to roost for those companies making lofty commitments without a clear action plan to achieve them. Speaking of greenwashing, 87% of investors surveyed say they think corporate reporting contains unsupported sustainability claims, and they would clearly prefer externally assured disclosures. Curiously, investors responding to the survey very candidly expressed that the two top priorities for businesses are to ‘be innovative’ and ‘seek profitable financial performance’… Perhaps ‘be innovative’ is intended as a catch-all synonym for ‘change to integrate sustainability to your business model and strategy, manage, measure, and report differently, and contribute to your ecosystem sustainability while remaining profitable’? Here’s hoping.