Future Proofing Capital Markets: Emmanuel Faber on a Global Baseline for Disclosures

On Wednesday 29 October, the OSFSS committee attended a lecture by Emmanuel Faber, Chair of the International Sustainability Standards Board (ISSB) hosted by the University of Oxford and the Smith School of Enterprise and the Environment. The event celebrated Faber winning the prestigious University of Oxford Prize for Greening Finance for his outstanding service, recognizing his work at the ISSB and his prior sustainability leadership as CEO of Danone.

The 32-Year Problem: Why Traditional Accounting Fails

Faber began by identifying a fundamental gap in capital markets. He noted the average market-to-book value ratio is 5x, meaning 80% of a company's perceived value is not on its balance sheet.

With average S&P 500 P/E ratios at 32x, investors are paying for 32 years of future profits. Faber argued that traditional financial statements are completely insufficient for predicting value that far into the future, especially when valuation models rest on a single variable: "g" (growth to perpetuity).

A Global Baseline: The ISSB's Solution

Faber explained the ISSB's mission: to create "generally accepted principles for the accounting of risks and opportunities."

• IFRS S1 (General Requirements) and IFRS S2 (Climate) create a comprehensive global baseline, compelling companies to report on all material sustainability-related risks and opportunities.

• The standards are policy-neutral. Faber stressed the goal is not to define "green" or "bad." Instead, it provides a common language for investors to finally price resilience and risk, using examples from the Rhine River's low water levels to nuclear plant cooling.

From Theory to Global Adoption

Faber highlighted the powerful momentum, with 40 jurisdictions (representing 60% of global GDP) already moving to adopt the standards. He noted this includes many Global South nations, for whom the standards are a vital tool to attract foreign direct investment and build capacity.

He also argued that geopolitics multiplies sustainability risks (like supply chain resilience), making the standards more urgent, not less.

Key Challenges from the Floor

The lecture was followed by a dynamic exchange with the audience, which included academics, students, and practitioners. Discussion focused on the practicalities of complex scenario analysis, ensuring adoption in the Global South without creating barriers, and the critical need to avoid a "siloed" report (Faber insisted it must be integrated into core financial ERPs, not a separate CSR document).

Following the reception, the discussion continued at a formal dinner held in the historic Divinity School, where attendees and guests engaged further on the future of sustainable finance.

OSFSS thanks Emmanuel Faber for his insightful lecture and for the engaging discussion.