Before the ISSB: How Sustainability Disclosure Became Market Infrastructure

Sustainability disclosure can look like a recent addition to corporate reporting. Climate risk, human capital, supply chains and ESG ratings all seem to belong to a system that emerged only recently.

The underlying mechanism is much older. Capital markets have long operated through a cycle of disclosure, analysis, investment and capital allocation. Sustainability reporting did not replace that cycle; it expanded the information flowing through it. That is why sustainability disclosure had become so influential before the International Sustainability Standards Board (ISSB) even existed.

1. The capital-market information cycle already existed

Public companies have long operated inside a basic information cycle:

Corporate disclosure → analysis and evaluation → investors and asset owners → capital allocation → companies

Accounting standards support the first part of that cycle. IFRS® Accounting Standards and US GAAP do not tell investors whether a company is a good investment, and they do not score companies. They set common rules for recognition, measurement, presentation and disclosure, which makes financial information more consistent and comparable.

The market then evaluates that information. Analysts, credit rating agencies, data and index providers, banks, asset managers and pension funds combine financial statements with market, industry and macroeconomic information to make decisions. Those decisions return to companies through share prices, financing conditions, shareholder engagement and access to capital.

The division of roles is simple: standards create comparable information; markets evaluate it.

Long before sustainability reporting became prominent, companies such as S&P, MSCI and Morningstar had built businesses that turned corporate and market information into data, benchmarks, ratings and investment tools. The machinery for converting information into capital-allocation decisions was already in place.

2. Beyond the financial statements: from more information to comparable information

From the 1990s onward, investors increasingly asked whether traditional financial statements captured all the risks that could affect long-term corporate value. Environmental liabilities, climate transition, employee safety, water scarcity, data security and governance failures could all have significant financial consequences. But those consequences often reached the financial statements only after the underlying risk had already developed.

This created demand for additional information, and different organisations approached the problem from different directions.

These initiatives were not solving exactly the same problem, and GRI in particular addressed a wider audience than investors. But together they reflected a growing recognition that some information relevant to investors existed outside the financial statements.

For capital markets, the decisive argument was therefore not "Sustainability is important, so companies should report on it." It was "Investors may be exposed to material risks and opportunities that are not sufficiently visible through existing financial reporting." That framing allowed sustainability information to enter an investment process that already existed.

More information alone, however, was not enough. If every company chose its own topics, definitions and metrics, investors still could not compare them. What mattered in practice was that frameworks such as SASB's industry metrics and TCFD's four-part structure gave companies a shared format. As companies increasingly reported similar information in similar structures, peer comparison became possible. An investor could ask why one company identifies a transition risk while a peer does not, why one quantifies its targets while another offers only narrative, or why governance responsibility is clearly assigned at one company but unclear at another.

This changed the character of sustainability disclosure. It was no longer only a matter of producing a separate CSR or sustainability report. It became part of a comparative information environment, and that created a first feedback loop:

Disclosure → comparison → investor questions → management attention → improved processes and disclosure

At this stage, no formal score was required. Comparability itself created pressure.

3. Ratings turned comparable information into economic pressure

Once sustainability information became more structured, another layer developed around it: ratings, scores, benchmarks and indices.

None of these organisations was a regulator, and none could require a company to disclose anything. Their influence came from who used their assessments.

Large asset owners were central. Pension funds and similar institutions invest over horizons that match their multi-decade liabilities, so risks such as climate transition, resource constraints, workforce issues and governance failures fall within the period they care about. From 2006, the Principles for Responsible Investment gave that concern an organised form. Signatories committed to incorporate ESG issues into investment analysis and to seek ESG disclosure from the companies they invest in. As asset owners came to expect the same from the managers they appointed, ratings and data providers found a market for their assessments.

For companies, this changed the question. Whether a company was included in an index, remained in a manager's investable universe, or faced difficult questions from shareholders could all depend, in part, on these assessments. The rating provider did not need to control trillions of dollars. It only needed to become part of the information infrastructure used by institutions that did.

Sustainability disclosure, in other words, had become part of how markets evaluated companies well before most of it became mandatory.

4. A second channel: customers and supply chains

Sustainability pressure also travelled through commercial relationships rather than capital markets. EcoVadis offered standardised sustainability ratings that companies could use in procurement and supplier management. Sedex, through its SMETA audit methodology, created shared infrastructure for assessing labour conditions, health and safety, environmental practices and business ethics across global supply chains. CDP extended its model to supply chains, allowing large purchasers to request standardised environmental information directly from their suppliers.

Pressure could therefore come from two sides. Through capital markets, it affected engagement, index inclusion and financing. Through the real economy, it affected supplier qualification, procurement decisions and the continuation of commercial relationships.

This is an important reason sustainability disclosure spread beyond large listed companies. A privately owned supplier with little exposure to equity investors could still face significant information demands from a major global customer.

5. Two different consolidation processes began

By the late 2010s, the system's success had created a new problem: fragmentation. Companies faced numerous frameworks, questionnaires, metrics and ratings. Investors faced multiple datasets and methodologies. Two separate consolidation processes followed.

Consolidation of disclosure frameworks

On the reporting side, the organisations behind the main frameworks started the process themselves. In 2020, CDP, CDSB, GRI, IIRC and SASB published a joint statement of intent to work towards comprehensive corporate reporting. Rather than presenting their frameworks as competitors, they described them as nested layers: sustainability topics with significant impacts on the economy, environment and people; a subset of those topics that affect enterprise value; and a further subset already reflected in the financial statements.

The frameworks then took different paths.

In terms of the nested model, the investor-focused layers converged within the IFRS Foundation, while the outer, impact-oriented layer remained with GRI.

Consolidation of ratings and analytics

The evaluation side consolidated differently, mainly through commercial acquisitions.

CDP appears on both sides because it performs both roles: its questionnaire functions as a disclosure framework, and its scores function as an assessment.

Disclosure frameworks consolidated to create a common language. Ratings consolidated because sustainability data was becoming part of mainstream financial-information infrastructure. Standards consolidated institutionally; ratings consolidated commercially.

In practice, the two sides remain closely connected. The disclosures companies prepare under the frameworks are the raw material these providers assess.

6. Why did companies participate?

Much of this system developed before comprehensive mandatory sustainability reporting existed. Why, then, did companies devote increasing resources to it?

Because they were not responding to a single standard setter or ESG organisation. They were responding to a system that gradually closed the loop. A voluntary request became peer disclosure. Peer disclosure enabled comparison. Comparison fed ratings, indices, shareholder engagement and supplier requirements. Eventually, regulators began embedding similar concepts into mandatory reporting.

As the loop closed, the incentive changed. What had been a question of reputation and transparency became relevant to capital allocation, financing, index inclusion, customer relationships and regulatory compliance.

7. Conclusion

By the early 2020s, the system still lacked something financial reporting already had: a broadly accepted global baseline for investor-focused reporting. That is what the ISSB was created to provide. Its standards did not create the pressure on companies; they arrived in a system that was already evaluating them.

The division of roles remains the same: standards create comparable information; markets evaluate it. Sustainability disclosure is therefore more than a compliance exercise. It connects companies pursuing long-term value with investors seeking sustainable growth, through the allocation of capital.

Disclaimer

For educational purposes only; not investment, legal or accounting advice. Information reflects publicly available sources as of September 2026. No affiliation with or endorsement of the organisations mentioned is implied.