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Updates to the CDSB Framework, for reporting environmental and social information

Letter to the Climate Disclosures Standards Board, 18 January 2022.

19 January 2022

Norges Bank Investment Management (“NBIM”) appreciates the opportunity to respond to the Climate Disclosures Standard Board (CDSB)’s consultation on updates to its framework for reporting environmental and social information.

NBIM is the investment management division of the Norwegian Central Bank and is responsible for investing the Norwegian Government Pension Fund Global. NBIM is a globally diversified investment manager with assets valued at NOK 10,914 billion kroner[1].

As a long-term investor, we have an inherent interest in how companies manage their use of natural and social resources, as this can have a bearing on their ability to create financial value. We benefit from information on companies’ exposure to sustainability risks, how these are managed, and relevant performance metrics.

Voluntary sustainability reporting frameworks, such as the one developed by the CDSB, have played an important role in providing guidance and thereby improving companies’ reporting on environmental and social issues. However, due to the multitude of standards and their voluntary nature, the information disclosed by companies is not always complete, consistent, or comparable across markets. The reporting process can also be burdensome for companies. Therefore, we welcome the formation of the International Sustainability Standards Board (ISSB) and its ambition to develop a comprehensive global baseline of high-quality sustainability disclosure standards to meet investors’ information needs. We note that the CDSB, among others, will soon be consolidated into the new board. In this context, we hope that our response will also be useful for the ISSB’s work.

In its consultation document, the CDSB proposes to expand the scope of its framework to include social information. We welcome this decision and hope the future ISSB standards will also cover social matters, as there is a need for global and comprehensive standards for reporting information on social issues. We welcome the CDSB’s efforts to ensure alignment of its framework with the UN Guiding Principles on Business and Human Rights and the OECD Guidelines for Multinational Enterprises when it comes to social information. We note that the CDSB’s definition of social impacts focuses on the ability of people to realise their human rights. In our view, social impacts could also encompass issues that impact society at large, without necessarily being a breach of human rights (such as corrupt and anti-competitive practices, disregard for consumer interests and welfare, and lack of tax transparency).

Overall, the updated CDSB Framework provides strong principles for sustainability reporting (such as the forward-looking perspective, materiality and verifiability), and covers most of the information we expect companies to disclose on sustainability issues. Nevertheless, we believe the use of the CDSB Framework alone may not result in information that is “clear, concise and comparable” – which is one of the framework’s stated objectives. The guidance is quite complex, thereby potentially difficult for companies to use. We believe it is not always clear what constitutes reporting requirements and what constitutes guidance under the framework. While the information disclosed may be useful for an in-depth understanding of a single company’s sustainability performance, it is unlikely to be comparable across companies and therefore may not allow portfolio analysis.

Finally, as the framework does not include a comprehensive list of indicators which could help investors assess companies’ performance in managing sustainability risks and opportunities, it might be preferable for CDSB to maintain a principle-based approach (rather than pointing at a couple of performance indicators only).

Yours faithfully,

Carine Smith Ihenacho,
Chief Corporate Governance Officer

Séverine Neervoort,                     
Senior Analyst, Corporate Governance

Please find our responses to the questionnaire in the attached pdf.

[1] As of December 31, 2020

Download the letter (pdf)