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Hello and welcome to today's Leadership
in Extraordinary Times event from Oxford

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University's Saïd Business School. Wherever
in the world you are, thank you for joining

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us. I'm Clara Barby and I'm Chief Executive of the
Impact Management Project. Today's subject is all

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about sustainability reporting, and the need for
sustainability standards globally. Specifically,

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we're going to examine how the capital markets
can take sustainability to the next level.

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I'm delighted to be joined by four people who are
perfectly placed to help us answer that question.

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We have Sandy Boss, who's the Global Head
of Investment Stewardship at Blackrock,

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Dame Elizabeth Corley, who's the Chair of the
Impact Investing Institute, Tajinder Singh, who's

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the Deputy Secretary General of the International
Organization of Securities Commissions,

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and Richard Barker, who's the Associate
Dean at the Oxford Saïd Business School.

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You can get involved in the discussion,
and we do want it to be really interactive

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so I encourage you ask your questions by the chat
box on whichever platform you're watching on; you

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can use LinkedIn, Facebook or YouTube. I ask you
just to keep your question brief and make

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sure you tell us not only who you are but where
you are. So now let's go into the debate and I want

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to start with Richard. Richard, the IFRS foundation
has just consulted on whether there's a need for

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global sustainability standards and the role that
it might play; can you scene-set for us what are the

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key concepts for our audience to be aware of, why
is this such an important moment for the IFRS, and

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what else is happening around the IFRS to make
this a moment for rapid progress? Thank you Clara;

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so I think to frame this it helps to start with
the International Accounting Standards Board, which

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sets global financial reporting standards which
are mandatory in more than 140 countries around

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the world. The ISB is an independent body, it sits
within the independent,

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robust governance structure of the IFRS Foundation,
and its mission is to provide useful information

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to investors: that's the primary focus - financial
materiality that is sometimes called. Now the

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way that the ISB interprets that mission is to
provide information through financial statements,

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including the notes to the accounts. So we have
mandatory financial statements globally. Now

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there are two ways in which that provides actually
limited information from an investor's point

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of view. The first is that financial statements
are historical. Investors are concerned with the

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future, they're concerned with future cash flows.
Accounting records what has happened in the past,

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and what the current rights and obligations of the
reporting entity are, so if you take something like

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climate change, where we know we have a dramatic
global transition to net zero by 2050 ahead of us,

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and one that hasn't happened yet, so we know
there's going to be significant discontinuity.

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The accounts provide limited
information, they're very natural.

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The second limitation is that accounting is
only concerned with the financial effects of the

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reporting entity itself, of the entity's activities
and other activities and events; so if for example

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an entity emits carbon and that imposes a cost on
society but the entity does not pay that cost, so

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there's an externality, an external cost,
then that's not in the accounts. But again from

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an investor's point of view you might want to
know about that because a business with a high

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carbon footprint is one that needs to undertake
a significant transition of its business model.

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So not surprisingly investors are increasingly
calling for more sustainability information,

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not just climate but ranging
all the way to social inclusion,

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and the reason they're calling for this sustainability
information is because sustainability data

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is relevant to understanding the viability of
business models, the corporate license to operate,

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and therefore the corporate
capacity to create enterprise value.

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So we have an information gap. We have a
global standard-setting body that is providing

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financial statements and we have global
investors who are requiring more information

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these days than just financial statements; so the
capital allocation decisions made by investors,

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and indeed made by companies themselves, are in
principle compromised by that lack of information.

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So that's why the International Financial
Reporting Standards Foundation has been consulting

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on creating a sustainability standards board. The
idea is that a sustainability standards board

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would sit alongside the International Accounting
Standards Board, so the ISB would set financial

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accounting standards; the Sustainability Standards Board
would set sustainability reporting standards.

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Now we have a graphic, which the Impact Management
Project has put together, which illustrates

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how this comes together, and what you can see is
that there's a small box on this graphic in

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pink, which is the financial statements; the balance
sheet, the income statement, the cash flow statement

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and the associated notes, so that's the domain
of the ISB: that's IFRS as we currently know.

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The broader purple box here represents
information that is relevant to the determination

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of enterprise funding, the information that
investors need, that includes financial accounts

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and information but is broader than that. So the
gap between the pink box and purple box

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is the domain of the Sustainability Standards
Board. This is also the domain that has been

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filled in a sort of a voluntary NGO
type capacity by various organisations,

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the Integrated Reporting Organization, the 
Sustainability Accounting Standards Board,

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SASB, TCFD, Taskforce of Climate-related
Financial Disclosure, CDP, and the list goes on.

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There are quite quite a few frameworks around
the place that provide that seek to provide ESG

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information of that type that all belong in the
purple box; that's the domain of the proposed SSB.

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In addition, the grey box, which sits outside and
which includes all information relevant to all

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stakeholders in society, so not just relevant to
investors, relevant to society more broadly,

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that goes beyond the scope of the IFRS Foundation,
and beyond the scope of the current proposal to

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create a sustainability standards board; that
very broad scope is the domain currently of GRI,

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the Global Reporting Initiative. Now, one
final thing right before I pass back to Clara;

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there's a dynamic nature in these boxes.
So for example 20 years ago, let's say for the sake

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of argument, climate change was well known
at a societal level to be a serious problem;

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it was less well understood and factored
into the pricing of equities, of capital, of

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shares of capital markets, and so gradually
over time the information requirement is moved

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from the grey box on the outside to the middle
of those three boxes eventually over time. As

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carbon tax and so on becomes more prevalent you'd
expect there to be direct financial consequences

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for businesses, and therefore information
that ends up in the financial statements.

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So information can flow between these three boxes,
in particular from the larger box down to the

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smallest of the three, so I think that's probably
enough, Clara. It's very helpful Richard, very

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helpful, and I want to move from that conceptual
framing to Tajinder at IOSCO. Tajinder, this is

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not the first time that the IFRS Foundation has
been at an important point in time; 20 years ago

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the IOSCO played a major role again, and I want
to ask you ,what is similar about the moment we're

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facing now with the IFRS Foundation and
what you saw at IOSCO 20 years ago, and

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what may be different in the considerations
that you're making as securities regulators?

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Sure, thanks a lot Clara, and before talking
about the history let me take just a few moments

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to explain why IOSCO is interested. So just to
back up a bit, any financial system, of course, has

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at its two ends the providers of finance and
the users of finance, and therefore the role

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of investors and capital markets is paramount
in such a system, and that is where securities

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regulators come in; and that is where IOSCO, as
an organisation of over 125 securities regulators

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that regulate more than 95 per cent of the world's capital
markets, comes in. These securities regulators are

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responsible for the oversight of capital markets
and have responsibility for disclosure regulations

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in many jurisdictions, including the form and
content of financial reporting, and that's why

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we set up a sustainable finance task force that
published a report about the difficulties in

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this area, including the plethora of voluntary
initiatives that Richard mentioned. Since then

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we've conducted fact-finding work reviewing
corporate reports and engaging with asset

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managers, all of whom confirmed that the current
investor demand for sustainability information

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is not being met and that's why the IOSCO
board discussed this in November last year

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and agreed that the following steps were necessary.
Firstly, that we need to develop, similar to what

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Richard mentioned about the accounting standards,
a pathway to mandatory standards in this area

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beyond comply or explain; secondly, to engage with
the IFRS Foundation; and thirdly, do not forget that

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you know these discussions also should involve
going forward the establishment of an assurance

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framework for sustainability disclosures. And
these objectives take us, or are taking us to,

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these conclusions which are, firstly, to support
the establishment of the Sustainability Standards

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Board that the IFRS Foundation is consulting
on, focusing on information that serves investors

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and capital markets or enterprise value creation
that sits alongside the ISB, and we think this

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would command sufficient market acceptance to
support mandatory disclosures across jurisdictions,

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to allow integration with the financial reporting
standards, and form the basis for an audit and

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assurance framework. Secondly, to encourage this
SSB to leverage on the content of the alliance of

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standard setters, for example, the climate prototype
that was published last year, and thirdly to

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apply a building-blocks approach to provide
a common consistent baseline of non-financial

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information. We hope that a system can be set up
which can allow filtering from the superset of

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the wider sustainability topics - from the largest
grey box that Richard showed, to the inner box.

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For example things that are related to the
stakeholder impact in a way that helps the ISB

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assess the dynamic materiality of sustainability
topics. Coming now to the question about what we

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did in the past; we've had a long history
of collaboration with the IFRS Foundation

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and that's not surprising since
IOSCO and the IFRS Foundation

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share the objectives of promoting and facilitating
transparency within the capital markets.

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In the year 2000, IOSCO issued a resolution that
set the foundation for the adoption of the IFRS

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across member jurisdictions, leading
to the establishment of the ISB,

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the International Accounting Standards Board
and the current governance system as Richard

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mentioned. That's a robust system and that has
three tiers; at the top tier it has

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the monitoring board that IOSCO chairs, because
as security regulators, they have an interest there

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in the interest of investors, so regarding
our relationship we also have a protocol

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with the IFRS foundation, as I mentioned, IOSCO chairs the
monitoring board which oversees the IFRS trustees

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to ensure that they discharge their duties in
accordance with the IFRS constitution. So these are,

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in a sense, the similarities which we can actually
use now going forward because this is again

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information that capital markets and investors
need. In terms of what's different now, unlike

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in 2000, we already have a structure under the
Foundation that has proven to be successful,

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jurisdictions have adopted endorsement mechanisms,
and because we've already have this and we've

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seen it work, it can help speed up the process in
this round. Secondly, we have the important work

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of the alliance of standard setters which we
have encouraged and the climate prototype that I

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mentioned that builds on the TCFT recommendations,
as well can provide a running start for the SSB

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when it is set up to go ahead and and go forward.
And the other thing that is a bit different is

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the felt urgency at this time to go
ahead, given the demands from the investors, and we

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in IOSCO are very happy to continue to work
collaboratively with the alliance and the IFRS

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foundation, and just before I hand back to Clara,
let me mention that the sustainability task force

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that IOSCO is working on, this is an important
element of that, but there are still two other

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areas that we are working on: asset managers and
green washing and ESG indices and data providers,

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but the one thing that we note, which is relevant
here as well, is that sustainability reporting is

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crucial to all of them with that, let me hand
it back to you Clara. Thank you Tajinder, and

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we've had a question from the audience
quite rightly saying: we get the urgency,

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you know, what needs to be done to make sure
it happens urgently? Is there

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one big thing that you think needs to
happen? And Richard, maybe I'll come back to you

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before I go to Sandy, and then Elizabeth, and just
say what is your reflection, having looked at this

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space as an academic, Richard, on the big levers
we can pull to make things happen fast?

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Well I think, as Tajinder has mentioned, the
the fact that the IFRS foundation has an existing

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infrastructure, it has a governance framework, it
has things that seem trivial, like a capacity

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to translate standards into different languages,
that really matter for getting these things done.

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So you have a framework already in place, I
think, absolutely critical is you need the

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support of the broader ecosystem, so if there's
strong investor support, strong corporate support,

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and strong support from regulators and
jurisdictions around the world, then it can happen

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very quickly. But that support absolutely does need
to come together; the setting in accounting

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standards is not a quick process and it's actually
really important that the IFRS foundation itself

0:15:04.320,0:15:09.200
has a faster track, more entrepreneurial mechanism
as it were, for progressing sustainability

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standards. The final thing to say; there's a lot of
existing work that's already been done, right,

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so if you take the work of the Taskforce
for Climate-related Financial Disclosure,

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combine that with the work of the other standard
setters and framework providers in this space

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you can get to a cardinal standard really
quite quickly if the motivation's there.

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Great, and I have to say it's been last year was an
amazing year to see this surge of of collaboration,

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with those voluntary standards setting efforts,
who all reckon this is the time

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for them to come together in the public interest.
Sandy, I want to come to you now; you know, Richard

0:15:45.600,0:15:50.640
has just said how important the support of the
ecosystem is and without question that means

0:15:50.640,0:15:56.960
investors at Blackrock. You're using this
information every day to make actual decisions

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and so I want to understand your perspective
on it, you know, why are these disclosures

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so important for your decision making and, 
actually, why is convergence so important? Why do

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we need to be talking about global mandatory
at this point rather than what we have had?

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I mean, great question, and I think anyone
who's read Larry's 2021 letter - our CEO Larry

0:16:18.800,0:16:23.920
Fink's letter - will know how committed we are to
our conviction in our investment conviction that

0:16:23.920,0:16:30.080
sustainability risk is in fact an investment risk
for our clients, and also managing sustainability

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risk well presents opportunities, so I think Larry
said in his letter there's no company that will

0:16:35.040,0:16:39.760
find that its business model is untouched
by the transition to a low-carbon economy,

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and last year we said, climate risk
is investment risk, we think there'll be this

0:16:44.640,0:16:50.240
fundamental reallocation of capital. And then 
a few months later people said 'well what about

0:16:50.240,0:16:56.480
COVID, might that actually delay it?'. But in fact
what we've seen during 2020 is an acceleration

0:16:56.480,0:17:01.920
of that reallocation of capital, and we've also
seen, in parallel to the changes associated with

0:17:01.920,0:17:07.200
climate risk, some really significant events
that the pandemic has shown in terms of

0:17:07.200,0:17:13.360
companies' social and economic license to operate,
so it's not just about climate risk, but it's this

0:17:13.360,0:17:19.120
incredibly fragile ecosystem that we're living in,
and how companies are increasingly expected to to

0:17:19.120,0:17:24.320
be playing a part. So then what does that mean
in terms of you data and sustainability

0:17:24.320,0:17:29.760
disclosure? How do you get from this investment
thesis to you what we're looking for? Well,

0:17:29.760,0:17:34.960
if our investors want to actually express that
conviction then they need information and they

0:17:34.960,0:17:41.360
use it in two ways. One would be at a company
specific level to understand this is the value

0:17:41.360,0:17:46.640
of this company, not just as a function of its
financial statements, but also a function of the

0:17:46.640,0:17:52.240
broader sustainability risk and opportunity that
it faces, as Richard mentioned; it's not

0:17:52.240,0:17:56.720
just what's in those backward-looking financial
statements that matters but, beyond that, we're

0:17:56.720,0:18:03.280
also interested in looking at a comparable
way across companies and being able to form

0:18:03.280,0:18:08.480
products that will tilt toward companies that
are managing that sustainability risk better,

0:18:08.480,0:18:15.440
and away from companies that are not doing so well,
and we saw for example in the formation of ESG

0:18:15.440,0:18:22.400
oriented indices,the products around those.
Last year, 80 of those outperformed their 

0:18:22.400,0:18:26.960
traditional benchmark during the course of the
year and other research confirms

0:18:26.960,0:18:31.840
similar findings so we really see that this
is not just a cyclical event, but really a

0:18:31.840,0:18:37.520
structural trend, as more and more investors are
seeking to find ways to put their money toward

0:18:37.520,0:18:41.840
their belief ,that we share; which is that
sustainability is an important investment theme.

0:18:42.480,0:18:47.840
So why do we need the common standards then?
Well look, I mean, we've done a lot in the last year

0:18:48.640,0:18:53.200
particularly; our stewardship group has met with
the companies that we invest in on behalf of our

0:18:53.200,0:18:59.520
clients to ask them to do disclosures using
the TCFD framework. We're also very interested

0:18:59.520,0:19:06.320
in the standards that are set out by SASB:
they're specific, they're industry

0:19:06.320,0:19:12.240
relevant,  very very suitable for the
kind of investment decisions we need to make,

0:19:12.240,0:19:16.960
and there's been tremendous progress in
those standards and we've seen now 1700

0:19:16.960,0:19:24.000
TCFD reporters, we've now have 400 percent increase
in SASB reporters in the last year, but that said,

0:19:24.000,0:19:30.720
companies are still facing a variety of
different possible ways of disclosing. It is

0:19:30.720,0:19:36.160
for them a bit of an alphabet soup still and then
that means that we as investors  don't get the

0:19:36.160,0:19:41.200
information that we need; so for that reason you
know we are ready for the sustainability standards

0:19:41.200,0:19:48.160
board to stand up. We're very enthusiastic about
the COP 26 deadline that the trustees have set,

0:19:48.160,0:19:53.840
and our view is that the IFRS is
just the perfect organisation to take this on.

0:19:53.840,0:19:58.720
I think everyone on this call and hundreds of
others have been really supportive of this idea,

0:19:58.720,0:20:03.680
because that single global standard will
help both the companies and ourselves as

0:20:03.680,0:20:09.360
investors to be able to understand this incredibly
important set of risks for the investor community,

0:20:10.080,0:20:16.080
so I'll stop there, Clara. Thank you Sandy; that's
great, and really obviously brings it home in

0:20:16.080,0:20:21.040
terms of how it actually affects decisions which
is what this is all about. And on that note, I

0:20:21.040,0:20:25.360
wanted just to bring you in, Elizabeth, and
I'm going to come back to you later as well, but

0:20:26.160,0:20:31.920
you're unique insofar as you have
the experience, not only in asset management but

0:20:31.920,0:20:36.720
also in terms of being a director on the board
of large companies, you also chair the Impact

0:20:36.720,0:20:42.160
Investing Institute, and therefore you're exposed
to changing investor preferences I want to come

0:20:42.160,0:20:47.760
back to, but obviously also purpose-driven business.
Now, Sandy was talking about purpose-driven

0:20:47.760,0:20:52.880
business and I imagine that many of the
purpose-driven businesses that you're looking at,

0:20:52.880,0:20:59.760
Sandy, are the big ones in impact investing, you
get a whole range right down to smaller, you know,

0:20:59.760,0:21:06.000
SMEs, but also flavors in terms of how they're
mission-driven including social enterprises and we

0:21:06.000,0:21:12.560
have a question from Ryan Chen-Wing in British
Columbia, Canada, who rightly says, and I think,

0:21:12.560,0:21:17.920
Elizabeth, it's helpful to come to you for this,
how do you see sustainability reporting

0:21:18.880,0:21:23.600
having an effect on social enterprises? Are
we talking about something that's foreign to

0:21:23.600,0:21:28.960
them or in fact is this their bread and butter?
How do you think about that? Well thanks, Clara,

0:21:28.960,0:21:34.320
and it is a great question on two levels. One,
it's around outcomes rather than just risk

0:21:34.320,0:21:39.040
avoidance, and secondly it's talking about
small companies as well as large companies

0:21:39.040,0:21:44.080
and I think that's a really, really important
dimension to think about whatever we do, and

0:21:44.080,0:21:50.000
I wholeheartedly support the idea that the SSB
should be set up as soon as possible, and encourage

0:21:50.000,0:21:53.920
global convergence from existing work that's
been done. There is a lot of work that's been

0:21:53.920,0:22:00.080
done, but we also have to be proportionate and
we have to be very aware that we don't put

0:22:00.080,0:22:05.280
such a burden on small enterprises, but it becomes
very difficult and I think we've learned lessons

0:22:05.280,0:22:09.840
on the accounting side that we can apply from the
from the get-go when we think about small social

0:22:09.840,0:22:15.920
enterprises, but the key thing for me is that we
use consistent language and consistent frameworks,

0:22:15.920,0:22:20.240
because the one thing you don't want if you're an
entrepreneur and you're starting up, whether you're

0:22:20.240,0:22:25.440
purpose-driven or profit-driven or both, is to
suddenly find halfway through your evolution

0:22:25.440,0:22:30.480
of your company you've got to completely relearn
the way in which you engage with capital markets.

0:22:30.480,0:22:35.280
So we have to find a continuum from the
large companies through to the smaller ones

0:22:35.280,0:22:40.080
that is relevant; and I think that's very very
important and that means thinking through, ahead

0:22:40.080,0:22:46.160
of time, the different constituencies and being
pragmatic as well as purposeful in what we do.

0:22:47.120,0:22:54.080
There's no doubt at all that the combination of
climate change, social justice movements, and COVID

0:22:54.080,0:23:00.480
has put the whole question of purpose and outcomes
and responsibility onto large corporate agendas as

0:23:00.480,0:23:07.040
well as social enterprises, and I think if we can
find a way of engaging with capital markets in a

0:23:07.040,0:23:11.520
consistent way around that that would be very
helpful, because there is still a plethora of

0:23:11.520,0:23:16.640
different ways in which information is requested
from companies, but let's do it pragmatically and

0:23:16.640,0:23:22.880
let's do it in a way that could reflect a small
purpose-driven company and a large profit driven

0:23:22.880,0:23:29.200
company, because at the point of meeting they
will overlap on key criteria and key essentials,

0:23:29.200,0:23:34.160
and we know enough from learning our accounting
standards progress that we can anticipate some

0:23:34.160,0:23:38.800
of that. The other thing though is to make
sure we don't try and strive for perfection

0:23:38.800,0:23:44.080
and spend so long perfecting things that we
aren't putting them into the market for use,

0:23:44.080,0:23:49.840
this is a very very fast space. Richard talked
about the dynamic nature of it; it is dynamic and

0:23:49.840,0:23:56.240
it is situational, and whilst it's structural as
Sandy said, and it's what regulators are expecting,

0:23:56.240,0:24:01.280
which is what Tajinder said, we should really
start moving forward from existing standards as

0:24:01.280,0:24:06.240
smoothly as possible so that we can start to get
the experience and start to get track records of

0:24:06.240,0:24:11.360
the relevance of data as forward indicators
of future performance and value creation.

0:24:12.880,0:24:17.440
Thank you, that's extremely helpful and actually
I want to come back to Tajinder, Elizabeth, in light

0:24:17.440,0:24:23.920
of what you've said, because we both need to cover
the spectrum of large to very small companies with

0:24:23.920,0:24:30.320
different kinds of governance and missions.
We also need to prevent fragmentation globally

0:24:30.880,0:24:36.720
or geographically and so, Tajinder, I want to
come back to you because you really

0:24:36.720,0:24:42.320
do look at things globally, why is it so important
that we get this right from the beginning?

0:24:44.400,0:24:50.880
Sure, I think absolutely we
were talking about you know 20 years ago

0:24:50.880,0:24:56.720
when the IFRS Foundation was set up, now 20 years
after that capital markets if anything are even

0:24:56.720,0:25:01.680
more globalised. As an example in
a completely different area, we found that

0:25:01.680,0:25:06.880
derivatives markets are so global that we needed
international standards for financial market

0:25:06.880,0:25:13.200
infrastructures and for margin requirements,
and last year or the year before that we had

0:25:13.200,0:25:19.360
done some work on market fragmentation and market
participants, and authorities realise and recognise

0:25:19.360,0:25:25.920
the need to avoid harmful fragmentation driven
by regulatory measures as that by itself can give

0:25:25.920,0:25:30.960
rise to different risks, and therefore having
global principles is helpful in this context.

0:25:32.080,0:25:37.120
On the other hand, I think we can say that,
because this is basically our bread and butter,

0:25:37.120,0:25:42.000
establishing global standards, that global
standards and principles can work well, can

0:25:42.000,0:25:47.840
interact well with the local and in
this current context maybe the way I would

0:25:47.840,0:25:52.800
like to think about it is going back to the
building blocks approach that

0:25:52.800,0:26:00.880
I just mentioned, which is that the IFRS says the
SSBS - the sustainability Standard Board Standards -

0:26:00.880,0:26:05.680
should ideally be the global standard on the
enterprise value side but we probably need a

0:26:05.680,0:26:12.000
mechanism that is able to filter in the element
from the grey box, from that outermost box, from the

0:26:12.000,0:26:17.040
broader materiality perspective, which are more
likely to be jurisdiction specific; so there is

0:26:17.040,0:26:22.320
an interplay between global on the one hand
and jurisdiction specific on the other hand.

0:26:22.320,0:26:28.480
And that's why we hope that the solution that is
being developed now will be supported globally,

0:26:28.480,0:26:33.920
but that it should allow interoperability with
jurisdiction specific standards, so maybe that's

0:26:33.920,0:26:41.120
my answer, really, Clara, to your point, to
you. Thank you, yes, and I think the role of

0:26:41.120,0:26:48.000
jurisdiction-specific work here is so
intertwined with local public policy priorities

0:26:48.560,0:26:53.920
and there needs to be more conversation about
that; what can be global? What needs to be local

0:26:53.920,0:26:59.200
inherently? And how can we celebrate both, if you
will, with a system that takes both into account?

0:26:59.840,0:27:04.800
Richard, we've had an interesting question in the
chat which I want to bring back to you now;

0:27:04.800,0:27:09.760
it's looking at - so it's someone called Anando Sarker,
thank you for asking the question - and he's asking,

0:27:09.760,0:27:16.720
how can we incorporate some form of discounting or
bring externalities into the balance sheet? And

0:27:16.720,0:27:21.040
and I think there's quite a lot in there and you
could look at that in different ways but 

0:27:21.040,0:27:26.320
he makes the point that the mispricing of climate
risk, in his view, is bigger than the

0:27:26.320,0:27:31.680
mispricing of subprime mortgages, and so I wanted
just to hear some reflections from you, Richard.

0:27:32.240,0:27:37.680
How far can the balance sheet, per se, take us and
and then what else do we need to be doing just to

0:27:37.680,0:27:43.520
come back to your earlier conceptual point? Yeah,
I'm smiling because I've just finished revising

0:27:43.520,0:27:49.840
a paper on precisely that question, so I can send
Anando a copy of that if that will be helpful.

0:27:49.840,0:27:55.280
I think what's really important is to understand
the conceptual foundations of accounting, of a

0:27:55.280,0:28:00.560
balance sheet; that the balance sheet does not
by design anticipate the future and there's a

0:28:00.560,0:28:04.880
good reason for that because there is no such
thing as reliable information about the future,

0:28:04.880,0:28:08.720
there is only reliable information about the
past; you can't audit the future.

0:28:09.360,0:28:14.320
So accounting has a particular niche which
is providing one type of input into investment

0:28:14.320,0:28:20.000
decisions; likewise the next analysis, the 
accounts, are by design not intended to capture

0:28:20.000,0:28:24.560
externalities, and if you start to build those
into the accounts you compromise the usefulness

0:28:24.560,0:28:29.680
of, the existing usefulness of the account, so
you don't want to undermine financial accounts

0:28:29.680,0:28:34.320
as they are currently done; what you do need to
do is complement them with other information.

0:28:34.880,0:28:39.520
So the information gap is not because
the balance sheet isn't good enough

0:28:39.520,0:28:44.320
the information gap is because there isn't
sufficient sustainability-related disclosures

0:28:44.320,0:28:48.480
that go alongside the balance sheet; that's the
short answer - for the long answer read the paper.

0:28:49.120,0:28:53.520
Great, yes, do read Richard's paper now.
We're about halfway through so for anyone

0:28:53.520,0:28:59.120
who's just joined us, I wanted to welcome you to
today's Leadership in Extraordinary Times event.

0:28:59.120,0:29:03.680
The subject that we're discussing is how capital
markets can take sustainability to the next level.

0:29:03.680,0:29:08.160
I'm Clara Barby from the Impact Management Project,
and I've got four of the authorities in the field;

0:29:08.160,0:29:13.520
you're very lucky to have them all together. All of
the discussions that we're having now, and others

0:29:13.520,0:29:17.040
that have been had in this series, are available
as a podcast, so you will be able to download

0:29:17.040,0:29:23.200
this episode soon, or you can catch up on previous
events as well and wherever you get your podcasts

0:29:23.200,0:29:28.480
from, just search for Leadership in Extraordinary
Times. Now, we were discussing lots of things here

0:29:28.480,0:29:33.840
but I want to come back to climate because the
IFRS Foundation has tested in its consultation

0:29:34.400,0:29:40.160
whether it should lead with climate.
There were many responses to that consultation -

0:29:40.160,0:29:46.560
nearly 600 - having been that geek that has
read most of them, I will tell you that there is an

0:29:46.560,0:29:53.040
overwhelming response that, absolutely, start with
climate, but there is also an overwhelming call for

0:29:53.040,0:29:58.560
them not to stop there. Sandy, I want to come to you
from a practitioner's perspective and just ask you

0:29:59.280,0:30:04.240
why you, as Blackrock, always talk about ESG, you
don't just talk about E. And then Elizabeth, I

0:30:04.240,0:30:07.440
I hope you could follow on from
that and actually talk about it from the

0:30:07.440,0:30:13.360
perspective of the just transition;
why can we actually from a societal perspective

0:30:13.360,0:30:20.560
not dislocate climate from other matters? So Sandy,
over to you. Sure, Clara, and I think one of our

0:30:20.560,0:30:26.080
of our comments in the consultation which we
responded to on December 30th was 'yes please

0:30:26.080,0:30:32.240
climate and don't stop there'; so climate risk has
become so significant that it's actually moving

0:30:32.240,0:30:37.120
increasingly from the purple box down into that
lower left box that Richard described. So now we're

0:30:37.120,0:30:43.280
seeing an increasing number of actual 
significant multi-billion dollar write-offs that

0:30:43.280,0:30:49.040
that energy companies are taking, but what we're
also seeing is it's affecting discount rates and

0:30:49.040,0:30:54.160
cost of capital as we're seeing a gap between the
companies that are managing that sustainability

0:30:54.160,0:30:59.040
risk well and those that aren't, but I think it's
really important for us to recognise that these

0:30:59.040,0:31:05.600
are not the only really significant financial
risks, future financial risk that companies are

0:31:05.600,0:31:13.280
taking on. So take the example of natural capital;
so a company depending on biodiversity, forestry

0:31:13.280,0:31:21.760
replenishment, water - WEF has estimated
now that 50 of GDP is dependent on the use of

0:31:22.320,0:31:29.920
of nature in some fashion, and I've seen data from
Swiss Re that says 20 percent of companies actually have a

0:31:29.920,0:31:36.080
dependence for their business model on
an exposed or endangered ecosystem so

0:31:36.080,0:31:42.240
that is a really significant risk. Now similarly, if
you look at social issues, obviously we've talked

0:31:42.240,0:31:47.200
a lot about purposeful business management and how
that can be a positive differentiator, but then you

0:31:47.200,0:31:53.360
see recently in the couple past couple of
weeks, Vale - the Brazilian mining company -

0:31:53.360,0:32:00.640
taking a seven billion financial cost associated
with the tragic and devastating dam bursts

0:32:00.640,0:32:05.440
that occurred a couple of years ago, so 
it's not just climate issues, it's a full

0:32:05.440,0:32:11.440
range of social issues that matter, and if we then
think about our ESG approach, well that's

0:32:11.440,0:32:16.640
kind of what the investment research shows us.
So I talked earlier about the products that we're

0:32:16.640,0:32:23.680
forming and where we're seeing differentiation and,
thus far we have formed some low carbon transition

0:32:23.680,0:32:30.080
products, it's early days for investing in a net
zero transition and I believe those will show

0:32:30.080,0:32:35.680
promising return characteristics but
what our data shows us right now is that the

0:32:35.680,0:32:43.360
risk returns associated with ESG oriented
investing, bringing those factors in together,

0:32:43.360,0:32:46.640
that's where we're able to see
really differentiated performance,

0:32:47.280,0:32:53.680
superior risk return performance, vis-a-vis 
a sort of standard traditional index, so it

0:32:53.680,0:33:00.320
is looking across those factors and we're
very much in the camp of having the SSB

0:33:00.320,0:33:08.320
focused on those investment relevant
areas, but again I think, as was mentioned earlier

0:33:08.320,0:33:15.040
by several of our participants, we definitely
see the importance for that outer box to be

0:33:15.040,0:33:19.440
very well managed, very well maintained and
that is where we do see opportunities for

0:33:19.440,0:33:24.480
regional differences. I know I sit sort of on
both sides of the Atlantic; I think Europe is

0:33:24.480,0:33:31.360
very interested in in that outer grey box, that's
quite significant to them. The Americans probably

0:33:31.360,0:33:37.200
more interested in that centre box and that's
where we'd love to see that global convergence

0:33:37.200,0:33:44.080
really working even though we do expect that
regional difference in the societal impact area.

0:33:46.160,0:33:52.960
Great, and Elizabeth, I'd love your commentary. Sandy
spoke so well from the perspective of enterprise

0:33:52.960,0:33:58.400
value and why these factors interrelate, what about
from the perspective of society and what we need?

0:33:59.120,0:34:03.440
Well the two are inextricably linked, as
Sandy said, and I think we have a sort

0:34:03.440,0:34:08.720
of legacy from the last century of bucketing
things as economic or social or political,

0:34:08.720,0:34:15.200
and if anything we've learned in the last few
years is that these are very porous membranes and

0:34:15.200,0:34:20.160
what might be economic today can become social
tomorrow and vice versa. And this is particularly

0:34:20.160,0:34:27.280
true as we address climate transition, a transition
to a net zero world, because in any transition in

0:34:27.280,0:34:32.000
any industrial revolution there are winners
and losers, and we know that capital markets

0:34:32.000,0:34:36.960
are completely indifferent to winners and
losers, they're not there to police morality,

0:34:36.960,0:34:42.960
they're not there as a value system. However, if
you have short-term winners at the consequence

0:34:42.960,0:34:48.320
of long-term losers, that is an unbalanced
transition that just will not last, it will implode.

0:34:48.880,0:34:54.000
And, as Sandy commented on, there is no doubt at
all that the more thought given to the way in

0:34:54.000,0:35:01.520
which we now renew post-COVID building back into,
not just a greener environment, but one which is

0:35:01.520,0:35:07.840
more sustainable on many factors and is fairer, I
think will really make resilient economies. We want

0:35:07.840,0:35:13.120
to stimulate innovation, create jobs - sustainable
jobs - and skills and what better way to do it

0:35:13.120,0:35:17.600
than deploy talent and capital to address
the biggest challenge this world faces,

0:35:18.160,0:35:23.680
but if we do that in a way which is indiscriminate
and doesn't reflect on that wider responsibility

0:35:23.680,0:35:27.920
then we cannot assume that those
returns are going to be sustainable returns,

0:35:27.920,0:35:33.040
whether that's profitable or whether it's in terms
of political or regulatory acceptance, or whether

0:35:33.040,0:35:39.600
it's consumer loyalty. And I think a question
came in around the whole question of supply chain;

0:35:40.240,0:35:45.840
we know, we've seen, we talked about that dreadful
Vale experience, but we know that there's an

0:35:45.840,0:35:52.480
expectation in capital markets - which don't think,
they just act - there's an expectation of sensible

0:35:52.480,0:35:58.320
supply chain behaviour. When we discover that
supply chain mismanagement has happened, it has

0:35:58.320,0:36:04.480
very very significant consequences on valuations
and customer loyalty both, so I think these things

0:36:04.480,0:36:10.080
are inextricably intertwined, and certainly
if you were sitting in a corporate boardroom

0:36:10.080,0:36:15.360
you would be talking about carbon and
environment and other things, but equally you'll

0:36:15.360,0:36:21.840
be talking about inclusion, diversity, equality,
approach to supply chain, approach to the way

0:36:21.840,0:36:26.720
in which you look after your people, gender and
other inequalities, these are inextricably linked.

0:36:29.200,0:36:35.600
Thank you, and we have another question, Elizabeth.
And I might bring Tajinder in here as

0:36:35.600,0:36:42.640
well. We've all talked about urgency;
there's a pointed question on, yes, but tell me

0:36:42.640,0:36:49.520
when it's going to happen, what is the timeline? So to
Tajinder, perhaps a reflection from you, knowing well

0:36:49.520,0:36:54.400
the move to the IFRS Foundation and how it is
thinking about this, and then I invite, obviously,

0:36:54.400,0:37:01.920
anyone else to weigh in. Sure, I think, probably, you
know a good reference point is the announcement

0:37:01.920,0:37:07.200
by the trustees of the IFRS foundation that
was earlier this month about what the next

0:37:07.200,0:37:13.840
steps are and there is a clear
recognition about the role of the IFRS foundation

0:37:13.840,0:37:18.400
as well the establishment
of the Sustainability Standards Board. So

0:37:19.200,0:37:25.680
what that talks about is that the trustees
will produce a definitive proposal by the end of

0:37:25.680,0:37:32.560
September of this year, and it could possibly lead
to an announcement of the establishment of the new

0:37:32.560,0:37:39.920
SSB by November 2021, which is basically the COP 26
Summit, I think, so those are the timelines.

0:37:39.920,0:37:44.480
Now that's about the setting up of the SSB, I think
to that, I would basically add the point

0:37:45.040,0:37:49.200
that we've talked about here, which is that there
is, it's not like we're starting from scratch

0:37:49.760,0:37:55.200
in terms of the work that has
already happened with the voluntary

0:37:55.200,0:37:59.920
standard setters, their working together, and
therefore, there is a mass of material, there is.

0:38:00.720,0:38:05.680
On the climate side, we have the prototype that
is there and therefore there is that urgency

0:38:05.680,0:38:11.360
that we are all talking about is actually pretty
much ingrained into the processes that are there,

0:38:11.360,0:38:17.840
and I think, therefore, that can actually lead to
a very quick - after the SSB setup - I think it

0:38:17.840,0:38:23.280
can actually lead to a very quick setting up
of the standard, but let me just add a note, a

0:38:23.280,0:38:29.040
caveat here, that it is true it is urgent and
that's why we are all here, we are wanting to

0:38:29.040,0:38:35.280
get things done by yesterday if possible, but
I think that when we talk about the

0:38:35.280,0:38:41.360
success of the IFRS foundation that was set up
20 years ago, let's not forget that due process

0:38:41.360,0:38:48.560
is an important element of the staying power,
and the acceptability of a particular

0:38:48.560,0:38:55.920
standard in in the markets and around the
globe. So urgency, yes, impatience, somewhat,

0:38:56.800,0:39:01.760
but speed not at the cost of due
process is the point that I would make here.

0:39:02.560,0:39:09.360
Great point, and Sandy, if there are companies,
either actual or potential investees

0:39:09.360,0:39:13.520
of Blackrock listening to this, what would be
your message to them in terms of what they

0:39:13.520,0:39:18.560
should be doing now rather than sitting around
waiting? Well yes, thank you for asking because

0:39:18.560,0:39:24.720
we do have a very specific message which is we
would like companies to be reporting using TCFD

0:39:24.720,0:39:31.600
four pillars, so we want to see governance, risk
management, strategy targets, and metrics that show

0:39:31.600,0:39:37.120
how companies will be aligned toward that,
well below two degree, ideally 1.5 degree, world,

0:39:37.120,0:39:42.880
a net zero by 2050 world. We recognise that not
every company is in exactly the same place, we

0:39:42.880,0:39:48.640
don't think there should be a one-size-fits-all
strategic pathway, but it is very important for

0:39:48.640,0:39:54.240
companies to demonstrate how they will be fitting
into that journey. The other thing that we ask for

0:39:54.240,0:39:59.200
is, we ask for the SASB standards for
the industry and that the company is in

0:39:59.200,0:40:04.800
and there it's because in order to develop
that ESG perspective that's so important,

0:40:04.800,0:40:10.560
there are many matters beyond climate that really
do matter to us as investors, and we

0:40:10.560,0:40:17.600
recognise that companies have been reporting using
other standards, so for example, GRI, many of the

0:40:17.600,0:40:22.880
metrics can be mapped directly to SASB standards
so we ask companies to do that. I mean our hope

0:40:22.880,0:40:29.360
coming back to Tajinder's point, is if
the private standard setters can actually converge

0:40:29.360,0:40:36.480
toward the SSB ideally, we won't have the perfect
be the enemy of the good, and we can get 

0:40:36.480,0:40:42.560
global recognition of the importance of TCFD
reporting, increasing alignment around the

0:40:42.560,0:40:48.720
relevant metrics that companies need to report,
and then that becomes the foundation for that 

0:40:48.720,0:40:58.160
future, IFRS-sponsored sustainability standards
board, due process produced set of standards.

0:40:59.440,0:41:05.600
Great, so the message is definitely; don't wait
get going now, internally within your company,

0:41:05.600,0:41:11.200
but I have to say the timeline that
Tajinder outlined as a potential timeline,

0:41:11.200,0:41:17.680
that is fast, COP 26; all roads leading to Glasgow.
That is fast, and as you've all said with the level

0:41:17.680,0:41:22.960
of content that's already been developed that's
quite an optimistic path before us, I think if

0:41:22.960,0:41:28.640
it can be achieved. Now there's a very good - I like
our audience - there's a very punchy question here

0:41:28.640,0:41:33.840
which is from Kim Polgreen, and Kim, thank you for
asking this, which is why has this taken so long?

0:41:34.720,0:41:40.560
She says, at KPMG we were pointing out risks on
reputation, changing laws, liabilities back in 2000.

0:41:41.360,0:41:44.720
It's a really fair question,
Richard I'm going to come to you.

0:41:44.720,0:41:50.320
You look at this, really, as an ecosystem,
as an evolution; what is it that's taken

0:41:51.520,0:41:55.760
us until now to be moving and now,
suddenly, we're all moving so quickly?

0:41:58.480,0:42:03.600
Well it's a combination of factors. If
you take climate, you know, a precondition

0:42:03.600,0:42:10.000
for developing climate-related standards is having
some form of consensus on what carbon emissions

0:42:10.000,0:42:14.800
are and how you import them, so the work of the
greenhouse gas protocol, which is pretty much 20

0:42:14.800,0:42:20.400
years old now, I think was absolutely
essential in defining what we mean by carbon

0:42:20.400,0:42:25.200
emissions and equating other forms of greenhouse
gas in terms of carbon potential and so on.

0:42:26.000,0:42:30.320
Once you have those kinds of standards in place,
you then need the appropriate institutional

0:42:30.320,0:42:34.640
pressures and structures to develop reporting and
I think what you're seeing now is those things

0:42:34.640,0:42:40.080
coming together so the ecosystem I mentioned
before, of investors calling for this information,

0:42:40.080,0:42:44.240
the work that's been done by TCFD,
and SASB and GRI and others

0:42:44.240,0:42:48.720
in laying the foundations for reporting
and making it possible for the SSB, and

0:42:48.720,0:42:53.040
the IFRS foundation is recognising that it
has a role beyond just financial accounting.

0:42:53.040,0:42:56.960
So all those institutional pressures just
take time, I think is the reality of it.

0:42:56.960,0:43:00.080
But now is an absolutely critical window
because they're all coming together.

0:43:02.080,0:43:08.480
Any other reflections from anyone else? I
might make an observation, Clara, which is that

0:43:08.480,0:43:13.680
I think the big shift that has occurred in the last
couple of years, is that these issues have become

0:43:13.680,0:43:19.920
central to mainstream finance, so if you looked
back five or ten years active investors were

0:43:19.920,0:43:25.280
engaging with very carbon-intensive companies
and there was some very robust dialogue,

0:43:25.280,0:43:30.640
but I came from the Bank of England.
prior to my role at Blackrock, and when we made the

0:43:30.640,0:43:35.760
switch to say, we're not just worried about the
financial risk that created the last financial

0:43:35.760,0:43:43.520
crisis but we now recognise that, unless we bring
forward the risk associated with climate risk into

0:43:43.520,0:43:47.920
the financials of the banks and insurance
companies we're regulating, there will be

0:43:47.920,0:43:52.800
no good point at which we'll recognise that; the
mechanism that says stress testing is for three

0:43:52.800,0:43:59.200
years or five years doesn't show the exposure. So
I do see the Bank of England's work putting this

0:43:59.200,0:44:06.640
onto the risk management landscape, combined
with the SSB founding TCFD, and now increasingly

0:44:06.640,0:44:12.320
the role that many regulators are playing to
ask banks, in particular, as well as insurance

0:44:12.320,0:44:17.760
companies, to be more focused on this, I do think
there's been a tipping point and that 

0:44:17.760,0:44:24.080
really does change the dialogue from what was
previously bilateral discussions between

0:44:24.640,0:44:28.960
very responsible active investors and
their most carbon intensive companies.

0:44:29.760,0:44:34.080
And Clara, I just add to that, I completely agree
with what Sandy said; I think a lot has been

0:44:34.080,0:44:40.160
happening in the last 20 years and I think the
the whole shift of thinking this is optional, an

0:44:40.160,0:44:45.440
optional extra, and also that it's only about risk
management. It's essentially about risk management

0:44:45.440,0:44:51.680
but it's also about opportunity creation. There
are so many issues to be addressed, you can't

0:44:51.680,0:44:57.360
just say 'I'm no longer holding X in my portfolio, I
don't want to buy that', because somebody else will

0:44:57.360,0:45:03.440
end up buying it and that will not address climate
change. So this has to be a very inclusive approach,

0:45:03.440,0:45:07.120
it has to be one about looking at
brown assets as well as green assets,

0:45:07.120,0:45:12.480
and really incentivising accelerated innovation
and solutions to address the climate challenge.

0:45:12.480,0:45:16.640
I mean, ex-Governor Mark Carney talking about the
Bank of England said this is probably one of the

0:45:16.640,0:45:22.720
biggest opportunities that we have as well as one
of the biggest risks. And Elizabeth, I mentioned at

0:45:22.720,0:45:27.360
the beginning that you are a director on public
companies as well, what's the mood in the boardroom

0:45:27.360,0:45:33.360
and has that mood changed recently?
Massively, Clara, I think it started,

0:45:33.360,0:45:38.080
it was already there, I mean everybody of all the
companies overall were thinking about these issues,

0:45:38.080,0:45:43.600
but the last 18 months the whole attitude has
accelerated, and it's been this perfect storm of

0:45:44.400,0:45:49.680
real awareness of the state of urgency
around climate change and including natural

0:45:49.680,0:45:55.520
capital and biodiversity, not just carbon as 
described, thinking about the whole social

0:45:55.520,0:46:03.120
justice movement last year and then the cracks
in society and in resilience that COVID has shown,

0:46:03.120,0:46:08.960
and all these things coming together, this is
absolutely central to boardroom discussions, and I

0:46:08.960,0:46:14.400
think there is a lot going on that already, and I
think, as Richard said, the time is right, this is

0:46:14.400,0:46:20.000
about an ecosystem change and systems change. The
one thing I think we should do better this time

0:46:20.720,0:46:25.680
is think across silos, so that we get
the whole of the ecosystem represented

0:46:25.680,0:46:30.160
in the way in which we can move rapidly and,
to use Tajinder's phrase, that there is a

0:46:30.160,0:46:35.360
sort of filtering mechanism of good ideas that
come in more regional or jurisdictional levels

0:46:35.920,0:46:39.920
that is more dynamic than we've seen in the
past, but we can learn from that. I think it's a

0:46:39.920,0:46:46.800
huge opportunity this year to get this right. We've
got another good question from the audience about

0:46:46.800,0:46:54.720
industry specificity and Richard, I welcome a
reflection from you on how the question

0:46:54.720,0:47:00.000
is, you know, why is industry specificity important?
And I guess I bring it to you because I'm

0:47:00.000,0:47:04.880
interested, knowing everything you know about
financial accounting standards, do you think that

0:47:04.880,0:47:09.840
when it comes to sustainability information
an industry lens is more important and why?

0:47:11.840,0:47:18.320
Yeah, my view on this is that one shouldn't be
too binary. Right, so if you think about financial

0:47:18.320,0:47:23.840
reporting, currently the financial reporting
standards are not explicitly designed by industry

0:47:24.400,0:47:27.840
but different industries have different
financial reporting models when it comes

0:47:27.840,0:47:32.960
down to it, and they're analysed by different
sectors and investors and so on, so

0:47:32.960,0:47:38.240
industry is built into financial accounting
and finance reporting as is, and then from a

0:47:38.240,0:47:43.680
sustainability perspective, sustainability issues
are not just specific to industry right. So a ton

0:47:43.680,0:47:48.320
of carbon emissions is a ton of carbon emissions
whichever industry you happen to be in, so a

0:47:48.320,0:47:52.400
degree of industry reporting is very important
and a degree of standardisation across industry

0:47:52.400,0:47:58.080
is also very important, it's actually not one
or the other, I think. It's a matrix: it always is.

0:47:59.600,0:48:04.560
But it was interesting,
hearing Sandy talk about the role of SASB and how

0:48:05.280,0:48:10.240
how decision useful it is for you at the
investment level. Sandy, do you think that, in

0:48:10.240,0:48:15.280
addition to what Richard said, the way in which
strategic asset allocation tends to be done

0:48:15.280,0:48:21.040
and the industry lens that's often applied
is part of what is making the industry focus

0:48:21.040,0:48:24.720
useful for sustainability information, or
have you learned different things about it?

0:48:25.760,0:48:29.200
I mean it's an interesting question
about where is the greater value,

0:48:30.000,0:48:36.080
allocating between industries or allocating within
industries across sustainability? I would say that

0:48:36.880,0:48:42.720
while there has been a theory that
all of the value generated in ESG investing

0:48:42.720,0:48:48.880
over the last year associated with, essentially
going long tech and short oil and gas,

0:48:48.880,0:48:54.080
that actually hasn't proven to be the case - well,
obviously there has been a key shape performance

0:48:54.080,0:48:59.120
with one set performing better than the other.
Where we've actually seen a lot of differentiation

0:48:59.120,0:49:05.760
is within sectors, companies that are managing
their carbon exposure, companies that are managing

0:49:05.760,0:49:11.760
their other sustainability risks better, pulling
ahead of those who are doing so in a less good

0:49:11.760,0:49:17.760
fashion, and you can look in any industry I think
and find real differentiation. So I agree

0:49:17.760,0:49:24.160
with Richard's point: it is a continuum
and sadly, yes it is a matrix where

0:49:24.160,0:49:30.000
factor X will be very important across 
five industries and irrelevant to others,

0:49:30.000,0:49:36.560
but nonetheless the understanding of
that factor and where that needs to be considered,

0:49:36.560,0:49:41.600
that's very important for companies who
need to make prioritisation decisions, and also

0:49:41.600,0:49:47.680
for investors to know 'what are the things I really
need to worry about', but yeah it is not one size

0:49:47.680,0:49:52.240
fits all. I do agree though with the point 
a ton of carbon is a ton of carbon and 

0:49:52.240,0:49:57.840
we've actually identified a thousand companies
that will focus on more than we do otherwise

0:49:58.720,0:50:04.000
in our listed company universe, because those are
companies that have significant carbon footprints

0:50:04.000,0:50:09.280
irrespective of what their industry is, and one
point I'll just make, and I think Elizabeth has

0:50:09.280,0:50:14.160
talked a lot about small and medium companies. I
do think one of the risks that we're attentive to

0:50:15.040,0:50:21.120
and my group focusing on large listed companies
is that what we don't want is an outcome

0:50:21.120,0:50:27.520
where unsustainable activities migrate
into so-called other regions, or private

0:50:27.520,0:50:33.360
companies that have different goals, so it is
important as the Sustainability Standards Board

0:50:33.360,0:50:39.360
thinks about its work, and as regulators pick
up its work, that we ensure that we don't get sort

0:50:39.360,0:50:45.040
of dark pockets of unsustainable activity, because
that doesn't really help anyone, that kind of

0:50:45.040,0:50:50.720
cleans up one set of companies but leaves issues,
and that frankly the planet still has to deal with.

0:50:52.480,0:50:56.240
Agreed thank you, and actually I want to
thank Lauren from Luxembourg, who was the one

0:50:56.240,0:51:00.160
that asked the question about industry
specificity, I think that comes up a lot.

0:51:00.160,0:51:05.200
There's another interesting question about
greenwashing: how can investors crack through

0:51:05.200,0:51:10.480
greenwashing? And that's asked by Wendy Addison,
and actually, Tajinder, I'd like to bring that to

0:51:10.480,0:51:17.920
you because you touched on the role of assurance,
and although it might be very obvious the

0:51:17.920,0:51:22.640
the reason why global standards with the due
process that you were emphasising are so important

0:51:22.640,0:51:27.680
is because then it allows for assurance. Can you
reflect a bit more on that for us and help us

0:51:27.680,0:51:31.520
understand how you as securities regulators
think about that to prevent green washing?

0:51:33.120,0:51:39.680
No, indeed, I think frankly, when the
discussions first started about sustainability

0:51:39.680,0:51:44.240
and so on, I think the first thing that we were
talking about was not about sustainability

0:51:44.240,0:51:48.800
reporting but about addressing green washing,
because clearly as regulators that's the thing

0:51:48.800,0:51:55.200
that we are concerned about, and indeed these
are all interrelated things - the proper

0:51:55.200,0:52:02.240
supply of information, proper disclosure, indeed
it goes back even to taxonomy - connects really to

0:52:02.960,0:52:06.960
what is disclosed and whether what is
disclosed is in accordance essentially

0:52:06.960,0:52:11.840
with the label on the tin or not is basically
the point that we are talking about.

0:52:12.400,0:52:18.640
And we do take this quite seriously, that is the
other work stream that I mentioned, we are talking

0:52:18.640,0:52:23.920
about the work stream on disclosures is the one
that is kind of running along fast because of

0:52:23.920,0:52:29.360
the urgency that we are talking about, but this one
is not too far behind. What we are trying to see is,

0:52:30.080,0:52:33.200
essentially, what are the
disclosures that are also made at

0:52:33.920,0:52:40.240
at firm level at asset managers level, and
are also taking into account any of the case

0:52:40.240,0:52:46.080
studies that would be available inside 
jurisdictions to see whether we can actually have

0:52:46.640,0:52:53.760
a set of good practices or best practices,
that we can have to be able to help regulators,

0:52:53.760,0:52:58.800
because, similar to what we were talking about
industries and so on, the regulatory arena is

0:52:58.800,0:53:03.520
also diverse. You have people at different ends
of the spectrum and our job is to be able to

0:53:03.520,0:53:09.200
make sure that people are able to look at
what are the best practices and the good practices

0:53:10.560,0:53:16.960
across the world to be able to cross fertilise,
so that we are able to address this

0:53:16.960,0:53:23.760
issue sooner rather than later, because a scandal,
let's say, in this area can actually set back

0:53:23.760,0:53:27.840
a lot of the work that we're
really talking about. So I have to say that

0:53:28.400,0:53:32.160
at a very very core level that's the basic
stuff of regulation, which is about saying,

0:53:32.720,0:53:37.280
okay if there is misselling happening
then that needs to be addressed but 

0:53:37.280,0:53:42.960
there are differences as
well here, and I think we should have the

0:53:42.960,0:53:47.520
the ability and what we will be able to come
up with in terms of these practices should

0:53:47.520,0:53:55.840
go a long way in terms of helping regulators
and supervisors to address this green washing.

0:53:58.480,0:54:03.680
Richard, we have just a few minutes more of our
session, and I want to come to you for final

0:54:03.680,0:54:07.920
reflections having listened to the dialogue
that we've had. What, what are the

0:54:07.920,0:54:14.160
key messages we should leave the audience with
today from your perspective? Well 

0:54:14.160,0:54:21.200
that's a big question, but I think the first
thing that's really important that Elizabeth

0:54:21.200,0:54:26.560
and Sandy described, I thought, really nicely, was
there is the mainstreaming of sustainability so

0:54:27.360,0:54:32.160
you don't have sort
of purpose and impacts and CSR

0:54:32.160,0:54:36.960
or something in one box and profit-making
corporations in a completely different space.

0:54:44.720,0:54:48.800
At board-level it's inconceivable that you're not thinking about
the business transition. Does it transition

0:54:48.800,0:54:53.760
to zero carb for example? Diversity and
inclusion within your organization and so on, so

0:54:54.720,0:54:58.960
that I think is really important. The
second thing that that I think is striking

0:54:58.960,0:55:04.240
is that governments here, we haven't talked
too much about governments but they've been

0:55:04.240,0:55:10.000
latent in the discussion and they have two quite
distinct roles. I think if we're going to get to

0:55:10.000,0:55:17.120
a rolling out of a global solution for standard
setting then support by different jurisdictions

0:55:17.120,0:55:24.560
across the planet is incredibly important. Moreover
governments have a role with respect to societal

0:55:24.560,0:55:29.200
reporting, and not just reporting to investors.
So we focus on reporting to investors and on

0:55:29.200,0:55:34.400
the role of the IFRS foundation and the needs of
investors and so on. There are additional needs for

0:55:34.400,0:55:39.040
corporate reporting, for impact on the environment
and society, and governments need to step up and

0:55:39.040,0:55:45.600
fill the gap as anywhere that's not met by
just reporting to investors. The third thing, which I

0:55:45.600,0:55:51.520
think is absolutely critical, is the urgency of all
this, and that's been mentioned several times by

0:55:51.520,0:55:58.960
all three of the other panellists, and there
it's really important that there is 

0:55:58.960,0:56:05.600
collaboration across the system, so the challenge
of sustainability is not a national challenge or

0:56:05.600,0:56:11.280
an industry challenge or a regional challenge: it's 
a global challenge, and the natural solution

0:56:11.280,0:56:18.560
for reporting standards is a global solution, and
so the faster that all of the relevant parties,

0:56:18.560,0:56:23.360
investors, and companies in particular has very
strong voices, but also regulators in the world.

0:56:23.360,0:56:28.560
Tajinder and the way he's talked about IOSCO and
so on, and governments and so on and so forth, all

0:56:28.560,0:56:34.560
need to come together on this and recognising that
there is a very strong platform on which to build.

0:56:35.120,0:56:40.800
So when Sandy was describing the Blackrock
support for TCFD and SASB, what she's

0:56:40.800,0:56:45.120
describing there is something that's absolutely
in line with the development of IFRS, because

0:56:45.840,0:56:50.880
that is the direction of travel, right, so
in just the same way that when the ISB

0:56:50.880,0:56:56.800
came into being it adopted the standards of its
predecessors, you would expect a sustainability

0:56:56.800,0:57:01.680
standard board to have come into being and adopt
the best practices already out there. So the

0:57:01.680,0:57:06.960
more that investors and companies are moving in
the direction of, for example, adopting TCFD, the

0:57:06.960,0:57:11.840
faster the system will get there, so that urgency,
I think, is critically important not to lose that

0:57:12.560,0:57:17.360
Break down silos and get on
with it are the headlines.

0:57:20.000,0:57:24.240
Listen, we're sadly out of time and it's been
fascinating, so before I thank my guests 

0:57:24.240,0:57:28.400
I just want to say to our audience, I do hope that
you'll be able to join us for the next Leadership

0:57:28.400,0:57:34.080
in Extraordinary Times event. Tt's on high impact
entrepreneurs, it features Linda Rottenberg, the CEO

0:57:34.080,0:57:39.200
of Endeavour Global, which, if you don't know it, is
a worldwide network that links and nurtures those

0:57:39.200,0:57:44.800
bold ones, those high-impact entrepreneurs. It's
in just a couple of days time, it's this Thursday

0:57:44.800,0:57:51.520
February the 18th at 2 p.m GMT, so please don't
miss that. And I will just close our session on

0:57:51.520,0:57:59.280
time by thanking all of you for your participation
today, I think this is the ...

0:57:59.280,0:58:03.680
the difference in backgrounds of the participants
that we thank you all for extraordinary leadership.

0:58:07.200,0:58:07.840
Thank you.

0:58:40.320,0:58:40.820