Accelerating investment decision-making through reporting (part 2)
High quality, reliable and comparable sustainability information is the foundation of sound business and investment decisions, which supports sustainable growth and resilience. But when it comes to organisations’ attempts to manage their climate risks and opportunities, sustainability reporting is also an area where the rubber hits the road, says Alicia Kedzierski, head of sustainable finance at the FCA.
“We are in a phase of firms figuring out what this really means for them. I spend a lot of time explaining that this is not just something that they're doing for the regulator. This is about good business and good risk management. It’s about business supply chain issues that can impact on the profitability of these companies. It is material stuff.”
But Kedzierski accepts that for many organisations, this is also a learning curve. Realistically, it will take some time for sustainability reporting to come of age, she comments. “You have to be well versed in it. You have to go into the detail and roll up your sleeves. It's not something that's going to materialise out of nowhere.”
The current geopolitical environment is shaping a narrative that may suggest that firms are pulling back on their sustainability commitments. But Kedzierski believes that while the language surrounding sustainability may have softened, the underlying action and focus remains firmly in place.
International standards are the cornerstone to greater transparency and accountability around how boards address climate and sustainability issues. Just last month, the UK government launched a consultation on the exposure drafts of UK Sustainability Reporting Standards (UK SRS) based on the standards published by the ISSB in June 2023, providing businesses and other stakeholders much needed clarity on the direction of travel for UK sustainability reporting.
For Richard Barker, ISSB Board member, achieving a global baseline of complete and comparable information is critical, not just for the benefit of investors but also for the efficiency of the reporting system. “The worst thing you can have is multiple frameworks and standards. We just announced the first jurisdictional profiles. There are already 36 jurisdictions around the world that have either adopted our standards or are in the final stages of commitment to that process.”
The ISSB has also published guidance on climate-related transition plan disclosures to help entities provide high-quality information about their climate transition plans, covering both mitigation and adaptation measures.
Directors are well versed in thinking about business risks and opportunities, and sustainability should be no different, Barker says. It's a mistake to think about sustainability or climate as being somehow fundamentally different, he says.
“In the same way that it's core for a company to explain to its investors its planned sales growth and its policies towards employee retention and so on, it's critical to explain how the entity has risks and opportunities that are climate related, and I think the skill set here in investor communication is much the same.”
- Richard Barker, International Sustainability Standards Board member, Chapter Zero Fellow.
Barker’s advice to those committed to improving the usefulness of the sustainability information they report is to remember that this is about mutual benefit for investors and companies. “The value in reporting an entity’s performance in its financial statements, transparently and completely, and with external audit, is that it provides investors with the confidence to invest. This benefits investors and reporting entities alike. The same is true for sustainability reporting, where the same materiality test applies.”
From the standard setter’s perspective, materiality equates to information that can reasonably be expected to influence an investment decision. “It's a high bar. This is information that is really important to your business,” Barker says.
The way to think about materiality and reporting is authentic communication about stuff that matters to your business. “If you have that mindset of ‘we are explaining to our investors what matters to us around the board table, then you won't go far wrong,” Barker says.
For NEDs thinking about sustainability reporting, this is about putting yourself into the shoes of potential or existing investor, Barker says. “What would you want to know about the risks and opportunities that really matter to this business and in what form would you want to know it.”
Related Resources
Corporate Reporting Insights 2025 | Deloitte UK
