LONDON/BOSTON (Reuters) – BlackRock <BLK.N>, the world’s biggest asset manager, said it supports harmonising sustainability accounting rules and standards globally so investors can better track how companies are transitioning to a lower-carbon economy.
Sandy Boss, head of investment stewardship overseeing the group’s $7.8 trillion in assets, said the U.S. firm supported efforts to make it simpler for companies and investors to report and assess climate and other sustainability risks.
“If we look at what investors and corporates alike need we need common data and we need it to be comparable and we’d like the definitions to be comparable,” said Boss in an interview for Reuters ESG North America conference on Tuesday.
“We’ll able to build investment products and investment strategies using that data… (which) brings private capital together with the corporate demand that we know exists in the context of this transition.”
Currently, regulations and rules vary wildly across the world, detailing what information companies need to provide.
At a regional level, the European Union has led the way with its Non-Financial Reporting Directive, which tells large companies what types of environmental, diversity and similar data they should provide.
“We’ve seen in Europe that when the government is behind a green finance direction that that’s certainly helpful,” said Boss.
However, the EU rules are currently being overhauled amid criticism they are not clear enough and do not cover enough companies.
In Britain, former Bank of England governor Mark Carney championed the Taskforce on Climate-Related Financial Disclosures (TCFD), which helps companies frame the risks of climate change to their business and structure mitigation plans.
Still voluntary in most countries, Carney, now the United Nations’ special envoy on climate, is pushing for countries to make it mandatory for all companies ahead of the next round of global climate talks in Scotland in 2021.
A number of private sector initiatives have also sprung up to help companies meet the growing demands from investors for more and better data, among them the Sustainability Accounting Standards Board (SASB) and the Global Reporting Initiative (GRI).
“I think the private standard world has actually really taken off this year,” Boss said, citing a doubling in the number of TCFD supporters over the last two years and a large jump in interest in using the SASB standards.
Last month, SASB, GRI and three other groups announced plans to work together to develop a “comprehensive corporate reporting system” amid criticism from some that there were too many competing ways to assess corporate sustainability.
The International Financial Reporting Standards (IFRS) Foundation, which sets accounting rules used in over 140 countries, said last month that it would consult on demand for global standards under its auspices.
“It would be fantastic to see IFRS embrace that sustainability standards effort… and ideally to see these private sector standards merging under such a standard setting organisation,” said Boss.
Although it would take some time, doing so would help companies focus on managing sustainability risk and changing their business models to respond to the challenge of climate change and preserving their social license to operate.
“That’s where corporates should be spending time, not having to manage a flurry of disparate requirements, which is the challenge they have now.”
(Reporting by Simon Jessop and Ross Kerber; Editing by Susan Fenton)