A regular audio briefing for the alternative asset management industry. Just about everyone agrees that a single set of internationally accepted sustainability disclosure standards would benefit all stakeholders. But global convergence creates significant challenges. For example, policymakers who are keen to set very high standards – the EU, for example – will be tempted to goldplate any requirements that can achieve widespread approval. That's especially likely because different stakeholders have different expectations, and some jurisdictions will want to satisfy a wide range of constituencies. Moreover, achieving widespread buy-in requires extensive consultation and due process, which takes longer than many are willing to wait.When the International Sustainability Standards Board (ISSB) was established last year, its goal was ambitious: to create a global baseline for corporate reporting, and to do it quickly. Publication in March of two consultation draft standards, one on general requirements for sustainability disclosures and the other covering climate-specific risks and opportunities, is a big step forward. When the standards are finalised – which could be as soon as the end of this year – they will encourage many companies to make a step change in sustainability reporting. It will be up to individual countries to decide whether to mandate the finalised standards, and for which companies. Some will do so quickly: UK policymakers, for example, have already said that they will use the ISSB's standards as the "backbone" for UK corporate sustainability reporting requirements, perhaps, in time, applying them to large private companies as well as their listed counterparts. Other standard-setters, including EFRAG in the EU – which has just launched its own consultation on sustainability reporting standards – will take careful note, even if they ultimately opt for some divergence, as the EU certainly will.The ISSB has been acutely aware of the challenges in delivering a globally accepted framework, and explicitly recognises that its standards will not be the complete answer. That's at least in part because it adopts a "materiality" rule: disclosures are only required when they are relevant to an entity's enterprise value. The standards will require companies to provide the information required by investors. Reports will not include the external impacts of corporate activity unless they have a financial impact on the entity.This approach is not as narrow as it might appear: it is clear from the drafts that a very wide range of matters could be "material", including (for example) corporate reputation, longer-term regulatory risks, the stability of a company's workforce, and its "relationships with local communities and natural resources". Disclosures are therefore expected in relation to (among many other things) an entity's...

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