New rules aim to clamp down on corporate greenwashing

Companies will face more pressure to disclose how climate change affects their business under a new set of G20-backed global rules aimed at helping regulators crack down on greenwashing.

The norms published on Monday have been written by the International Sustainability Standards Board (ISSB) as trillions of dollars flow into investments that tout their environmental, social and governance credentials.

It would be up to individual countries to decide whether to require listed companies to apply the standards, ISSB Chair Emmanuel Faber said, adding the standards can be used for annual reports for 2024 onwards.

Canada, Britain, Japan, Singapore, Nigeria, Chile, Malaysia, Brazil, Egypt, Kenya and South Africa are considering their use, Faber told Reuters.

The standards build on voluntary ones from the G20's Task Force on Climate-related Financial Disclosures (TCFD).

Britain was the first major economy to make TCFD disclosures by listed companies mandatory.

"We are committed to including reporting against UK endorsed versions of the IFRS sustainability disclosure standards launched here today," UK treasury minister Joanna Penn told a launch event for the standards.

The ISSB is part of the independent International Financial Reporting Standards foundation, which also writes accounting rules used in more than 100 countries, while global securities watchdog IOSCO is expected to "endorse" the new standards.

"Endorsement shall be a real game changer for regulators around the world in considering the use of the ISSB framework," IOSCO Chair Jean-Paul Servais told the launch event.

David Harris, head of sustainable finance strategic initiatives at London Stock Exchange Group, said the new norms bring more rigour to sustainability reporting, more aligned with financial reporting.

Harris said that 42% of the world's top 4,000 companies do not provide data on Scope 1 and 2 carbon emissions.

"It means capital markets are far less effective because you haven't got a full picture," Harris said. Under the ISSB rules, companies would need to disclosure material emissions, with checks by external auditors.

The European Union finalises its own disclosure rules next month and it and the ISSB have sought to make each other's norms "interoperable" to avoid duplication for global companies.

ISSB requires more detailed disclosures from banks on carbon emissions related to individual sectors such as oil and gas.

"We maintain that because banks and banking supervision were really clear that it is needed for them," Faber said.

The ISSB and EU are set to issue guidance on avoiding duplication in coming months.