Comparative Analysis of Upcoming Disclosure Standards: Key Steps to Raise Ambition (and the case of deforestation)

ANALYSIS: “Comparative Analysis of Upcoming Disclosure Standards: Key Steps to Raise Ambition (and the case of deforestation)”

What’s in it?

An ambitious and internationally-harmonised disclosure landscape is crucial for enabling financial market participants to evaluate and price-in sustainability risks and impacts when making investment decisions. This study structurally analyses three proposals for sustainability and climate-related disclosure standards, published by the European Financial Reporting Advisory Group (EFRAG), the International Sustainability Standards Board (ISSB), and the US Securities and Exchange Commission (SEC) in March and April 2022, along our ‘seven building blocks for effective disclosure standards’. For each building block, we evaluate the three proposals’ design choices, identify ambition gaps and provide recommendations on how to close these gaps.

The case of deforestation

The paper zooms in and applies these insights to the case of deforestation. A significant share of terrestrial biodiversity is harboured by forests, and as these are disappearing, so is the availability of ecosystem services on which many economic activities depend. Deforestation is therefore an investment risk because a loss of ecosystem services can negatively affect companies’ production processes and finances. Additionally, exposure to biodiversity loss or degradation of ecosystem services opens up the company to transitional and reputational risks.

This comparative analysis and the resulting recommendations are based on the three consultation drafts published by the European Financial Reporting Advisory Group (EFRAG), the International Sustainability Standards Board (ISSB) and the US Securities and Exchange Commission (SEC) in March and April 2022. Since these drafts, there have been a number of developments.

Whilst the development of disclosure standards is ongoing, this paper aims to contribute towards an ambitious and effective international disclosure landscape by providing an analytical comparative framework for disclosure standards and recommendations.

Read about all of this and more in our report below: