Ahead of G20 summit, India dodges mixing human rights with climate agenda

Combining the two issues would have created a burden for Global South

Days before they host the G20 summit in Delhi, Indian officials have described efforts to get consensus for the final communique akin to stepping on a minefield. One sensitive task was to avoid a surprise move to hyphenate the climate change agenda of green accounting standards with extraneous issues like human and labour rights under the euphemism of “worker wellbeing”.

G20 recommendations are not mandatory, but when published companies come under pressure to adapt or consider them. Green accounting standards are expected to do so. A study by research firm Boston Consulting Group (BCG) notes private capital will play a key role in contributing to the $150 trillion in investments required to achieve net zero globally by 2050. How accounting standards are set matters therefore.

Until now this twinning of human rights and related labour standards had not happened in the dozen odd reports on climate expected to be mentioned in the Leaders’ Declaration, including the G20 Report on Macroeconomic Risks Stemming from Climate Change and Transition Pathways. This is unlike multilateral negotiations on trade that often get sidetracked into labour issues and similar topics.

Climate-related issues have created a rare solidarity between countries of the Global South. Their goals include jointly mobilising $100 billion of climate finance per year and emphasising “the significant role of public finance, as an important enabler of climate actions”. They are unequivocal about the role of monetary and fiscal policies and that of the private sector in supporting the public sector. These goals are also listed in the Outcome Document and Chair’s Summary at the third G20 Finance Ministers and Central Bank Governors (FMCBG) meeting in July.

Those specific agenda items are likely to find a place in the final document to be released after G20 leaders meet in Delhi, September 8 to 10.

India has, however, succeeded in altering a critical sentence mentioned in the G20 Bali Leaders Declaration in 2022. It read, “We look forward to the finalization of standards by the International Sustainability Standards Board (ISSB) in support of globally consistent, comparable and reliable climate-related financial disclosures, and its work beyond climate.” (Italics the writer’s). ISSB is part of International Financial Reporting Standards (IFRS), the global body that sets corporate accounting standards.

The sentence was modified in the FMCBG meeting to read as: “We look forward to the finalization of standards by the ISSB for globally consistent, comparable and reliable climate related financial disclosures”. It added, “It is important that flexibility, to take into account country-specific circumstances, is preserved in the implementation of those standards.” It is how the Leaders Declaration or the Chair Summary should also be read.

In other words, there shall be no uniform one-size-fits-all approach to global accounting standards for topics like human rights and “workers wellbeing”. In global negotiations, changing and more so dropping phrases from an earlier agreed document is a difficult and significant exercise.

In an emailed reply to Business Standard, ISSB acknowledged that it is working to incorporate the topics of human rights and workers wellbeing in the green accounting standards. “The phrase ‘work beyond climate’ therefore refers to both the IFRS S1 general requirements standard and our consultation on future priorities,” it said. The organisation was hopeful that, “The latest G20 report from the 2023 meetings demonstrates the continued support for the work of the ISSB".

ISSB is a board that operates as part of the IFRS Foundation, the not-for-profit public interest organisation which develops globally acceptable accounting and sustainability disclosure standards. “These standards are developed by our two standard-setting boards, the International Accounting Standards Board (IASB) and International Sustainability Standards Board (ISSB),” says the IFRS website.

The ISSB’s first set of global accounting standards were issued in June 2023 to cover climate-related disclosures as well as general requirements for disclosure of sustainability-related information. “Since they were issued, the Standards have been endorsed by IOSCO – the international body of securities regulators,” the website says.

ISSB argues that based on research on the information needs of investors it has identified four potential projects: Three sustainability-related research projects (biodiversity, ecosystems and ecosystem services, human capital, and human rights) and a fourth project researching integration in reporting.

ISSB, which is headquartered in London, has sent questionnaires to companies around the world asking them to prioritise which of these four projects it should focus on. “Currently, the ISSB is focused on capacity building to support the effective implementation of the Standards and is also consulting on its future priorities,” ISSB told Business Standard.

Anup Wadhawan, a former commerce secretary of India, said putting extraneous issues like human rights in the G20 agenda complicates international negotiations. “These are subjects which are difficult to interpret for every nation symmetrically. So their inclusion could raise the costs for countries in issues like obtaining external finance for development agendas like climate change”.

An India government official involved in G20 deliberations said that while the direction of the advocacy was clear, the position at the Bali summit “abruptly brought in additional issues into the climate agenda as a uniform global requirement, something that countries in the Global South would have had extreme difficulty reconciling with in their needs”.

“Investors globally should begin integrating climate impact measurement into their investment processes — and the time to do so is now” noted Daniel Oehling, lead author of the BCG study and member of the Principal Investors & Private Equity (PIPE), Climate & Sustainability, and Industrial Goods practices at the research firm.