By Sarah Zeines
Thursday, November 19, 2021
NEWS - ANALYSIS
This post is an on-site edited version of The Geneva Observer's SUSTAINED - The SDGs Decoded bimonthly newsletter, November 18 2021 edition. To receive SUSTAINED directly in your inbox, register here.
Why did Geneva lose the International Sustainability Standards Board (ISSB) bid to Frankfurt? High hopes that the body—considered key to the future of sustainable finance—were dashed, when the International Financial Reporting Standards Foundation (IFRS) settled on Germany as its final choice.
For local paper Le Temps, word has it that Switzerland’s delicate relations with the EU are to blame. Others point to legacy issues. SUSTAINED talked to Sustainable Finance Geneva’s (SFG) Sandrine Salerno, and asked her to share her thoughts on Geneva’s unsuccessful application.
The focus is now on the ISSB’s agenda. Two draft working papers—general requirements and climate-related disclosures—published earlier this month give stakeholders a good idea on what the future financial norms will look like.
We also highlight a few events on a rich agenda in News in Brief, including Building Bridges Week, an upcoming panel discussion following the Transnational Alliance to Combat Illicit Trade’s (TRACIT) report on the human cost of illicit trade, and today’s Young Activists Summit.
SUSTAINED: Despite what local SDG actors describe as a solid bid, Geneva will not be home to the ISSB, which will be setting up camp in Frankfurt in the near future. What were the political considerations that encouraged this choice?
Sandrine Salerno: It is hard to say, and any political motivations are hypothetical. Besides, I was not involved in the negotiations at COP26 that led to this choice. One cannot assess whether it was a decision related to Switzerland’s fragile relations to the European Union or a strategic move meant to prioritize a member of the G7. Generally speaking, political consensus is always a lengthy process.
What will be the ISSB’s main challenges?
Social targets tend to be absent from investment policies. This is a mistake that needs to be rectified. Institutions tend to focus on the problem of carbon emissions, and neglect the social side of sustainable investment. Thankfully, the International Labour Organisation has a certain number of solutions to this issue and will contribute to the upcoming discussions.
The pace of change is also an issue. On one hand, we need to regulate global finance now, with a 2030 deadline for SDGs around the corner. On the other, settling on solutions takes time—COP26 has shown us this.
Some finance watchers have wondered if Geneva could really have represented the ISSB, due to the controversial history of Geneva’s financial sector?
I think that it’s rubbish. This problem is not specific to Geneva; it is a global problem that involves the entire financial world. Germany, which will be hosting the ISSB, has major charcoal and cement industries financed by the state. Had Geneva’s private sector been the issue in the IFRS’ decision, Frankfurt would never have been chosen either.
Besides its stated participation at the World Economic Forum, how will Geneva, home to a dense network of international organisations and companies, participate in ISSB’s activities?
Our Building Bridges initiative—which brings diverse actors from the finance industry, the United Nations, international organizations, NGOs, academia, and government together—would certainly make an interesting partner. The numerous stakeholders involved—one of them being SFG—are key actors in the sustainable finance ecosystem. For the time being, it is too early to determine what this collaboration could look like. But we are all ears.
In a recent article, you mention that accounting standards negotiations are better off in a politically neutral space. How will Germany’s lack of neutrality impact the ISSB’s outcomes, in your opinion?
Stakeholders are more cautious in a non-neutral environment. Switzerland’s neutrality is one of the reasons Geneva was such a great candidate for hosting the ISSB. The less politically biased a place is, the freer the discussion. Unfortunately, this is not the reasoning the IFRS had.
At the Geneva Centre for Security Policy, a new foundation, Equity4Humanity, aimed at reducing the cost of SDG funding is being launched. Is one more sustainable finance initiative in the vast ecosystem a good thing, or confusing?
Multiplying the number of actors is a good thing. Multiplying the number of norms, however, is not. Too many regulations is a dangerous road that can lead to greenwashing. How can an investor or the average citizen navigate a complex universe of regulations that are similar in appearance, but not in practice? How can financial actors know what rules to go by when there are too many options? Consistency is vital. We need global standards that every financial institution on the planet can refer to.
The Other Side of the ISSB Story
The IFRS told SUSTAINED that the ISSB will have a global and multi-location presence with offices in the Americas, Asia-Oceania and EMEA (Europe, the Middle East, and Africa). The offices in Frankfurt (the seat of the Board and the office of the Chair) and in Montreal will be responsible for key functions supporting the new Board and deeper co-operation with regional stakeholders,” writes the organisation’s Head of Communications, Kirstina Reitan. “The IFRS Foundation is an independent, non-political organisation created to develop reporting standards to meet the information needs of capital markets. It has a global remit and works with stakeholders across the world. Everybody can contribute with comments during the standard-setting process. Several advisory groups are being created to inform the ISSB’s work, including providing technical advice.”
Frank Wettstein, spokesman for the State Secretariat for International Finance (SIF), says that the Confederation’s goals remain unchanged. “Geneva is still an important place for sustainable finance. The international outreach of the city is an important asset and Switzerland has other attractive sites to offer, such as Zurich, which is an important city for big banks and innovating start-ups in fintech.”