The impetus for consolidating ESG frameworks

State of the Canadian Electricity Industry 2022 Accelerate Net Zero

Theme 2 An Industry Ahead of the Curve: Looking Beyond the ESG Hype

2022 will also be a defining year for consolidating ESG reporting standards. As sustainability becomes mainstream through the concept of ESG, the world community is now recognizing the need to consolidate a plethora of historical measurement and reporting standards that have been published by international entities, such as the Global Reporting Initiative, the Task Force on Climate-Related Financial Disclosures, and the Sustainability Accounting Standards Board— to name just three.

ESG Growing Pains

• Numerous and inconsistent sustainability reporting standards leading to duplication of effort for companies • Lack of sector-specific guidance leading to reporting of non-material information by companies • Evolving application of investor criteria to access capital for major projects • Inconsistent performance assessment criteria by sustainability rating organizations • Limited guidance on how best to integrate ESG into company governance frameworks vis-à-vis guidance on measurement and reporting • ESG is used as a tool for “public relations” instead of driving tangible results and outcomes through integrated decision-making More recently, driven by the call for high-quality, transparent and comparable data on ESG, the Internal Financial Reporting Standards Foundation Trustees announced the creation of the International Sustainability Standards Board, a new standard-setting board headquartered in Montreal, to address this gap and consolidate some of the existing reporting standards. 12 While this is a step in the right direction, there is still a high level of uncertainly regarding the pace of consolidation, as well as the effectiveness of this latest initiative, given various jurisdictional differences in guidance provided by governments, regulators and securities administrators. What happens in Europe and the United States will also have a significant impact on future ESG reporting around the world.