Extend XBRL to ESG to Enhance Climate Finance

Posted on November 7, 2018 by Editor

It’s clear that XBRL makes a lot of sense for financial reporting, and the standard’s increased uptake around the world has done much to promote financial transparency – however, currently, XBRL’s potential capabilities are being underused for non-financial reporting.

Sustainability reporting is moving into the mainstream, as boosting transparency on environmental, social, and governance (ESG) issues proves essential not just for those concerned with the public good but also for investors and markets.

For example, in the US alone, on the upwards of 26,500 comments on the SEC’s 2016 Concept Release on Regulation S-K – the regulation governing corporate disclosure – there was an overwhelming desire for ESG disclosures, showing that there is an industry appetite for sustainability reporting. In fact, on 18 October, Commissioner Kara Stein gave a talk encouraging consistent ESG disclosures, commenting, in part “The Commission should lead by helping to create standards for disclosure, using structured data and taxonomies, where applicable. Facilitating the establishment of standards resolves uncertainty and reduces the cost of information.”

As this data is desired, already in use and essential for making responsible investments in light of climate related risks, the argument for policy makers and securities regulators to consider consistency, accessibility, discoverability and digital formatting is now overdue. Far too much ESG information is extremely hard to access.

Look no further than Japan for inspiration on a way forward. The Japanese Ministry of the Environment has been working with investors and companies to help ensure that a range of ESG information can be consumed and compared using the XBRL standard. This is a pressing topic in the EU and the US and many other parts of the world — in Japan they are several years ahead.

You can hear more on this topic at Data Amplified 2018 where Naomi Sugo from the Japanese Ministry of Environment will be discussing Japan’s work on ESG disclosures in XBRL.