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Lindsey Hall: Hi. I'm Lindsey Hall, Head of Thought Leadership at S&P Global Sustainable1.

Esther Whieldon: And I'm Esther Whieldon, a Senior Writer on the Sustainable1 Thought Leadership team.

Lindsey Hall: Welcome to ESG Insider, an S&P Global podcast, where Esther and I take you inside the environmental, social and governance issues that are shaping the rapidly evolving sustainability landscape.

On this podcast, we bring new coverage from events in many different parts of the world. From Paris to New York, from Davos to Dubai, just to name a few. This week, we're taking you to London as we cover the annual S&P Global Sustainable1 Summit that took place in the city.

Esther Whieldon: Corporates, investors, analysts, and academics gathered in London on May 8 to discuss themes ranging from evolving sustainability standards to the energy transition and the need to manage climate and biodiversity risks in tandem. Now, Lindsey, you know London pretty well, right?

Lindsey Hall: That's right. I actually spent my student days at the London School of Economics and started my career as a journalist in the Financial Times office in London. It was fun being back to emcee the event this week. I get to team up with our colleague, Jennifer Laidlaw, who's a Senior Writer on the Sustainable1 Thought Leadership team and a regular contributor to this podcast. Jennifer, thanks for joining us. Tell me, what did you hear at the event? Any exciting takeaways to share with our audience?

Jennifer Laidlaw: Well, hi, Lindsey, it's so great to see you in person again. Thanks for having me back. I heard about the latest and sustainability standards from the Vice Chair of the International Sustainability Standards Board, Sue Lloyd. Sue is the keynote speaker at the conference. And I had the opportunity to sit down with her the on the sidelines of the event after her speech. We discussed the uptake of the standard so far and how the ISSB is working with different jurisdictions to guide them in adopting the standard.

Lindsey Hall: And this is timely to just last week, the IFRS Foundation jointly published guidance with the European Financial Reporting Advisory Group to show the interoperability between global and EU sustainability-related disclosure standard.

As a refresher, the IFRS Foundation is the body that develops international accounting standards, and it launched the ISSB back in 2021. EFRAG serves as a technical adviser to the European Commission and developed a European Sustainability Reporting Standard, or ESRS. The new guide provides details about how climate-related disclosures between ESRS and ISSB standards aligned.

Jennifer Laidlaw: Yes. And Sue talks about this in our interview, you also hear her mention S1 and S2. S1 refers to the ISSB's first standard, which asks companies to disclose sustainability-related risks and opportunities. And S2 refers to the ISSB's climate-related standard. Here's our conversation.

Okay, Sue, well, thanks so much for sitting down with us. Just to get started, what key takeaways should listeners who couldn't be here today. What kind of things would you like them to know, the kind of remarks that you made today during the conference?

Sue Lloyd:  Well, I think the key point is reminding everybody what the ISSB is all about, what we're trying to achieve. The fact that our role, really, is to ensure that investors have the information that they need to make informed investment decisions that they can rely on that information. And that information is capable of being compared on a global basis. And so that's the whole point of the exercise that we're all engaged on.

And also to comment on the sort of momentum, what's been achieved to date. The fact that we're very pleased that we published our first two standards in June last year that the international securities regulators promptly endorsed those standards, saying that they were fit for use in global capital markets and encouraging jurisdictions to make use of those standards at a jurisdictional level.

And then really commenting on the momentum that we now see in terms of the numbers of jurisdictions around the world actively consulting on the use of our standards, decisions made by some jurisdictions already, such as Brazil, on the use of the standards.

The fact that we've got good interoperability with Europe, which is very, very important, both for companies and investors. And a real reminder to the audience that our job is not done yet, so encouraging people to continue to be engaged particularly with the consultation process that's going on at the jurisdictional level to ensure that we don't just have the theory of globally comparable information for investors, but that's realized through the adoption and use of the standards.

Jennifer Laidlaw: Okay, great. And since you released the standards last June, what kind of things would you say you've learned so far?

Sue Lloyd: So I think so far, we are seeing a huge amount of interest. I think that's the most -- not unexpected, but a higher level of interest than we -- I've certainly had anticipated, in terms of the pace of jurisdictional engagement and interest in consulting and making decisions about the use of our standards.

Also, a huge interest from people and making sure they really understand the standards and they're getting ready, so a huge demand for capacity building. And something that we're starting to see, which was the evolution I expected, but it's great to see it is going from starting with a fairly high-level questions to understand the standards and now moving into more technical questions, which shows that people are really starting to dig into the detail of applying the standards. And so we're starting to see that evolution.

Jennifer Laidlaw: All right. And when you see technical questions, what kind of technical questions are they?

Sue Lloyd: People are asking questions about how to read particular words on the standards. We had -- just to give you an idea of just how granular they are. We had some questions that we talked about at our first transition implementation group meeting in March in Frankfurt about what the word "vulnerable" means when we talk about describing information about assets that are vulnerable to physical and transition climate-related risks are. So very specific questions. People are really now starting to think about operationalizing the use of the standards.

Jennifer Laidlaw: Yes, really getting into the nitty-gritty somehow.

Sue Lloyd: Yes, absolutely.

Jennifer Laidlaw: Okay. Great. Is there any other feedback that you've received?

Sue Lloyd: I think what people are focused on is making sure that they really understand where we introduced some reliefs or approaches to make sure that our standards were proportionate. Because the very, very strong message that we got when we went out with the drafts of the standards before we finalize them was we really needed to make sure that this was a truly global baseline.

That it wasn't only fit for purpose for the most well-resourced, sophisticated company in developed economies, but could be used by smaller companies and in emerging markets. And we did include mechanisms in the standards to address that to make sure that sometimes qualitative information rather than quantitative could be provided and to make it clear that we didn't ask people to make an exhaustive search for information, that it should be what's reasonable and supportable but without undue cost and effort.

Quite a few questions on whether we really meant it with those words, which I think is an area that people are interested in digging into in quite a bit of detail. And it's really important for this change management process that we're going through.

Jennifer Laidlaw: All right. And you mentioned there's been a lot of interest from jurisdictions all over the world. Brazil, for example, the standards have been effective from this year. Turkey as well. How are you working with these different jurisdictions to help them apply the standards?

Sue Lloyd: Yes. Well, we've developed this -- well, in the process of developing a jurisdictional guide. We issued a preview in February and the final version is planned to be published later in May. And that sets out our plan for working with jurisdictions.

What we're doing is setting out some key things that jurisdictions should think about when they're making decisions about which companies should be required to apply the standards and what particular disclosure should be provided, the pace at which they are introduced.

And we set out the things to think about, if you like, in that guide. And then what we're then doing with jurisdictions is actually being involved in some of those conversations at a jurisdictional level to help them think through issues and to build their so-called road maps for the introduction of standards.

We're actively engaged in that, both directly, but also working through relationships we have, such as with the international securities regulators, IOSCO, to make sure that the regulatory community has good information that's available to support the journey.

And actually, one of the things that we plan to publish when we publish the final jurisdictional guide later in May, is a regulatory implementation program, which is a plan to develop more materials to really help support jurisdictions, making decisions and building road maps to sort of orderly and realistic introduction of standards into markets around the world.

Jennifer Laidlaw: Yes, I'm just interested as well because looking at the standards, there are some countries who have made slight differences, maybe from what the ISSB has said. For example, I know just Canada, for example, the Scope 3 emissions, they were mentioning a two-year relief period. How are you working with jurisdictions to make sure that their standards are actually aligning with what you have proposed?

Sue Lloyd: And that's where others have got a role to play as well as us. What I hope we achieved and what our jurisdictional guide and the preview really highlights is, ultimately, we'd like as many companies as possible to be fully aligned with the ISSB's standards. But we realize that there's a path to get there, and you may need to be proportionate and measured in the way that you get companies onto that path.

What we don't want is for jurisdictions to look at our standards and say, "Oh my goodness, this looks hard so we're just going to cross requirements out." What we really want jurisdictions to do is rather to think about whether a more measured introduction of requirements might assist an ultimate compliance that's closer to our global baseline.

What we did ourselves when we published S2 was we said in the first year that you provide climate information, you don't have to provide Scope 3 greenhouse gas emission information, so you've got an extra year to get ready.

One of the things that we acknowledged in our conversations with jurisdictions is at a jurisdictional level they may wish to extend a relief like that a bit longer so that they've got more time to get ready, particularly for smaller companies.

And we can see why that can make sense for a jurisdiction, but we would much rather the jurisdiction takes a little longer, but ultimately does ask for the Scope 3 information rather than says, "This is too hard," and just deletes it.

And so the conversations we're having with jurisdictions and the stakeholders is really around making sure that those balanced decisions are being made and really encouraging people not to forget that we were asked to build a global baseline because there was a global benefit that was identified and working towards that ultimate global comparability is really, really important and don't lose sight of that prize.

What we're seeing in jurisdictions is that the feedback that comes in response to the consultation is very important in terms of the final decisions made by jurisdictions. So if you see proposals and you see that there's differences from the ISSB standards and you think that it's good to have global alignment, really important to stand up and be counted to really assist because what we don't want is regulatory fragmentation.

When we worked so hard to remove voluntary fragmentation. I think it will be so said, if we ended up with regulatory fragmentation, which sort of entrenches it even more than the case that we had before.

Jennifer Laidlaw: Yes. And also the aim of the ISSB is to bring around some kind of consolidation in the market as well.

Sue Lloyd: It would be terrible to fail at that hurdle.

Jennifer Laidlaw: All right. Yes, exactly. I guess, the work that you're going to be doing with this guide that's coming out with the preview that you already published, that's really going to help jurisdictions to really guide.

Sue Lloyd: And what we also plan to do as a result of the -- and that will be set out in the jurisdictional guide is then to help people in the market really understand just how well we're doing collectively on this journey towards globally comparable information.

We plan to set out our jurisdictional profiles, which will explain what the current state of play is in the jurisdiction, what's required today, and what the plans are for the future so that we can all see where those similarities and differences are. Really to avoid the risk of misunderstanding of something being comparable when there could be differences, but also to signal the progress that's being made as well.

Jennifer Laidlaw: Just one thing I wanted to go back to when we were talking about differences between jurisdictions. You mentioned in your speech, you were talking about the EU, the EU was not one of the countries that you actually showed that is planning to adopt or had adopted the standard. Can you just explain exactly why that is? How are you attempting to help companies with the difference between the EU standards and the ISSB standards?

Sue Lloyd: Absolutely. I've been very engaged personally in this whole series of conversations between us and Europe that have been going on now for several years, even before the ISSB was born, I was involved in some of these conversations.

And really what we are focusing on here is rather than emphasizing the differences, which is often the conversation you hear. What's the EU doing? What's ISSB doing? Why are they different?

Let's focus on what's in common. And what's in common is that we are both interested in providing information to inform investment decisions. We're both interested in that. Europe is also interested in meeting the broader needs of other stakeholders and meeting European legislative requirements.

But at its core, they've got a common purpose with us, which is meeting investor information needs. That gives us an opportunity to identify that common set of information and really work hard to make sure that, that is aligned. So that's what we've been focusing on.

What that essentially enables us to conclude is that when we come to climate, the ISSB's global baseline of climate disclosures for investors is included within the European climate requirements. They've sort of got it built into ESRS. So they're aligned but in a different way. And so what's really important is to make sure that where we do have these common disclosures, we do what we can to make sure that the information we ask for is aligned. So we ask for the same piece of information.

We don't ask for a different calculation or a different piece of information that's very similar but a bit different. And so what we've been working very hard to do and then communicate it in the interoperability guide that we published just last week, is to explain where we've found that common information and also to explain to people where there are things to be aware of to make sure that you provide those disclosures in a way that will indeed enable you to comply with both ESRS, the European requirements, and our requirements, so it's efficient and effective for companies.

And that's what we've been focusing on. And clearly identifying the incremental information that Europe asks for. Because it's really important that if you provide a bigger set of information, you can still see the globally comparable information to make comparisons between markets. That's what we've done on climate.

And then if we look beyond climate — because our S1 standard actually requires information on all of the important sustainability-related risks and opportunities a company is exposed to. We just happen to have the most specific requirements for climate. We ask information beyond climate. And so there, we say already in S1, you can look to the European requirements to fill in the gaps as long as that information is appropriate to meet investors' information needs.

What we're trying to make sure is that beyond climate, we've got an efficient mechanism to make use of the European disclosures as long as they meet investor requirements. That's an important feature that we're focused on.

And sort of the flip side of that from a European perspective, we are fortunate that the ISSB to have the Sustainability Accounting Standards Board standards or SASB standards. Europe is still developing their sector-bases standards. So when you use the European requirements, and you have to provide entity-specific or sector-specific information in ESRS, it that says, "Good news. You can use the ISSB and the SASB standards to fill in the gaps."

So we've both tried to leverage where we've got more literature than the other to make it as efficient and effective as possible. And the plan going forward will be to look for more opportunities to find ways to make things interoperability. And for me, let's focus on what's in common and how we get it to work well instead of arguing about what's different and why it's a problem.

Jennifer Laidlaw: You mentioned during your speech that the advice have been from the market don't run too hard, get the standards done, get them published, get jurisdictions like starting to draft them to put the standards into place. I'm just interested, what are your plans for the rest of 2024? Because you mentioned you're going to be working on projects such as human capital, nature.

Sue Lloyd: We've really got a three-pronged focus for this year, at least this year and probably a bit longer. The first is making sure that we're available to help those using S1 and S2. So putting energy into our capacity building work directly in partnership with others and also making sure we're available to help answering questions. We've got our transition implementation group. And we're starting to see more questions coming in there.

A good chunk of our work will be just making sure people understand what to do, and they're doing well, applying S1 and S2 that will be a primary focus. The next thing we're spending a lot of time and energy on is these conversations with jurisdictions to try and support the adoption of regulation or legislation, which is well aligned with our standards to get this globally comparable information in practice, not just in theory. And also talking to companies about the benefits of choosing to use our standards. You don't have to be told to do it.

And talking to investors about the benefits of the information and investors are asking investees to use these standards. And so those adoption conversations are very, very important to help us really achieve our objectives. And then the third thing that we're doing, last but not least, is starting to look at new research and standard-setting work. You'll start to see from now for the rest of the year, us starting to talk about our new projects.

So for example, in May, in Montreal at our meeting, we'll be talking about the industry classification system that underpins the SASB standards and what our approach is there. We'll be talking about how we prioritize what parts of the SASB standards, the Sustainability Accounting Standards Board industry-specific standards that we have, which should we prioritize for enhancing and you'll start to see us doing work there.

And you'll start to see us digging into the topics of biodiversity, ecosystems, and ecosystem services, the BEES topic. You'll start to see us digging into the human capital topic to really understand investor information needs, existing literature, the extent to which we can build on that. You'll start to see us developing our thinking on these new topics.

But the good news for anybody listening who's thinking, "Oh my goodness, that sounds like a lot." Everything we do is subject to consultation. You're not going to suddenly be required to provide information on lots of new things. You'll have an opportunity to have a say and it will take us a while to get to that point.

Jennifer Laidlaw: OK interesting. Is there anything else that we maybe haven't touched upon that you want to share?

Sue Lloyd: I think really the only thing I would say to listeners is I really, really do call on people to stay engaged. I know we've asked a lot of everybody in the last two years and not just us, it feels probably -- I'm sure it feels like there's endless consultations and asks for responses. Don't stop doing it because we're really at the early stage of this journey.

You can help us in two really important ways. One is by engaging in jurisdictional consultations to really say what you feel about alignment with the ISSB's requirements and information. Really helpful to be engaged in that. It's an ongoing conversation that's not done yet. And also when we get to our new topics, we really want to make sure that we hear from our stakeholders.

Our standards are very much driven by the quality of the feedback and input we receive. So even though I know it's not other people's day jobs, unlike mine, really just encourage people to stay engaged because it really just helps us make sure that we do get information to the market that's really useful. So companies spend money on a useful exercise and investors can feel confident to make investment decisions. And so we need your help.

Jennifer Laidlaw: Okay. Well, I'm sure many of our listeners will be there, will be ready to respond to your call. Well, thank you so much for taking time out of your busy schedule and then sitting down with us. It was great to have you.

Sue Lloyd: Thank you so much. It was a pleasure.

Lindsey Hall: We heard today from Sue Lloyd about how global sustainability standards are evolving and how the ISSB is approaching future projects like our biodiversity disclosures. Thanks so much for joining us today, Jennifer.

Jennifer Laidlaw: Well, it was a real pleasure and I'll be back next week with more coverage from the London Summit, including an interview with the Vice Chair of Sustainability at Temasek, that's a global investment firm based in Singapore which is investing in climate-related businesses.

Esther Whieldon: Well, Jennifer and Lindsey, I look forward to hearing your key takeaways from the event next week and for our listeners, please stay tuned.

Lindsey Hall: Thanks so much for listening to this episode of ESG Insider. If you like what you heard today, please subscribe, share and leave us a review wherever you get your podcast.

Esther Whieldon: And a special thanks to our agency partner, The 199. See you next time.

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