Defining moment

Work is starting in earnest on new sustainability reporting standards for the UK and we now have some idea of the sensitivities that have already emerged, as regulators rush to finish their review by the end of the year. The government has indicated it wants to make final decisions in Q1 of 2025.

This week, the technical advisory committee (TAC) will rule on a timeline and key issues to be addressed before the new disclosures, based on two new standards from the International Sustainability Standards Board (ISSB) can go ahead.

One concern is materiality. An agenda for this month’s TAC meeting reveals that concerns have been expressed about “practical challenges” in applying the standards’ definition of materiality.

Also, there are concerns about the need to report sustainability “risks and opportunities” with some worries again about the definition and just how many have to be reported when the standard says “all” risks and opportunities. There’s also work to do on working out whether companies can withhold “opportunities” from disclosures on the basis that they may prove commercially sensitive.

TAC also reveals it has some work to do in finding a home for sustainability reports: Should they be at the same time and in the same place as financial reports? That’s another issue they are still thrashing out.

This is just a taster. In all, the agenda reveal 24 areas that “require further assessment” by the TAC before sustainability reporting gets a green light.

That Q1 2025 deadline is starting to look tight.

An AI education

Artificial intelligence (AI) could impact the UK’s business so hard that companies could see the widening of “corporate inequalities”, with sectors prone to consolidation hit hardest, according to a report from London Business School and the Institute of Directors (IoD).

As a result of research, the IoD now believes we need an education a system redesigned for a post AI world (assuming the kids are not on national service), new regulation for vulnerable sectors and law beefed up to handle a new world of intellectual property.

Businesses should make sure they build proprietary data, take advantage of regulatory protecting and not get over excited by the hype of AI.

Faisal Khan, IoD’s science, innovation and technology supremo, says: “Depending on the sector a business operates within, it is vital that company directors assess not only the opportunities and risks presented by generative AI, but also take stock today of the factors upon which the sector itself will transform.”

Better get a move on.

Profit and boss

Governance sees its fair share of change but FT columnist Stuart Kirk says we need more: he suggests investors should pick CEOs.

Investors, of course, get the right to vote on approval or rejection, but Kirk, who once held senior positions in investment banking, sees value in investors voting up front in an election for chief execs.

“Companies are some of humanity’s most powerful institutions. They create immense wealth. So, it’s odd that we allow them to eschew democracy when selecting a leader. What’s worse is that they have opted to embrace a terrible version of the parliamentary system,” he observes.

Boards, Kirk says, are often seduced by the internal candidate whose business division appears to be doing best at the time of selection.

He says many companies end up with “dull, merry-go-round CEOs who populate most C-suite today. Few add value but boards are conservative and headhunters know they will never be fired for recommending them.”

Bit surprised to hear this from Kirk, though he has reputation for being maverick. Nevertheless, Board Agenda can see the LSE and Capital Markets Industry Taskforce (CMIT) tabling this one for immediate implementation. Once they get over their collective apoplexy.

Follow that

Quite the clash brewing over in the US between Exxon and a number of investors. Broadly, the shareholders have taken exception to the energy giant’s legal action against two climate-focused activist investors—Arjuna Capital and Follow This.

Since revealing their concerns, they have threatened to vote against the reappointment of Exxon’s chief executive Darren Woods. Vast pension fund Calpers has said it will vote against Woods.

Woods, in response has written in the Financial Times, complaining: “Calpers’ fiduciary duty is not furthered by their attack on our company (or any company). They should leave politics to the politicians.”

Except that Calpers probably doesn’t have politics front of mind, rather their long-term investments.

Calpers are not alone, by the way, in their ire with Exxon. Norge Bank, Norway’s sovereign wealth fund, has said it will vote against reappointment of Jay Hooley, Exxon’s lead independent director.

The AGM is due this week. Promises to be quite the showdown. We’ll let you know how it goes.