• Global Standards Adoption: Adoption of ISSB standards is critical for attracting international investors and ensuring market competitiveness.
• Enhanced Valuations: Companies with robust sustainability disclosures are likely to achieve better valuations in increasingly eco-conscious markets.
• Strategic Policy Implementation: Jurisdictions should align local standards with ISSB to prevent market discounts and maintain investor confidence.

In-Depth Analysis: ASIFMA’s ISSB Standards Report

ASIFMA Asset Management Group (AAMG) has unveiled a comprehensive report on the adoption of International Sustainability Standards Board (ISSB) Standards across Asia. This first-of-its-kind report provides invaluable insights into the regional adoption of these global standards, crucial for aligning with international investor expectations.

The Need for Unified Disclosure Standards

“Disclosure standards, where all companies publish the same type of information according to common methodologies, are essential for global investors to make investment decisions across markets,” commented Yvette Kwan, Executive Advisor, AAMG. The ISSB Standards aim to harmonize sustainability-related financial disclosures, enhancing comparability and consistency.

Critical Adoption of IFRS S1 and S2

The report underscores the necessity of adopting both IFRS S1 (General Requirements for Disclosure of Sustainability-related Financial Information) and IFRS S2 (Climate-related Disclosures). “It is important to adopt both IFRS S1 and IFRS S2 simultaneously,” Kwan emphasizes. A climate-first approach, common in many Asian jurisdictions, could lead to partial compliance and potential market discounts.

Local Adaptations and Risks

Local adaptations should build upon, not dilute, ISSB standards. “We do not support relief beyond the ISSB built-in reliefs and definitely not measures that allow companies to cherry-pick what they report on,” Kwan insists. Transparent and comprehensive reporting is vital for investor trust.

Challenges and Solutions for Listed Companies

Listed companies face the challenge of potentially higher reported greenhouse gas emissions when complying with new standards. However, Kwan argues that transparent disclosures allow investors to understand underlying assumptions and challenges, ultimately benefiting well-reported companies.

Hong Kong’s Strategic Adoption

Hong Kong’s market attractiveness hinges on prioritizing sustainability-related disclosures. “Adoption of sustainability-related financial information disclosures should be prioritized,” Kwan states. The Hong Kong Exchanges and Clearing (HKEX) is set to implement climate-related disclosure requirements based on ISSB’s S2 standards by 2025, preparing for broader S1 adoption.

Investor Confidence and Market Competitiveness

With rising demand for sustainable investments, markets fully adopting ISSB standards will have better access to capital. “Markets and companies that fully adopt ISSB may potentially have more access to capital and may more likely be targets for sustainable investing,” Kwan notes. Failure to adopt comprehensive standards risks international investors bypassing non-compliant markets or discounting them due to insufficient data.

Liability Frameworks and Legal Protections

AAMG advocates for liability frameworks that protect companies making good-faith disclosures as standards evolve. Overly prescriptive local standards might discourage early adopters or divert focus from meaningful disclosures.

Related Article: Hong Kong Launches Green & Sustainable Fintech Proof-of-Concept Funding Scheme to Boost Green Finance Solutions

ASIFMA’s report calls for Asian jurisdictions to align with ISSB standards to attract global investors and enhance market valuations. Comprehensive adoption of IFRS S1 and S2 is critical, and local standards must support and expand upon these requirements without introducing unnecessary complexities.

For a detailed exploration of the report, access it here.