ESG REPORTING

Masterclass
Course Notes

Understand the range of standards and frameworks that exist for

climate accounting and more broadly ESG disclosures

Margott Terblanche
[email protected]
 ESG REPORTING

Table of contents
Glossary of terminology ........................................................................................................................ 3
Chapter 1: Environmental, Social and Governance (ESG) and Capital .................................................. 4
1 The importance of Environmental, Social and Governance (ESG) ............................................. 4
1.1 Introduction ...................................................................................................................... 4
1.2 The concept of capital ....................................................................................................... 4
1.3 The new equation ............................................................................................................. 5
Chapter 2: Existing ESG Reporting Frameworks and Initiatives ............................................................ 6
1 Existing ESG Reporting Frameworks.......................................................................................... 6
1.1 Introduction ...................................................................................................................... 6
1.2 Carbon Disclosure Project (CDP) ....................................................................................... 6
1.3 Climate Disclosure Standards Board (CDSB) ...................................................................... 6
1.4 Global Reporting Initiative (GRI)........................................................................................ 7
1.5 International Integrated Reporting Council (IIRC) ............................................................. 7
1.6 Sustainability Accounting Standards Board (SASB) ........................................................... 7
2 The future ................................................................................................................................. 8
Chapter 3: The State of Play in ESG Reporting Globally .............................................................................. 9
1 The European Union ................................................................................................................. 9
1.1 Introduction ...................................................................................................................... 9
1.2 European Commission (EC) Guidelines on reporting climate-related information ........... 9
1.3 EU Non-Financial Reporting Directive ............................................................................... 9
1.4 EU Taxonomy .................................................................................................................. 10
1.5 The EU Green Deal .......................................................................................................... 13
2 United States of America (USA) .............................................................................................. 14
3 Middle East and Asia ............................................................................................................... 15
3.1 China ............................................................................................................................... 15
3.2 Egypt ............................................................................................................................... 15
3.3 Indonesia......................................................................................................................... 16
3.4 Pakistan ........................................................................................................................... 16
3.5 Saudi Arabia .................................................................................................................... 16
3.6 Sri Lanka .......................................................................................................................... 16
Chapter 4: Carbon Accounting and Greenhouse Gas Accounting ....................................................... 17
1 Carbon Accounting .................................................................................................................. 17
1.1 Introduction .................................................................................................................... 17
1.2 Greenhouse Gas Protocol................................................................................................ 17
1.3 The GHG Protocol for Project Accounting ....................................................................... 19

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Chapter 5: The International Sustainability Standards Board (ISSB) ................................................... 21

1 A new standard-setting body .................................................................................................. 21
1.1 Introduction .................................................................................................................... 21
1.2 The Technical Readiness Working Group (TRWG) ........................................................... 21
1.3 TRWG Prototypes ............................................................................................................ 22
1.4 Climate Disclosure Standards Board (CDSB) .................................................................... 23
1.5 Value Reporting Foundation (VRF) .................................................................................. 23
Chapter 6: The Sustainable Development Goals (SDGs) and ESG ....................................................... 24
1 Sustainable Development Goals ............................................................................................. 24
1.1 Introduction .................................................................................................................... 24
1.2 How does the SDGs relate to ESG?.................................................................................. 24
Chapter 7: ESG - Key Reporting areas ................................................................................................ 26
1 Key reporting areas ................................................................................................................. 26
2 Three fundamental questions to ask ....................................................................................... 26
Sources and references....................................................................................................................... 28

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Glossary of terminology
CBAM Carbon Border Adjustment Mechanism

CDP Carbon Disclosure Project

CDSB Climate Disclosures Standards Board

EC European Commission

EU European Union

ESG Environment, Social and Governance

FSB Financial Stability Board

GHG Greenhouse Gas

GRI Global Reporting Initiative

IASB International Accounting Standards Board

IFRS International Financial Reporting Standards

IIRC International Integrated Reporting Council

IOSCO International Organization of Securities Commissions

ISSB International Sustainability Standards Board

NFRD Non-Financial Reporting Directive

SASB Sustainability Accounting Standards Board

SDGs Sustainable Development Goals

SFDR Sustainable Finance Disclosure Regulation

TCFD Taskforce on Climate-related Financial Disclosures

TRWG Technical Readiness Working Group

UN United Nations

US SEC United States Securities and Exchange Commission

VRF Value Reporting Foundation

WEF World Economic Forum

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Chapter 1: Environmental, Social and

Governance (ESG) and Capital
1 The importance of Environmental, Social and Governance (ESG)
1.1 Introduction
Sustainability is one key defining issue of our day. International investors with global investment
portfolios are increasingly calling for high quality, transparent, reliable and comparable reporting by
companies on climate and other environmental, social and governance (ESG) matters to enable them
to make informed investment and capital allocation decisions.

Often heard in today’s boardrooms and C-suites and their virtual equivalents: a mixture of anxiety and
enthusiasm about environmental, social, and governance (ESG) issues. “What risks are we sitting on?”
leaders (and investors) are asking, as pressure for ESG disclosures mount. “How do we measure and
manage them when there are no common standards? Where should we focus, when the list of
potential issues is a mile long?” And, critically—which is where the enthusiasm comes in—“As we take
a hard look at our business, what opportunities can we identify to solve big problems and create value
in new ways?” The answers to these questions are interrelated, as are the initiatives those answers
will motivate: reimagined reporting, strategic reinvention, and, ultimately, wholesale business
transformation.

The underlying forces at work are well known. Investors, lenders, and rating agencies expect greater
visibility of an ever-broader range of nonfinancial metrics to better understand diverse social and
environmental risks. Governments’ ambitious, top-down commitments to limit carbon emissions are
increasingly backed by new regulations and new taxes. More—much more—can be expected. Activist
shareholders, among many other stakeholders, are advocating for net-zero policies and for tighter
linkages between ESG targets and executive compensation packages. Socially conscious consumers
are more inclined to vote with their wallets, encouraging businesses to reappraise their products and
purpose, including their role as employers of diverse, engaged workforces. And the global pandemic
has created significant additional momentum for change.

1.2 The concept of capital

Capital consists of assets used to produce goods and services. Whereas financial capital - i.e., monetary
equity conferred by the shareholders in a business entity - has traditionally been a scarce and
expensive resource, other complementary forms of equity have progressively emerged.

Book versus market value of equity/capital is formed by (in)tangible capital and/or (non) monetary
equity.

These traditional features of capital are being complemented by social and human components,
harder to detect in accounting terms and so to appraise. Social/human capital, or variants represented
by circular, narrative, relational or reputational capital, are increasingly used and embedded in ESG
metrics that are part of the wider Sustainable Development Goals (SDGs). Network capital links firms
to the external ecosystem, promoting joint ventures increasingly mastered by digital platforms.

Sustainability emerges as a common denominator of any equity/capital definition that needs to be

continuously nurtured by complementary stakeholders to achieve long-lasting survival strategies.
Even the beneficiaries of capital exploitation go well beyond the narrow boundaries of shareholding

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stakes. Even if sustainability embraces social and environmental issues, its economic features
represent the backbone for long-term durability (… no money, no party). Sustainable capital is
counterbalanced by mostly intangible assets, as they reflect immaterial features consistent with ESG
patterns.

1.3 The new equation

a. Smarter business for a stronger world.

ESG is more than ticking boxes. It’s about making a difference – for your business and for our world.
Creating sustained outcomes that drive value and fuel growth, whilst strengthening our environment
and societies.

b. Your action plan should be based on your strategy

It is more that good intentions. It is about creating a tangible, practical plan that achieves real results
– not just having climate change and diversity disclosures alone but embedding these principles (and
more!) across your business – from investment to sustainable innovation.

So, the question to you is:

c. Transforming your business to be future proof

How well is your business adapting to a changing world? A world where success is no longer measured
by financials alone? From net zero to the circular economy. When you put ESG at the very heart of
your operation, you take bold steps towards a model that will deliver sustainable business advantage
and measurable value. It is an approach to makes possible the operational, cultural and financial
changes needed to future-proof your business.

d. Transparency is key

Responsibility. Sustainability. Diversity. How well does your business measure up? ESG metrics
should be infused right through all areas of your operation, creating maximum transparency. With
the right combination of data and disclosures, you can be confident in both clearer reporting and
greater trust – for now and the long term.

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Chapter 2: Existing ESG Reporting

Frameworks and Initiatives
1 Existing ESG Reporting Frameworks
1.1 Introduction
There are no less than a dozen major ESG reporting frameworks in existence – each with their own
metrics, methodology and scoring system. These reporting frameworks become the basis of how
companies set KPI’s, what they measure, and what information goes into the sustainability reports
they create.

The main reason for the large number of reporting frameworks or standards is the wide variety of
companies that now participate in ESG reporting as different industries have different ESG aspects
and impacts. There are currently five leading ESG reporting frameworks (or, in some cases, standards),
all of which are discussed in this chapter, namely:

• Carbon Disclosure Project (CDP)

• Climate Disclosure Standards Board (CDSB)
• Global Reporting Initiative (GRI)
• International Integrated Reporting Council (IIRC)
• Sustainability Accounting Standards Board (SASB)

It is important to distinguish between ESG reporting standards and reporting frameworks. ESG
standards such as those issued by the SASB and GRI provide explicit instructions on what should be
reported on ESG issues, as well as information on which indicators should be revealed.

Frameworks such as the Taskforce on Climate-related Financial Disclosures (TCFD), on the other hand,
provides principles-based guidelines on what areas organisations should report on and how the data
should be organised.

As a result, reporting standards and frameworks were intended to be utilised in tandem, but this isn’t
always the case. And given its complexity and the numerous reporting alternatives available,
understanding the disclosure process can be difficult.

1.2 Carbon Disclosure Project (CDP)

As the name implies, CDP, founded in 2000, focuses primarily on climate impacts such as carbon
emissions, water usage, and deforestation. Therefore, companies wishing to report on social and
governance factors will need to use a secondary reporting framework. Companies reporting under this
framework are scored based on their environmental transparency and action, while those scoring well
gain a competitive advantage over their peers.
Used by: 9,600 companies, 800 cities, states and regions

1.3 Climate Disclosure Standards Board (CDSB)

The CDSB was founded in 2007 at the World Economic Forum (WEF) annual meeting, and the CDSB
framework was released in 2015. It is heavily focused on environmental information. It provides a
structure for collecting data for reporting and aims to integrate climate-change related disclosure into
mainstream financial reports such as annual reports. By doing so, it hopes to encourage connections

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between sustainability and corporate strategy. It does not specify its own metrics and KPI’s for
reporting but rather relies on metrics and KPI’s developed by other standards organisations like CDP,
as well as GRI, WRI, WBCSD, and SASB.
Used by: 375 companies across 32 countries and 10 sectors, including Nestle and Coca Cola.

1.4 Global Reporting Initiative (GRI)

Launched in 1997, the GRI was the first global standard for sustainability reporting. It was developed
by the Coalition for Environmentally Responsible Economies (CERES) and the United Nations
Environment Programme (UNEP) in response to the Exxon Valdez oil spill. Today over 80% of the
world’s 250 largest companies use GRI, but it is also useful for small companies.

What makes GRI so useful is its flexibility, and the Standards enable any organisation – large or small,
private or public – to understand and report on their impacts on the economy, environment and
people in a comparable and credible way, thereby increasing transparency on their contribution to
sustainable development. In addition to reporting companies, the Standards are highly relevant to
many stakeholders - including investors, policymakers, capital markets, and civil society.

The Standards are designed as an easy-to-use modular set, delivering an inclusive picture of an
organisation's material topics, their related impacts, and how they are managed.

The Universal Standards - now revised to incorporate reporting on human rights and environmental
due diligence, in line with intergovernmental expectations - apply to all organisations;
The new Sector Standards enable more consistent reporting on sector-specific impacts;
The Topic Standards - adapted to be used with the revised Universal Standards - then list disclosures
relevant to a particular topic.
Used by: More than 13,000 organisations in 90 countries.

1.5 International Integrated Reporting Council (IIRC)

First released in 2013, the IIRC’s International Integrated Reporting Framework (IRF) was a landmark
development in Market-led corporate reporting. Its framework includes environmental, social and
governance aspects and specifies key content elements to be included in reports, including
governance, business model, risks and opportunities, strategy and resource allocation, performance,
outlook, basis of preparation and presentation.
Used by: Around 1,600 companies across 64 countries are working towards integrated reporting.

1.6 Sustainability Accounting Standards Board (SASB)

Another late 2010s development, the SASB standards are a set of 77 industry standards companies
can use to identify and report financially material sustainability information to their investors.
It lays out specific sustainability topics and related metrics for each industry such as transportation,
utilities, and oil and gas, making it very useful for organisations that need some help determining
which disclosure topics are financially material to their business and which metrics to report.
Overall, SASB covers many of the same issues as other standards, like GRI, but tends to look at
sustainability impacts through a narrower financial lens, while GRI is focused on broader
organisational impacts. For this reason, many organisations have opted to report with both SASB and
GRI.
Used by: Over 120 companies, including Nike and General Motors.

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2 The future
The CDSB, IIRC, and SASB have now been incorporated into the newly formed International
Sustainability Standards Board (ISSB), more detail of which are discussed later in these course notes.

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Chapter 3: The State of Play in ESG

Reporting Globally
1 The European Union
1.1 Introduction
An ECGI (European Corporate Governance Institution) study identified 25 countries that introduced
mandates for firms to disclose ESG information between 2000 and 2017, including Australia, China,
South Africa, and the United Kingdom.

1.2 European Commission (EC) Guidelines on reporting climate-related information

In 2019, the European Commission (EC) published new guideline and reporting climate-related
information supplementing its non-binding guidelines for non-financial reporting published in July
2017 (companies may decide to use international, European or national guidelines according to their
own characteristics or business environment).
The guidelines on reporting climate-related information integrate the recommendations of the
Taskforce on Climate-related Financial Disclosures (TCFD) of the Financial Stability Board (FSB).
In short, the new guidelines:

• accompany and are consistent with the EU Non-Financial Reporting Directive published in
November 2014 (see point 2 below);
• supplement the general guidelines on non-financial reporting published in July 2017, which
are still applicable;
• are based on proposals from Technical Expert Group (TEG) on Sustainable Finance published
in January 2019;
• integrate the recommendations of the TCFD published in June 2017; and
• are not legally binding.

The Technical Readiness Working Group (TRWG) of the recently established International
Sustainability Standards Board (ISSB) also includes members from the TCFD. More on the ISSB later
in the course notes.

1.3 EU Non-Financial Reporting Directive

EU law requires certain large companies to disclose information on the way they operate and manage
social and environmental challenges.

This helps investors, civil society organisations, consumers, policy makers and other stakeholders to
evaluate the non-financial performance of large companies and encourages these companies to
develop a responsible approach to business.

Directive 2014/95/EU – also called the Non-Financial Reporting Directive (NFRD) – lays down the rules
on disclosure of non-financial and diversity information by certain large companies. This directive
amends the Accounting Directive 2013/34/EU.

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a. Companies that must comply

EU rules on non-financial reporting currently apply to large public-interest companies with more than
500 employees. This covers approximately 11 700 large companies and groups across the EU,
including:
• listed companies
• banks
• insurance companies
• other companies designated by national authorities as public-interest entities.

b. Information to be disclosed
Under Directive 2014/95/EU, large companies have to publish information related to:

• environmental matters
• social matters and treatment of employees
• respect for human rights
• anti-corruption and bribery
• diversity on company boards (in terms of age, gender, educational and professional
background)

1.4 EU Taxonomy
a. What is the EU Taxonomy?

The EU Taxonomy is a green classification system that translates the EU’s climate and environmental
objectives into criteria for specific economic activities for investment purposes.

It recognises as green, or ‘environmentally sustainable’, economic activities that make a substantial

contribution to at least one of the EU’s climate and environmental objectives, while at the same time
not significantly harming any of these objectives and meeting minimum social safeguards.

The Taxonomy Delegated Acts will establish and maintain clear criteria for activities to define what it
means to make a substantial contribution and what it means to do no significant harm.

It is a transparency tool that will introduce mandatory disclosure obligations on some companies and
investors, requiring them to disclose their share of Taxonomy-aligned activities. This disclosure of the
proportion of Taxonomy-aligned activities will allow for the comparison of companies and investment
portfolios. In addition, it can guide market participants in their investment decisions.

Companies, if they wish, can reliably use the EU Taxonomy to plan their climate and environmental
transition and raise finance for this transition. Financial companies, if they wish, can use the EU
Taxonomy to design credible green financial products.

Nevertheless, the EU Taxonomy is not a mandatory list of economic activities for investors to invest
in. Nor does it set mandatory requirements on environmental performance for companies or for
financial products. Investors are free to choose what to invest in. However, it is expected that over
time, the EU Taxonomy will be an enabler of change and encourage a transition towards stainability.

Economic activities that are not recognised by the EU Taxonomy Delegated Acts as substantially
contributing to one of the EU’s climate and environmental objectives are not necessarily
environmentally harmful or unsustainable. And not all activities that can make a substantial
contribution to the environmental objectives are yet part of the EU Taxonomy Delegated Acts.
Delegated acts will be living documents that will be added to over time and updated as necessary.

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b. The EU Taxonomy Delegated Act

The EU Taxonomy provides a common understanding of economic activities that make a substantial
contribution to the EU’s environmental goals, by providing consistent, objective criteria in delegated
acts.

The Taxonomy Regulation tasks the Commission with establishing these technical screening criteria
through delegated acts.

c. Why is it necessary?

We need reliable tools to support companies in the transition to climate neutrality and a sustainable
economy. The EU Taxonomy is one such tool, translating the climate and environmental objectives
into clear criteria, to create a common language around green activities. It will create a frame of
reference for investors and companies. It will support companies in their efforts to plan and finance
their transition, help mitigate market fragmentation, protect against greenwashing and accelerate
financing of those projects that are already sustainable and those in transition, to deliver on the
objectives of the European Green Deal.

It is an important element of a much broader sustainable finance framework that will deliver a
complete toolkit for financing the transition. The added value of the EU Taxonomy is that it can help
scale up investment in green projects that are necessary to implement the European Green Deal.

d. How does it fit within the broader sustainability finance framework?

There are three disclosure tools that create one coherent framework:

• The Non-Financial Reporting Directive (NFRD) is currently being revised (named after revision
as Corporate Sustainability Reporting Directive - CSRD), with the aim of delivering a
comprehensive corporate reporting framework with qualitative and quantitative information
to facilitate the assessment of companies’ sustainability impacts and risks.
• The EU Taxonomy establishes a common understanding of green economic activities that
make a substantial contribution to EU environmental goals, by providing consistent, objective
criteria.
Together with the Corporate Sustainability Reporting Directive (CSRD) these two instruments
will ensure that companies falling under the scope of the CSRD disclose the environmental
performance information of the company as well as information about a company’s
Taxonomy-aligned economic activities.
• The Sustainable Finance Disclosure Regulation (SFDR) applies from 10 March 2021 and
complements corporate disclosures by creating a comprehensive reporting framework for
financial products and financial entities. Compliance with sustainability-related disclosures is
expected to have considerable behavioural effects on financial firms, and indirectly on the
business models of companies that are being invested in. Different investment strategies may
entail investments in economic activities with different levels of environmental performance.
For this reason, the SFDR distinguishes disclosure requirements for:
- financial products that claim to have ‘sustainable investment’ as their objective (in the
case of environmental objectives these are often referred to as ‘dark green’ financial
products);
- financial products that claim to be promoting social or environmental characteristics
(often referred to as ‘light green’ financial products).

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The SFDR requirements are linked with those under the EU Taxonomy by including
‘environmentally sustainable economic activities’ as defined by the Taxonomy Regulation in
the definition of sustainable investments’ in the SFDR. But neither the SFDR nor the Taxonomy
Regulation provide criteria and define eligible investments or strategies for so-called ‘light
green’ financial products. Therefore, the ESG ambition of ‘light green’ financial products may
vary: for example, certain ‘light green’ financial products may partially pursue sustainable
investments.

Regulatory technical standards jointly developed by ESMA, EBA and EIOPA further specify disclosure
requirements for ‘dark green’ and ‘light green’ financial products in terms of substance as well as
presentation of information by means of standardised templates across the financial services sectors.

e. How does the EU Taxonomy define green economic activities?

The Taxonomy Regulation lays out six EU environmental objectives:

1 Climate change mitigation

2 Climate change adaptation
3 Sustainable use and protection of water and marine resources
4 Transition to a circular economy
5 Pollution prevention and control
6 Protection and restoration of biodiversity and ecosystems

It also sets out four conditions that an economic activity has to meet to be recognised as Taxonomy-
aligned:

1 Making a substantial contribution to at least one environmental objective

2 Doing no significant harm to any other environmental objective
3 Complying with minimum social safeguards
4 Complying with the technical screening criteria

This technical screening criteria are developed in delegated acts. For each economic activity
considered, the technical screening criteria specify environmental performance requirements that
ensure the activity makes a substantial contribution to the environmental objective in question and
does no significant harm to the other environmental objectives.

The technical screening criteria for ‘substantial contribution’ to an environmental objective ensure
that the economic activity either has a substantial positive environmental impact or substantially
reduces negative impacts on the environment, e.g. substantially reduced levels of greenhouse gas
emissions.

The technical screening criteria for ‘do no significant harm’ ensure that the economic activity does not
impede on the other environmental objectives from being reached, i.e. it has no significant negative
impact on them.

Both sets of criteria together ensure coherence between the objectives in the EU Taxonomy and
guarantee that progress towards one objective is not made at the expense of another.

The performance thresholds in these criteria are science-based and developed on the basis of a robust
methodology and an inclusive process. They identify criteria for economic activities that can set

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sectors on a path consistent with the EU’s climate and environmental goals, based on currently
available technologies.

f. How will companies use the EU Taxonomy?

There are some mandatory disclosure rules defined in the Taxonomy Regulation. Alongside these,
companies can also use the EU Taxonomy voluntarily.

g. Mandatory use: disclosure

The EU Taxonomy Regulation sets mandatory requirements on disclosure, with the aim of providing
transparency on environmental performance.

Large financial and non-financial companies that fall under the scope of the Non-Financial Reporting
Directive will have to disclose to what extent the activities that they carry out meet the criteria set out
in the EU Taxonomy. Likewise, financial market participants (such as asset managers) will have to
disclose to what extent the activities that their financial products fund meet the EU Taxonomy criteria.

Companies will be able to disclose the extent to which they invest, for example through capital
expenditures, in either expanding or strengthening their activities which are already Taxonomy-
aligned, or to upgrade other activities to make them Taxonomy-aligned. Disclosure on green revenue
and green expenditure will provide the market with information on (1) companies whose activities
comply with the EU Taxonomy criteria (through disclosure of share revenue from Taxonomy-aligned
activities) and (2) companies that are taking steps to get there (through disclosure of green
expenditure).

h. Voluntary use: guide for investments

There are many possible voluntary uses of the EU Taxonomy by market participants, which are not
defined in policy instruments. For example, companies can use the criteria of the EU Taxonomy as an
input to their environmental and sustainability transition strategies and plans. Companies and project
promoters can choose to meet the criteria of the EU Taxonomy with the aim of attracting investors
interested in green opportunities. Investors can choose to use the EU Taxonomy criteria in their due
diligence for screening and identifying sustainable investment opportunities aiming to achieve a
positive environmental impact.

i. Will the EU Taxonomy be used elsewhere too?

Green standards and labels The Taxonomy Regulation requires Member States and the EU to use the
EU Taxonomy as the basis of any EU or national (public) labels for green corporate bonds or financial
products that fall under the scope of the SFDR. The EU Taxonomy therefore provides a good basis for
the development of further sustainable finance tools, including the EU Ecolabel for Retail Financial
Products and future EU standards for green bonds (all under development) as well as green
mortgages.

1.5 The EU Green Deal

a. What it is

The European Green Deal is a set of policy initiatives by the European Commission with the
overarching aim of making the European Union (EU) climate neutral in 2050. An impact assessed plan
will also be presented to increase the EU's greenhouse gas emission reductions target for 2030 to at
least 50% and towards 55% compared with 1990 levels. The plan is to review each existing law on its

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climate merits, and also introduce new legislation on the circular economy, building renovation,
biodiversity, farming and innovation.

The European Commission's climate change strategy, launched in 2020, is focused on a promise to
make Europe a net-zero emitter of greenhouse gases by 2050 and to demonstrate that economies will
develop without increasing resource usage. However, the Green Deal has measures to ensure that
nations that are already reliant on fossil fuels are not left behind in the transition to renewable energy.

b. Aims

The overarching aim of the European Green Deal is for the European Union to become the world's
first “climate-neutral bloc” by 2050. It has goals extending to many different sectors, including
construction, biodiversity, energy, transport and food.

The plan includes potential carbon tariffs for countries that don't curtail their greenhouse gas pollution
at the same rate. The mechanism to achieve this is called the Carbon Border Adjustment Mechanism
(CBAM).

It also includes:

• a circular economy action plan,

• a review and possible revision (where needed) of the all-relevant climate-related policy
instruments, including the Emissions Trading System,
• a Farm to Fork strategy along with a focus shift from compliance to performance (which will
reward farmers for managing and storing carbon in the soil, improved nutrient management,
reducing emissions, ...),
• a revision of the Energy Taxation Directive which is looking closely at fossil fuel subsidies and
tax exemptions (aviation, shipping),
• a sustainable and smart mobility strategy and
• an EU forest strategy. The latter will have as its key objectives: effective afforestation, and
forest preservation and restoration in Europe.
• It also leans on Horizon Europe, to play a pivotal role in leveraging national public and private
investments. Through partnerships with industry and member States, it will support research
and innovation on transport technologies, including batteries, clean hydrogen, low-carbon
steel making, circular bio-based sectors and the built environment.
c. Policy areas
• Clean energy
• Sustainable industry
• Building and renovation
• Farm to Fork
• Eliminating pollution
• Sustainable mobility
• Biodiversity
• Sustainable finance

2 United States of America (USA)

In the United States, the SEC adopted regulations requiring all publicly traded corporations to publish
their environmental compliance costs. Listed firms must also adopt and publicise a code of corporate
behaviour and ethics, according to the New York Stock Exchange (NYSE). There is, however, no
mandatory

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3 Middle East and Asia

3.1 China
China has seven regulations that operate as required sustainability disclosure instruments.
Corporations are required to publish environmental information in accordance with regulatory
standards under the Environmental Information Disclosure Act of 2008. Large enterprises listed on the
Shanghai Stock Exchange are also required to submit a supplemental report that includes an
environmental disclosure. Annual resource use, pollution levels, waste generation, disposal methods,
and a few other factors can all be voluntarily disclosed in order to receive additional grants and public
support rights.

3.2 Egypt
a. Existing guidance

In 2016 the Egyptian Exchange issued “Model Guidance for Reporting on ESG Performance and SDGs",
which aims to promote transparency in the capital market and ensures that listed companies are able
to develop a clear concept of sustainability to issue sustainability reports disclosing their sustainability
policies and performance.

EGX Model Guidance helps listed companies to issue periodical sustainability reports that highlight
their performance and practices related to environmental, social and governance issues, as
sustainability reports are considered one of the most important factors influencing investment
decisions taken by both institutional and individual investors.

b. New decrees on ESG and climate-related reporting

More recently (2021), the Financial Regulatory Authority (FRA) has issued two new decrees that place
new disclosure and reporting requirements on certain entities with regards to their environmental
and social impact. Decrees No. 107 and 108 for the year 2021 (the “Decrees”) provide new disclosure
rules applicable on companies undertaking non-banking financial services as well as companies listed
on the Egyptian Stock Exchange (EGX).

Below are the key highlights of the Decrees.

Types of Reporting

The Decrees provide two forms of reporting; (i) the Environmental and Social Governance report (the
“ESG”); and (ii) the Task Force on Climate-Related Financial Disclosures (the “TFCD”).

With regards to the ESG report, the disclosure focuses primarily on the organizational aspects of each
company with regards to its environmental and social policies. The information requested varies from
environmental operations and supervision, carbon emissions, and usage of energy sources to
employee rights, gender diversity and the diversity of the board of directors.

On the other hand, TFCD reporting focuses on the financial aspects of a company’s climate-related
policies. The disclosure addresses four main pillars: governance, strategy, risk assessment and metrics
and targets.

In both instances, the Decrees are annexed with the precise forms that must be populated by the
companies to adequately provide their disclosures. These forms contain a series of yes or no questions
that must be supplemented by further comments and explanations by the companies.

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Scope of the Decrees

The Decrees target (i) companies undertaking non-banking financial services; and (ii) companies listed
on the EGX.

Companies undertaking non-banking financial services must submit the ESG disclosure if they have a
minimum issued capital or net shareholder equity of EGP 100 million. The TFCD disclosure will only be
required from said companies if their minimum issued capital or net shareholder equity is EGP 500
million.

With regards to listed companies, there is no minimum threshold for submission of the ESG disclosure
and therefore, all listed companies will be required to report the same. For TFCD disclosures, only
listed companies with a minimum issued capital or net shareholder equity exceeding EGP 500 million
will be required to submit said disclosures.

Disclosure Timeframe

The Decrees provide that both the ESG and TFCD disclosures must be included in the companies’
annual board of directors’ report containing its financial statements as of the end of the 2022 financial
year.

Additionally, quarterly reports will be required as of January 2022. These reports must outline the
procedures that each company has taken or will take in relation to the required disclosures.

3.3 Indonesia
In Indonesia, all listed companies were required to publish Sustainability Reporting starting in 2020,
according to Indonesia Financial Services Authority.

3.4 Pakistan
The Securities and Exchange Commission of Pakistan (SECP) issued a Corporate Social Responsibility
(CSR) Order in 2009 applicable to all public companies. The said Order required descriptive as well as
monetary disclosures of CSR activities undertaken by companies, if any, during each financial year in
the directors’ report to the shareholders annexed to the annual audited accounts.

3.5 Saudi Arabia

The Saudi Exchange issued Environmental, Social, and Governance (ESG) disclosure guidelines to help
listed companies report on their sustainable practices.

The guidelines will help more than 200 listed companies and prospective firms looking to go public
with their ESG reporting and will raise awareness about it in the local market,

3.6 Sri Lanka

Sri Lanka formed a National Action Plan for the Haritha (Green) Lanka in 2009. The Programme is
administered by the National Council of Sustainable Development established under the presidential
secretariat in Sri Lanka. The Ministry of Environment provides secretariat facilities for the Council. In
2016 Sri Lanka initiated an Integrated Reporting Council with the aim of promoting inclusive and
concise corporate reporting of how entities create value through their business model, stakeholder
engagement, and deployment of risk and governance processes to achieve sustainable development,
and related matters.

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Chapter 4: Carbon Accounting and

Greenhouse Gas Accounting
1 Carbon Accounting
1.1 Introduction
Carbon accounting or greenhouse gas accounting refers to processes used to measure how much
carbon dioxide equivalents an organisation emits. It is used by states, corporations, and individuals to
create the carbon credit commodity traded on carbon markets (or to establish the demand for carbon
credits). Examples of products based on forms of carbon accounting may be found in national
inventories, corporate environmental reports, and carbon footprint calculators.

Carbon accounting is likened to sustainability measurement, as an instance of ecological

modernisation discourses and policy. Carbon accounting is hoped to provide a factual ground for
carbon-related decision-making.

1.2 Greenhouse Gas Protocol

The GHG Protocol Corporate Accounting and Reporting Standard provides requirements and guidance
for companies and other organisations preparing a corporate-level GHG emissions inventory.

The standard covers the accounting and reporting of seven greenhouse gases covered by the Kyoto
Protocol – carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFCs),
perfluorocarbons (PCFs), sulphur hexafluoride (SF6) and nitrogen trifluoride (NF3). It was updated in
2015 with the Scope 2 Guidance, which allows companies to credibly measure and report emissions
from purchased or acquired electricity, steam, heat, and cooling.

a. About the Corporate Standard

The GHG Protocol Corporate Accounting and Reporting Standard provides requirements and guidance
for companies and other organisations preparing a GHG emissions inventory. It was designed with the
following objectives in mind:

• To help companies prepare a GHG inventory that represents a true and fair account of
their emissions through the use of standardized approaches and principles
• To simplify and reduce the costs of compiling a GHG inventory
• To provide business with information that can be used to build an effective strategy to
manage and reduce GHG emissions
• To increase consistency and transparency in GHG accounting and reporting among
various companies and GHG programs

The module builds on the experience and knowledge of over 350 leading experts drawn from
businesses, NGOs, governments and accounting associations. It has been road-tested by over 30
companies in nine countries.

b. Who Can Use the Corporate Standard?

This standard is written primarily from the perspective of a business developing a GHG inventory.
However, it applies equally to other types of organisations with operations that give rise to GHG
emissions, e.g., NGOs, government agencies, and universities. It should not be used to quantify the

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reductions associated with GHG mitigation projects for use as offsets or credits; the GHG Protocol for
Project Accounting provides requirements and guidance for this purpose. Policy makers and architects
of GHG programs can also use relevant parts of this standard as a basis for their own accounting and
reporting requirements.

c. Compatibility with Other GHG Programs

The GHG Protocol Corporate Standard has been designed to be program or policy neutral. However,
it is compatible with most existing GHG programs and their own accounting and reporting
requirements. It is important to distinguish between the GHG Protocol Corporate Standard from other
GHG programs. This standard focuses only on the accounting and reporting of emissions but does not
require emissions information to be reported to WRI or WBCSD. In addition, while this standard is
designed to develop a verifiable inventory, it does not provide a standard for how the verification
process should be conducted.

d. Calculation Tools

To complement the standard and guidance provided here, a number of cross-sector and sector-
specific calculation tools are available. These tools provide step-by-step guidance and electronic
worksheets to help users calculate GHG emissions from specific sources or industries.

e. Introducing the concept of “ scope”

To help delineate direct and indirect emission sources, improve transparency, and provide utility for
different types of organisations and different types of climate policies and business goals, three
“scopes” (scope 1, scope 2, and scope 3) are defined for GHG accounting and reporting purposes.
Scopes 1 and 2 are carefully defined in this standard to ensure that two or more companies will not
account for emissions in the same scope. This makes the scopes amenable for use in GHG programs
where double counting matters. Companies shall separately account for and report on scopes 1 and
2 at a minimum.

Scope 1: Direct GHG emissions

Direct GHG emissions occur from sources that are owned or controlled by the company, for example,
emissions from combustion in owned or controlled boilers, furnaces, vehicles, etc.; emissions from
chemical production in owned or controlled process equipment.

Direct CO2 emissions from the combustion of biomass shall not be included in scope 1 but reported
separately.

GHG emissions not covered by the Kyoto Protocol, e.g. CFCs, NOx, etc. shall not be included in scope
1 but may be reported separately.

Scope 2: Electricity indirect GHG emissions

Scope 2 accounts for GHG emissions from the generation of purchased electricity2 consumed by the
company.

Purchased electricity is defined as electricity that is purchased or otherwise brought into the
organisational boundary of the company. Scope 2 emissions physically occur at the facility where
electricity is generated.

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The Scope 2 Guidance standardizes how corporations measure emissions from purchased or acquired
electricity, steam, heat, and cooling (called “scope 2 emissions”).

Scope 3: Other indirect GHG emissions

Scope 3 is an optional reporting category that allows for the treatment of all other indirect emissions.
Scope 3 emissions are a consequence of the activities of the company but occur from sources not
owned or controlled by the company. Some examples of scope 3 activities are extraction and
production of purchased materials; transportation of purchased fuels; and use of sold products and
services.

The Corporate Value Chain (Scope 3) Standard allows companies to assess their entire value chain
emissions impact and identify where to focus reduction activities.

See https://ghgprotocol.org/corporate-standard for more details.

1.3 The GHG Protocol for Project Accounting

The GHG Protocol for Project Accounting is the most comprehensive, policy-neutral accounting tool
for quantifying the greenhouse gas benefits of climate change mitigation projects.

The Project Protocol provides specific principles, concepts, and methods for quantifying and reporting
GHG reductions—i.e., the decreases in GHG emissions, or increases in removals and/or storage—from
climate change mitigation projects (GHG projects).

a. About the Project Protocol

The GHG Protocol for Project Accounting (Project Protocol) is the culmination of a unique four-year
dialogue and consultation process with business, environmental, and government experts led by WRI
and WBCSD. The Project Protocol provides the cornerstone for efforts led by WRI and others to
develop globally compatible standards for a robust and thriving greenhouse gas market.

During its development, more than 20 developers of GHG projects from 10 countries "road-tested" a
prototype version, and more than 100 experts reviewed it. As with the GHG Protocol Corporate
Standard, the Project Protocol's strength lies in this collaborative process that was used to clarify and
resolve challenging issues.

b. Who Can Use the Project Protocol?

The Project Protocol is written for project developers but should also be of interest to administrators
or designers of initiatives, systems, and programs that incorporate GHG projects, as well as third-party
verifiers for such programs and projects. Any entity seeking to quantify GHG reductions resulting from
projects may use the Project Protocol. However, it is not designed to be used as a mechanism to
quantify corporate or entity-wide GHG reductions; the Corporate Standard should be used for that
purpose.

Land Use, Land-Use Change and Forestry

The Land Use, Land-Use Change, and Forestry (LULUCF) Guidance for GHG Project Accounting (LULUCF
Guidance) was developed by the World Resources Institute to supplement the Protocol for Project
Accounting (Project Protocol). This document provides more specific guidance and uses more
appropriate terminology and concepts to quantify and report GHG reductions from LULUCF project
activities.It was launched at the Conference of Parties-12 (COP-12) in Nairobi, Kenya on November 7,
2006.

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Grid-Connected Electricity Projects

The Guidelines for Grid-Connected Electricity Projects provides detailed guidance on how to account
for greenhouse gas emission reductions created by projects that displace or avoid power generation
on electricity grids. The guidelines are designed primarily for two target audiences: project developers
seeking to quantify GHG reductions outside of a particular GHG offset program or regulatory system;
and designers of initiatives, systems, and programs that incorporate grid-connected GHG projects.

There is also additional sector-specific guidance on the website.

See https://ghgprotocol.org/standards/project-protocol for more details.

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Chapter 5: The International Sustainability

Standards Board (ISSB)
1 A new standard-setting body
1.1 Introduction
On 3 November 2021 at COP26 in Glasgow, the IFRS Foundation Trustees announced the formation
of the International Sustainability Standards Board (ISSB), the commitment to consolidate the leading
investor-focused sustainability disclosure organisations into the ISSB and the publication of prototype
climate and general disclosure requirements developed by the Technical Readiness Working Group,
which was formed by the Trustees to undertake preparatory work for the ISSB.

The intention is for the ISSB to deliver a comprehensive global baseline of sustainability-related
disclosure standards that provide investors and other capital market participants with information
about companies’ sustainability-related risks and opportunities to help them make informed
decisions.

The VRF, comprising the SAB, IIRC, Climate Disclosure Standards Board, support the establishment of
the SASB and will be incorporated into the IFRS Foundation. The remit of the ISSB is to meet the
accounting and sustainability information needs, and it will sit alongside and work in close cooperation
with the IASB. The IFRS Foundation is the parent of both the IASB and the new ISSB.

Jurisdictions will be able to use these standards stand-alone or with other reporting requirements.

To accelerate the development of these standards, a working group (TRWG) was established,
comprising of members from the VRF, CDSB, WEF and TCFD. This working group has published
prototype standards for climate disclosures and presentation. One of the first jobs of the newly
established ISSB will be to consider these prototype standards and also the work closely with other
bodies to align climate disclosures with financial disclosure requirements.

The ISSB is also working with bodies like the International Organization of Securities Commissions
(IOSCO) to establish how the new standards will become mandated for use.

These imminent first mandatory ESG reporting requirements for companies represent a major change
in corporate accounting, and the ISSB hopes to finalise the rules during 2022 for adoption in 2023.

1.2 The Technical Readiness Working Group (TRWG)

As part of this work towards the formation of a new board, the Trustees created the Technical
Readiness Working Group (TRWG) of leading organisations with expertise in sustainability and
integrated reporting standard-setting focused on meeting investors’ needs.

The TRWG was formed to provide a running start for the new board, as described in the Trustees’ 8
March 2021 statement. The TRWG also responded to the IOSCO’s 24 February 2021 call for the
coordination of work to drive international consistency of companies’ sustainability-related
disclosures that focus on enterprise value creation.

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The purpose of the TRWG was to enable the ISSB to build on the well-established work of long-
standing international initiatives focused on enterprise value. The specific technical objectives the
TRWG worked toward were recommendations on:

• General Requirements for Disclosure of Sustainability-related Financial Information;

• Climate-related Disclosures Prototype;
• Conceptual guidelines for standard setting;
• Architecture of standards;
• Other items to inform a standard-setting agenda;
• Due process characteristics;
• Digitisation strategy; and
• Connectivity between the IASB and the ISSB.

1.3 TRWG Prototypes

To accelerate the setting of the new standards, two prototypes and a summary document developed
by TRWG were published. These documents are all recommendations from the TRWG for
consideration by the ISSB.

The summary document explains the background and purpose of the TRWG and summarises the eight
deliverables and implications for preparers.

a. Climate Prototype

The Climate Prototype sets out the requirements for the identification, measurement and disclosure
of climate-related financial information. There are detailed reporting requirements for companies in
different business sectors, such as autos, and the ISSB adopted the 77 different industrial categories
already identified in the voluntary reporting rules established by the SASB.

The prototype includes about 30 detailed metrics to measure climate issues, and any individual
company would need to use three to five of the detailed metrics compared with around 14 for
companies using the full range of SASB standards.

b. General Requirements Prototype – Beyond Climate Accounting

The General Requirements Prototype sets out the overall requirements for disclosing sustainability-
related financial information relevant to the sustainability-related risks and opportunities faced by the
entity. These are closely based on existing financial accounting rules and specifies a number of basic
areas, notably a requirement to publish sustainability reports regularly and to tie back any financial
disclosures to the relevant financial accounts.

The ISSB adopted the definition of materiality used in IAS 1, which covers the presentation of financial
statements, essentially meaning that companies must disclose any information that could influence
their decision-making, ensuring collaboration with financial accounting.

These reporting requirements would apply to all corporate sustainability disclosures, meaning that
companies must report on all material ESG issues – even before standards are drawn up by the ISSB.

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1.4 Climate Disclosure Standards Board (CDSB)

The Climate Disclosure Standards Board (CDSB) was an international consortium of business and
environmental NGOs committed to advancing and aligning the global mainstream corporate reporting
model to equate natural and social capital with financial capital.

The CDSB Framework formed the basis for the TCFD recommendations and sets out an approach for
reporting environmental information, including climate change and social information in mainstream
reports, such as annual reports, 10-K filings or integrated reports.

CDSB has now been consolidated into the IFRS Foundation. This marks the completion of the first part
of the commitment made by leading investor-focused sustainability disclosure organisations CDSB and
the Value Reporting Foundation (VRF) to consolidate into the IFRS Foundation by June 2022, providing
staff and resources to the new International Sustainability Standards Board (ISSB).

This consolidation confirms the closure of the CDSB and no further technical work or content will be
produced.

CDSB technical guidance will form part of the evidence base as the ISSB develops its IFRS Sustainability
Disclosure Standards. CDSB’s Framework and technical guidance on Climate, Water and Biodiversity
disclosures will remain useful for companies until such time as the ISSB issues its IFRS Sustainability
Disclosure Standards on such topics.

CDSB technical work has not been subject to the IFRS Foundation’s due process, which the
International Sustainability Standards Board will follow in its work, and does not form part of IFRS
Standards. The IFRS Foundation’s due process is outlined in the Constitution and the Due Process
Handbook.

1.5 Value Reporting Foundation (VRF)

The Value Reporting Foundation is a global non-profit organisation that offers a comprehensive suite
of resources designed to help businesses and investors develop a shared understanding of enterprise
value—how it is created, preserved or eroded over time.

The resources— including the Integrated Thinking Principles, the Integrated Reporting Framework and
SASB Standards—can be used alone or in combination, depending on business needs. These tools,
already adopted in more than 70 countries, contribute to the 21st century market infrastructure
needed to develop, manage and communicate strategy that creates long-term value and drives
improved performance.

ISSB’s standards will build on existing frameworks and guidance, so companies should continue using
the CDSB and VRF’s frameworks and guidance as appropriate. Efforts put into reporting on
sustainability matters now is expected to help companies implement the ISSB’s standards in the
future.

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Chapter 6: The Sustainable Development

Goals (SDGs) and ESG
1 Sustainable Development Goals
1.1 Introduction
The United Nations Sustainable Development Goals (SDGs) are targets for global development
adopted in September 2015, set to be achieved by 2030. All countries of the world have agreed to
work towards achieving these goals.

The 17 Sustainable Development Goals are defined in a list of 169 SDG Targets. Progress towards these
Targets is agreed to be tracked by 232 unique Indicators.

For up-to-date information on the global progress towards achieving the SDGs, go to: https://sdg-
tracker.org/

1.2 How does the SDGs relate to ESG?

SDGs Represent the Goals, while ESG Stands for Methods and Processes.

As we have seen, both SDGs and ESG are concepts for resolving environmental and social issues in
order to attain the ideal of a sustainable society. They differ in that while the SDGs apply to all
stakeholders, including countries and the general public, ESG primarily applies to the business
community and companies.

More and more companies around the world have been taking the SDGs into consideration as they
develop their management benchmarks. Despite the fact they are neither obliged nor bound by law
to do so, companies are actively embracing the SDGs for the long-term benefits they will ultimately
provide. It is becoming evident that efforts to resolve issues concerning the global environment,
energy, diversity and working conditions not only reduce the risks to long-term business continuity
but also lead to improving corporate image as well as corporate value.

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ESG represents the environmental, social and governance aspects of corporate management and
growth.

SG is also important for corporate business sustainability. A company that neglects environmental and
social issues while focusing solely on pursuing short-term profit will ultimately increase the likelihood
of significant damage to management, such as the risk of holding stranded assets left behind by the
changing times. This is why many institutional investors emphasize ESG investment today. It has
become a benchmark for assessing corporate performance, and a growing number of companies have
begun to disclose reports with ESG-related information.

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Chapter 7: ESG - Key Reporting areas

1 Key reporting areas
ESG Reporting has become much more than just ticking boxes but has become a crucial area in an
organisation that needs to be integrated into the strategy and culture of the organisation.

And, while there are many different frameworks and standards for ESG Reporting as well as
imminent mandatory requirements, in summary, the following areas have become the key reporting
areas:

Sustainability strategy Stakeholder approach Metrics & goals Communicate your

results
Cover topics and Identify stakeholders Set metrics to Reflect on all
indicators reflecting and and explain in the report capture activities significant and
organisation’s significant how the company has with an impact on social impacts for
economic, responded to their economic, the reported
environmental and social expectations and environment, and period. Enable
impacts (materiality interests. social areas. Set stakeholders to
matrix). goals for the future assess the reporting
Include topics which are which will support organisation’s
likely to substantively your decision- performance in the
influence the making. And honest wider context of
assessments and comparison with sustainability. And
decisions of the goals is not less honest comparison
stakeholders. important. with the declared
goals is no less
important.

2 Three fundamental questions to ask

When it comes to ESG management and reporting, there are three fundamental questions to drive
outcomes.

a. Which metrics matter most to our business?

As with financial reporting, what is measured, monitored and reported should start with a company’s
specific strategy and purpose. There needs to be a clear link to strategy. Organisations should disclose,
specifically, how their business will be compatible with their ESG strategies. Generic statements are
not enough.

While finance department should lead the internal discussions, the heads of strategy and operations
are crucial because of their understanding of the factors that will determine the success of the
business. The ultimate decision about which metrics to disclose should be taken by the entire top
team, working in collaboration.

b. Which metrics matter most to our stakeholders?

What matters to management and what matters to their stakeholders will inevitably overlap, but the
match is unlikely to be perfect. There will often be a need to provide information simply because
stakeholders demand it.

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Just as organisations listen carefully to shareholders, so they also need to listen carefully to other
groups of stakeholders. Frameworks like the UN Sustainable Development Goals or the WEF/IBC
reporting framework can be helpful guides, but there is no substitute for engaging directly with
employees, regulators, NGOs and local communities. This is where maintaining a robust dialogue with
externally-oriented functions like Corporate Affairs, Investor Relations, Legal and Sustainability can
short circuit a lot of work. These groups can bring rich insights into what specific stakeholders are
looking for.

When it comes to investors it’s just as important to think about what they don’t care about as what
they do. Before committing to a new disclosure, organisations should ask whether investors find it
useful. Rushing out a new metric in haste is much easier to do than taking it back, so make sure it’s
the right one.

c. Do we have the systems and processes that we need?

Ultimately, companies will need to disclose the information that investors and other stakeholders
want, or they will suffer the consequences. However, it will often be a journey to get from what is
disclosable today to what is needed tomorrow. Non-financial disclosures will only be credible to
markets if the data that is collected and analysed is as robust as the data used in financial disclosures.
Companies therefore need to bring the same focus on relevance and reliability as they bring to
financial reporting. One untrustworthy disclosure - or material omission - can undermine confidence
in everything else.

The sophisticated mechanisms that ensure the accuracy of financial information - including control
procedures, internal audits, external assurance and cyber and other security systems - should be
deployed to meet the same high standards for non-financial information.

The new reality is that the demand for transparency over ESG is set to increase. Companies that don’t
publish information, or that publish information that turns out not to be trustworthy, will miss out on
investment and access to capital. Those that get it right - hitting the notes that investors and other
stakeholders expect to be hit - will gain an edge. Two identical companies could end up in very
different places simply by virtue of the quality of the information they share.

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Board, I., 2022. IFRS - International Sustainability Standards Board. [online] Ifrs.org. Available at:
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%20the,%2C%20energy%2C%20transport%20and%20food

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Available at: https://www.undp.org/sustainable-development-

goals?utm_source=EN&utm_medium=GSR&utm_content=US_UNDP_PaidSearch_Brand_English&
utm_campaign=CENTRAL&c_src=CENTRAL&c_src2=GSR&gclid=CjwKCAiAx8KQBhAGEiwAD3EiP7f7
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https://www.pwc.com/gx/en/issues/esg/publications/identifying-metrics-that-matter-most.html

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Annexures
2.1 Annexure 1: ESG reporting is coming to Egypt in 2023

What? The Financial Regulations Authority (FRA) will require companies to file mandatory
ESG reports, publicly disclosing their performance and key ESG metrics each year
when they submit their annual financial statements.
Who? EGX-listed firms and NBFS companies (listed or not) with issued capital of at least EGP
100mn.
Firms with capital of EGP500mn will also need to submit certain performance
indicators from the TFCD.
When? FY2022 financials (with quarterly updates on the steps taken to comply with the
decree. (Yes/No questions with clarification on their response for each question. This
is not published)
How? Evaluate ESG performance based on 21 KPIs using a designated form (50 questions)
which is to be included as an annexure to the directors ‘report.
Key 1. Climate and environment-related KPIs:
reporting a. Policies around environmental protection, waste recycling, water and
areas energy consumption, and greenhouse gas emissions
b. Are these policies monitored regularly and how?
c. If claiming to measure emissions – disclose how many metric tons
2. Climate-related prompts focused on governance:
The board is assessed on a number of metrics that assess the level of ESG
consideration in strategy, investments, product development, and corporate
risk management framework. This is to consider whether management
undertakes new ventures and sets its outlook with climate-change risks in
mind. No numbers.
3. Gender equality and diversity:
A number of social KPIs asks whether the firm discloses information such as
number of full-time employees, % by gender and position, average income for
male and female, board composition (new diversity targets coming soon)
4. Anti-discrimination KPI:
Are there strict policies against harassment or discrimination based on
religion, gender, or ethnicity?
5. Employee health, safety, and rights:
a. H+S policy adopted, disclosing number of adverse incidents occurred
and training hours provided on H+S and ESG matters?
b. Internal regulations on workers’ rights and child labour disclosed? And
whether these are in line with global standards (ILO)
c. Do the regulations in b extend to vendors and distributors?
6. SDGs:
a. Whether the firm aligns its operations with the UN SDGs.
b. Are these efforts communicated in reports?
c. ESG disclosures and sustainability reports should be in line with those
set by the GRI, CDP, SASB, IIRC or UN Global Compact.
7. Data privacy:
Does the firm adopt regulations concerning information protection other than
data privacy and consumer protection laws set by Egypt.
8. Impact investing:

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Single question on whether the firm has a policy or framework in place.

9. Corporate social responsibility:
Need to report on commitments.
10. Ethics and code of conduct
11. Bribes and anti-corruption policies
12. Staff turnover

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2.2 Annexure 1: ESG reporting is coming to Egypt in 2023

What? A useful resource for listed companies to help them navigate ESG.
https://sseinitiative.org/wp-content/uploads/2021/11/Tadawul-ESG-Disclosure-
Guidelines-EN.pdf
Who? In 2018, Saudi Exchange (formerly the Saudi Stock Exchange ‘Tadawul’) became a
partner exchange supporting the UN Sustainable Stock Exchanges Initiative to
promote ESG awareness initiatives and encourage sustainable investment,
in collaboration with market participants such as issuers and investors.
When? Voluntary
How?

Key See Appendix B – ESG themes and key issues

reporting 1. Environmental
areas a. Climate change
i. GHG Emissions (in absolute and intensity terms)
ii. Product carbon footprint
iii. Financing environmental impact
iv. Climate change vulnerability
b. Natural resources
i. Biodiversity and land use
ii. Water stress
iii. Raw material sourcing
c. Pollutions and waste
i. Toxic emissions and waste
ii. Packaging material and waste
iii. Electronic waste
d. Environmental opportunities
i. Opportunities in clean tech
ii. Opportunities in green building
iii. Opportunities in renewable energy
iv. Opportunities in cleaner hydrocarbon energy
2. Social
a. Human capital

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 ESG REPORTING

i. Labour management
ii. Health & Safety
iii. Human capital development
iv. Supply chain labour standard
b. Product liability
i. Product safety & quality
ii. Chemical safety
iii. Privacy & data security
iv. Responsible investment
c. Stakeholder opposition
Controversial sourcing
d. Social opportunities
i. Access to communications
ii. Access to finance
iii. Access to healthcare
iv. Opportunities in nutrition and health
3. Governance
a. Corporate governance
i. Board
ii. Tax transparency
iii. Pay
iv. Ownership & control
v. Accounting
b. Corporate behaviour
Business ethics
Reporting 1. UN Global Impact
initiatives 2. UN Guiding Principles (UNGP) Reporting framework
3. UNCTAD Intergovernmental Working Group of Experts on International
Standards of Accounting and Reporting (ISAR)
4. Carbon Disclosure Project (CDP)
5. Climate Disclosure Standards Board (CDSB)
6. Global Reporting Initiative (GRI)
7. International integrated Reporting Council (IIRC)
8. Sustainability Accounting Standards Board (SASB)
9. Financial Stability Board (FSB) Task Force on Climate-related Financial
Disclosures (TFCD)

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