On 18 January 2019, the International Organization of Securities Commissions (IOSCO) published a statement setting out the importance for issuers of considering the inclusion of environmental, social and governance (ESG) matters when disclosing information material to investors’ decisions. IOSCO emphasizes that ESG matters, though sometimes characterized as non-financial, may have a material short-term and long-term impact on the business operations of issuers as well as on risks and returns for investors and their investment and voting decisions.
In particular, IOSCO encourages issuers to consider the materiality of ESG matters to their business and to assess risks and opportunities in light of their business strategy and risk assessment methodology. When ESG matters are considered to be material, issuers should disclose the impact or potential impact on their financial performance and value creation. Issuers also are encouraged to give insight into the governance and oversight of ESG-related material risks. IOSCO states that issuers can provide such insight, for example, by disclosing the methodologies they follow in their risk assessment, and the steps taken, and/or action plans developed, to address the risks that they have identified. IOSCO adds that information provided by issuers should be balanced and should consider and reflect both risks and opportunities presented by material ESG matters. IOSCO also encourages issuers to clearly disclose the framework(s) that they have used (if any) in preparing and disclosing material ESG information.