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Transcript of The Catalyst Conversation: Emmanuel Faber on the International Sustainability Standards Board

HALLA TÓMASDÓTTIR: Thank you for joining us in this conversation today. And let’s dive right in. Please tell us: what exactly is the International Sustainability Standards Board?

EMMANUEL FABER: The ISSB is an organization that was announced at the COP26 in Glasgow – with the support of a number of G20 countries, the financial regulation global authorities, the IMF, the UN and others – by the IFRS Foundation. IFRS Foundation was basically created in order to create a common language, about 30 years ago, for accounting on global capital markets. And after a consultation that took about a year, it was finally decided that the IFRS Foundation should also seek to bring clarity, consistency and comparability in the language used about sustainability beyond accounting by the global capital markets. ISSB is about sustainability. And our remit will be, and the mission is, to create a set of internationally globally accepted standards and disclosures about sustainability topics in a manner that is comparable, reliable and decision-useful for investors. The goal of ISSB is basically to inform capital allocation on sustainability matters – making sure, basically, that these important topics that are more and more bubbling in the agenda of management and executive suites and board members, committees, CEOs on the sustainability of their business: climate and social issues and biodiversity and water – very much over the last several months, at least – are finding a place where they can have that dialogue with investors. And for investors to also know what is at stake with the companies that they support or, for the banks, the company that they finance when it comes to climate and other important topics.

HALLA TÓMASDÓTTIR: Thanks a lot. So, in other words, accountants have become change agents in measuring what matters. Something I’ve dreamt of for a long time, so I really appreciate that. But tell us: why should business leaders lend their strong support for ISSB?

EMMANUEL FABER: You know, over the last probably five and maybe even 10 years, I’ve met so many CEOs that probably did not have a 360-degree approach to how sustainability mattered to their business. But they had this sense that something was missing in the way we count what counts, basically – purely through accounting. They were finding it difficult to discuss with their board, to discuss with their investors about those matters that popped up gradually through the risk mapping of the audit committees and the risk committees, etc., etc.. Reputation topic here, supply chain issue there, climate maybe here, a new regulation coming there. And they didn’t know how to share with their investors how much money it would cost and what the return would be if you invest that money and you end up in a more resilient situation. I think too, in many ways, in particular for CEOs of listed companies, we’ve ended up in quite a short-term approach where we are all about meeting super efficient processes, including for capital. But efficiency sometimes is the enemy of resilience. And we have learned through many crises, including the huge COVID crisis, of course, and now climate change, that maybe the name of the game is going to be resilience. The sustainability financial disclosures of ISSB is going to be the language of resilience for the capital markets. So if, as a CEO, you want to engage with your board, with your investors about that and how much that transition is needed for your business on climate, on water and biodiversity, on social issues, on reputation issues, on governance and others. Then you have with our solutions a way to speak a language that will be understood and, therefore, which will truly allow capital allocation to be differentiated by investors alongside sustainability topics that do matter for the CEOs about their business.

HALLA TÓMASDÓTTIR: Absolutely, no doubt about that. And what exactly would you then like business leaders to do? How do they support that we get this global baseline in place?

EMMANUEL FABER: Certainly, the first thing that I would expect from business leaders, and by business I mean both, of course, the corporate side – the demand side of capital – but there are also huge businesses that are on the supply side of capital: the huge asset managers, the CEOs of those organizations, the chief investment officers, the CEOs of large banks, of course, of insurance companies that do supply capital to companies directly or indirectly. To all of those who are interested in creating that space for discussions about how we transition to more resilient business models, the call to action is actually very simple: make sure that you adopt our standards before they become mandatory. We will provide the option of early adoption. We are talking to coalitions, you know, a number of them: the WEF Climate Alliance, the WBCSD, of course The B Team leaders, the We Mean Business Coalition and many others. You really have a critical role to play by adopting our standards because the more there will be an early adoption, the easier it will be for regulators to come in, in jurisdictions and countries, and request a mandatory adoption. Today, the IFRS standards are being used by more than 140 countries. And it took 20 years. We don’t have those 20 years for the resilience language of our global systems. We have a few years. So the acceleration of that mandatory adoption, jurisdictional adoption would come through the fact that progressive, early-on CEOs and boards would decide to use our standards before they become mandatory. And they will drive, they will be the early adopters of a broader crowd to come.

HALLA TÓMASDÓTTIR: Exactly. And that’s exactly what progressive business leaders are looking to do to lead by example before it’s mandatory, and we’ll certainly encourage all of them to do that, but also not to oppose the policy changes that are needed to make these the mainstream metrics that matter. That’s a great way to end this conversation. Emmanuel, thank you for your bold and brave leadership, always. Thank you for being such a human-centric leader and helping us catalyze this transition – this just transition. And we can’t do that without measuring what matters to all of us – and transparently disclosing it so we can build trust. Much appreciation on behalf of The B Team and all of your peers here for your brave leadership.

EMMANUEL FABER: Thank you, Halla. Thanks for steering that group of leaders and making that group being a true team. It’s invaluable for us as leaders to have a place like this one to rely on partners, so thanks for that.