There are several, of which I will highlight a few. At present, one of the key trends globally is the rise of ESG disclosures. With the big announcement by IFRS Foundation on the official launch of the International Sustainability Standards Board (ISSB), a major step has been taken towards a global, consistent, and comparable sustainability disclosures. One of the biggest areas of concern for both critics and propagators of ESG was the lack of consistency in reporting standards. Now ISSB can work towards creating a robust set of industry standards by leveraging the inputs and support from IASB, CDSB, Value Reporting Foundation and SASB.
EU taxonomy is also playing a critical role in global ESG metrics adoption. Significantly, Blackrock was consulted directly by the EU to draft the EU Taxonomy. Upon completion of this exercise, I am certain other parts of the globe will use this as a reference and starting point to define and tailor their own taxonomy and sustainability initiatives. The world has shrunk, so companies looking for funding must be globally compliant. In the next few years, we will see corporates lay a strong emphasis on integrating ESG metrics into their core business functions to meet these prescribed ESG standards. This is going to become the new norm and professionals will have to gain expertise in relevant ESG topics that affect their respective functions.
It should not come as a surprise that in 10-15 years, the Chief Sustainability Officer (CSO) will emerge on par with the CFO, in terms of influence and impact within a company. We can liken this to the advent of IT, wherein today it is impossible for any business function to separate itself from IT, be it professionals in finance, human resources, marketing, operations, or procurement, all are required to have a depth of IT understanding based on their core deliverables. Another area that companies will need to get better at is the climate change target setting. We have witnessed ambitious net-zero targets that have been set by countries and companies alike in the past few days at COP-26, however, we have enough studies that show very few have set these targets based on scientific inputs. For example, according to a recent report by Arabesque, almost half of FTSE 100 companies have no net-zero target in the UK. The research found that 45 companies on Britain’s FTSE-100 Index have no net-zero target and only 23 companies have set net-zero targets meeting scientifically approved standards of The Science Based Targets initiative (SBTi), which defines best practices in such targets.