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More than 80 CFOs push back on sustainability reporting

August 1, 2022, 10:43 AM UTC
Colleagues at business meeting in conference room
"We have an overly complex set of standards," Mars CFO Claus Aagaard said of the International Sustainability Standards Board's reporting proposals.
FangXiaNuo for Getty

Good morning,

CFOs want to have a say in the creation of standardized reporting rules on sustainability. So, with the help of the Prince of Wales, 86 finance chiefs across the globe signed a letter sent to the International Sustainability Standards Board (ISSB) insisting on the improvement of its proposed reporting standards.

“It is a basic principle that you can’t manage what you don’t measure,” Mars Inc. CFO Claus Aagaard, one of the finance chiefs who signed the letter, told Fortune in a statement. “But in the race to create acceptable measurement frameworks, we have an overly complex set of standards which are making the challenge of sustainability reporting even harder than it needs to be. This risks obscuring the focus on what these numbers tell us and how we’re going to make progress.”

Aagaard is among the CFOs at companies headquartered in the U.S. who signed the letter. Here are a few more: Amy Weaver, president and CFO at Salesforce; Andrew Bonfield, CFO, Caterpillar; Scott Herren, EVP and CFO, Cisco; Harmit Singh, CFO, Levi Strauss & Co; Matt Ellis, EVP and CFO, Verizon; and David Zinsner, CFO, Intel.

Investors with global investment portfolios have been calling for transparent ESG reporting by companies. As a result, the ISSB was established in November to set climate reporting requirements that would be largely used worldwide. ISSB is a branch of the International Financial Reporting Standards Foundation (IFRS), which has developed financial reporting standards for more than 100 countries, including the European Union and the G20.

The ISSB released two drafts of a proposed set of rules: IFRS S1 (General Requirements for Disclosure of Sustainability-Related Financial Information) and IFRS S2 (Climate-related Disclosures). On July 29, the last day for comments on the proposals, the Accounting for Sustainability (A4S), an organization created by Prince Charles to get finance leaders involved in building a sustainable economy, submitted the letter signed by CFOs.

Here’s a summary of the six areas where CFOs want the ISSB to improve upon its proposed rules:

-Alignment with relevant existing sustainability reporting standards “to the greatest extent possible.”

-Clarity on what constitutes enterprise value, recognizing that investors may need disclosures on broader social and environmental impacts to assess risk and make investment decisions.

-Clear definitions and guidelines for preparers.

-Disclosure requirements should enable a “continued focus on setting science-based, ambitious targets and the actions needed to achieve them.”

-Promote integrated thinking through frameworks such as the Integrated Reporting Framework.

-Address the environmental, social, and economic issues that impact decision-making.

 ISSB will review feedback and aims to issue new standards by the end of the year.

In March, the U.S. Securities and Exchange Commission’s (SEC) proposal on thorough environmental reporting by American public companies also came in response to a shift in investor interest and public opinion. The comments period closed in June. And the proposed rules are still under review.  

The SEC received thousands of comments, and there was some pushback from corporate America.

For example, Wells Fargo wrote, in part: “Time and effort spent on granular, prescriptive disclosures for climate metrics and targets will require us, and other filers, to prioritize risk management resources on risks that do not impact firm’s safety, soundness, and resilience. The overly prescriptive metrics and targets are likely to go beyond material risk as we manage climate-related financial risk.”

Quick note: For the rest of the week, you’ll be hearing from Kevin Kelleher who will be keeping you in the know. See you next week. Take care.

Sheryl Estrada

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