The REP Wrap: ISSB meetings, study on CEO pay and more

The International Sustainable Standard Board met this week in Frankfurt. Among the topics on the agenda were discussions about feedback to its Methodology Exposure Draft, and an update on the work plan of the Global Reporting Initiative’s standards. 

The Australian Accounting Standards Board has proposed three sustainability reporting standards that tweak IFRS’ disclosure standards. Among the proposals, the body wants to amend IFRS S1, to limit it to climate-related financial disclosure, and add localised requirements into IFRS S2. The ASRS is pushing for the standards to apply to annual reporting periods starting next summer, but the Government needs to decide. Australia’s Treasury is due to release its position following a consultation in June. 

Danone, IKEA, Acciona and Bayer were among 131 companies to sign a letter calling for the phase-out of fossil fuels this week. The group is urging heads of state attending the COP28 climate summit to “set the enabling conditions, policies, regulations and investments” for the energy transition. “Our businesses are feeling the impacts and cost of increasing extreme weather events resulting from climate change,” said the letter, which was coordinated by the We Mean Business Coalition. 

Directors and investors disagree on CEO pay, with investors generally believing it is too high and focused on the short term while directors believe it’s necessary to attract and motivate talent. This, according to a study published (open access) in the Journal of Financial Economics this week. The authors, Alex Edmans, Tom Gosling and Dark Jenter, note that while there is disagreement on the topic, there is also consensus: directors and investors believe the top drivers for CEOs are intrinsic motivation and personal reputation, followed by money. While traditional theory has sometimes argued that financial incentives are needed (ex ante) to prompt performance, the study suggests that CEOs value compensation more as a reward (ex post) for performance. 

Investors are preparing to take legal action against fashion retailer Boohoo over allegations it faced about modern slavery, according to reports in The Telegraph. The scandal, broken in 2020 by the Financial Times, wiped more than £1bn off the UK giant’s value at the time, with many investors divesting to avoid reputational issues. A spokesperson for Boohoo told The Telegraph that it had yet to receive a formal claim, but it’s understood that a £100m lawsuit is in the pipeline, led by investors angry at the losses. 

The International Energy Agency’s latest World Energy Outlook is forecasting a tenfold rise in the number of electric cars on the road and three times more investment in new offshore wind than coal and gas by 2030. The report bases the predictions, which also include renewables’ share of the global electricity mix rising from 30% currently to 50% and heat pumps and other electric heating systems outselling conventional boilers globally, on current government policy. “If countries deliver on their national energy and climate pledges on time and in full, clean energy progress would move even faster,” it said.