Climate and health: the standard setter’s view

The scale and complexity of the problem is part of the challenge. Barker reminds us that people generally (let alone boards) struggle to relate to a 2° or 3° world, and long-term, abstract outcomes might not move boards or consumers to act. A role for reporting is to anchor climate-health risk in the present, identifying risks and opportunities and making transparent corporate planning.

These climate-health-related risks in question might be, for example, heat exposure from working outdoors (a longer-term climate-health risk) or, for example, exposure to fire risk (perhaps a risk that is present now).

Reporting standards and materiality

A challenge for sustainability reporting is how to reconcile macro-level climate impacts with entity-level financial consequences. “It’s one thing to say this is a macro impact and another to show the impact on the company,” says Barker.

He reminds us that IFRS Sustainability Disclosure Standards are either adopted or in the process of being adopted across 46 jurisdictions. IFRS S1 sets out broad requirements for reporting on sustainability-related risks and opportunities affecting financial prospects, over the short, medium and long-term, while IFRS S2 focuses on the subset of climate related risks and opportunities.

The ISSB’s work plan includes researching the need for more specific requirements relating to an entity’s workforce (both within its operations and more broadly in its value-chain).

Disclosure dynamics and social norms

“As IFRS S1 reporting becomes more widespread, we can expect that the combination of greater corporate and auditor experience, wider and deeper data availability, and more effective and refined engagement with investors, will lead to increasingly consistent and comparable norms of disclosure,” says Barker. “If climate-health risk emerges as an issue widely understood to be within scope, then of course more companies will start to report and a virtuous cycle of improved disclosures would likely follow.”

But the question remains: what does it take for a company to decide that there is material information for them to disclose in relation to climate-health risks? A variety of routes includes physical risks to employees, reputational risks for the business more broadly, possible exposure to legal or regulatory change affecting the business model, possible litigation, and so on. Such issues will vary by industry and geography. For example, companies in the fast-moving consumer goods industry might be more likely to be consumer- facing, visible and with value-chains that are long and relatively exposed to issues of social licence to operate.

These issues are likely to be familiar to the business already. Barker reminds us that “formal reporting often just articulates something companies are thinking about anyway – disclosure can follow awareness rather than create it”.