A group of 15 financial institutions*, including Federated Hermes Limited, Nordea AM and Rabobank, announced the publication of a letter submitted to the IFRS Foundation’s International Sustainability Standards Board (ISSB), urging the organization to develop a mandatory, standalone standard for corporate nature-related reporting, dependencies and opportunities, warning that current plans for voluntary requirements risk creating fragmented and inconsistent information for investors on material risks and opportunities.
The new letter follows the launch of a consultation last week by the ISSB into its proposed nature-related disclosure requirements, presented in the form of a non-mandatory Practice Statement.
The ISSB announced last year that it would begin work on standard setting for disclosure requirements on nature-related risks and opportunities, following its release in 2023 of its inaugural general sustainability (IFRS S1) and climate (IFRS S2) reporting standards.
Rather than developing a mandatory standalone standard, however, the ISSB announced in April that had decided to proceed with the development of proposed nature-related reporting requirements in the form of an IFRS Practice Statement. While non-mandatory by design, IFRS Practice Statements are a form of standard setting, sharing similarities including being subject to full due process, including public consultation.
At the time, the ISSB explained that it had elected to use the Practice Statement format in order to minimize disruption for companies currently implementing its existing standards. The ISSB also pointed out that the standards in the Practice Statement can become mandatory by jurisdictions that choose to apply it.
As part of its new consultation the ISSB said that it would seek feedback on whether to issue nature-related content in another form, such as a standalone mandatory standard.
In the new letter, released through the Finance for Biodiversity Foundation, while welcoming the ISSB’s work on nature-related disclosure and recognizing the considerations behind its decision to issue a practice statement, the investor group said that it believes that “a dedicated Nature Standard should remain the intended outcome,” warning that without this outcome, “we risk fragmentation and inconsistency across different jurisdictions.”
Among the key concerns highlighted by the group was the potential for the emergence of different practices across jurisdictions, warning that some may wait for further standard setting, while others could rely on the existing S1 and S2 standards to address nature-related issues, and some could choose to make the practice statement, or parts of it mandatory. The group said that this outcome “would lead to fragmented reporting requirements, reducing comparability and increasing complexity for both reporting entities and investors.”
The letter stated:
“Investors need a dedicated Nature Standard to ensure consistent, comparable, and decision-useful disclosures across global markets.”
In the letter, the group called on the ISSB to clarify how consistent application across jurisdictions will be delivered in order to provide consistent information for investors, how disclosures will support asset, company, and portfolio-level analysis, and the process, conditions and timeline towards the establishment of a dedicated nature-related standard.
Sonya Likhtman, Stewardship Director, Federated Hermes Limited and co-chair of the FfB Public Policy Advocacy working group, said:
“Investors require clear and coherent information from companies about their nature-related impacts, dependencies, risks and opportunities to support effective risk management and decision-making. Furthermore, addressing climate change without considering nature-related issues such as water, land use and pollution would provide an incomplete picture for investors. We therefore see significant value in the ISSB continuing to explore the development of a nature standard, responding to the widespread demand from the private sector and other stakeholders.”
The group invited other financial institutions to support the statement.
Click here to access the statement.
*signatories include: Achema, Achmea Investment Management, Aequo Shareholder Engagement, Cardano, Domini Impact Investments, Etica Funds – Responsible Investments, Federated Hermes Limited, La Banque Postale Asset Management, Nordea Asset Management, Rabobank, Rathbones, Storebrand Asset Management, Swedbank Robur Asset Management, Tribe Impact Capital and Univé.
