In the U.S., financial regulators are now taking the lead. The Securities and Exchange Commission is mulling disclosure rules to govern what companies must tell investors about their carbon footprint. More than 4,000 individuals, companies, and associations submitted comments starting in June. A draft rule is expected next year. U.S. accounting rules follow standards crafted by its own private entity, the Financial Accounting Standards Board (FASB).

Meanwhile, the SEC lifted Trump-era restrictions, making it easier to bring investor-led climate proposals to a vote at annual corporate shareholder meetings, issuing a legal memo on the change on the very day the ISSB was formally announced in Glasgow.

Does all this mean a global climate disclosure standard will emerge shortly to deliver the start of “transformative change” proponents like Mary Schapiro, former SEC chairman and head of the secretariat for the Task Force on Climate-Related Financial Disclosures (TCFD), told an audience at COP26 the ISSB rules will provide?

Not just yet, says Michael Littenberg, a lawyer who advises companies on ESG issues for the firm Ropes & Gray. 

“We’re getting closer to alignment of standards—I wouldn’t necessarily say we’re close to a single global standard,” Littenberg notes. 

The ISSB standards will offer a baseline for individual regulators, who would then modify or build on them as each jurisdiction sees fit, the IFRS said, something Littenberg calls a “building-blocks approach.” The standards will be based on existing metrics, including those from the TCFD, according to the announcement made at COP26. 

So far, the SEC has yet to publicly comment on the ISSB’s formal creation announced Nov. 3. In October, Commissioner Allison Herren Lee said during a webinar that the agency is “engaged in efforts to assist in this work” through the International Organization of Securities Commissions (IOSCO), the umbrella body for securities regulators, according to a transcript.

One reason the approach in the U.S. and the rest of the world differs? Potential lawsuits, says Shivaram Rajgopal, a professor of accounting and auditing at Columbia Business School. 

“They claim that they talk to one another a lot, but the philosophy is different partly because the litigation environment is different,” Rajgopal says. “The U.S. is highly litigious. So the FASB writes very detailed rules, partly because the user community pushes it to.”

That’s one reason the SEC is “being careful before saying anything,” Rajgopal notes. “But this gulf between the U.S. and Europe—and maybe the rest of the world—will probably carry on for a while.”

A growing number of firms already disclose greenhouse gas (GHG) emissions and other metrics voluntarily, reporting them under a framework set by the TCFD as well as detailed data via an array of groups, some of which began pushing for standards decades ago.

In December 2020, five of them—CDP, the Climate Disclosure Standards Board (CDSB), the Global Reporting Initiative (GRI), the International Integrated Reporting Council (IIRC), and the Sustainability Accounting Standards Board (SASB)—published an outline detailing how their combined disclosure platforms could “provide a running start” to develop broad climate disclosure standards.

The ISSB will release two “prototypes”: one tied to climate, the other tied to “general sustainability.” The board will first focus on climate, according to the announcement. The International Organization of Securities Commissions (IOSCO) intends to “focus on a careful assessment of the ISSB’s draft climate disclosure standard” in 2022. 

“It’s really good news for investors that have been calling for a long time and increasingly for mandatory, globally clickable or standardized disclosure for company-level climate risk, sustainability, and disclosure in general,” says Jackie Cook, the director of sustainability stewardship research for Morningstar.

For groups that spent years soliciting and compiling disclosures, the ISSB’s creation is exciting because the “ISSB is going to focus first on bringing climate change reporting into the space where financial reporting exists,” says Simon Fischweicher, who oversees companies and supply chains for North America at CDP, formerly known as the Carbon Disclosure Project, a nonprofit launched in 2000. Almost 3,000 public companies globally, including 572 in the U.S., disclose their climate impact through CDP’s voluntary questionnaire.

Standardizing rules across those entities is important, companies, accounting firms, investors, and the groups themselves say. Several feedback letters answering the SEC’s climate disclosure rules’ comment request, for instance, call for a peg to TCFD standards.

“The question mark ultimately is, What does regulation in this subject area look like in the United States?” Littenberg says.

Companies like Dell Technologies expect climate disclosure regulations to carry a weight similar to that of accounting standards and involuntary disclosure rules, says Cassandra Garber, Dell’s vice president of ESG.

“We would like to see a scenario where the SEC standards align to the global standards developed by the ISSB,” Garber tells Fortune. “This would provide the greater standardization, comparability, and reliability that stakeholders are asking for. Specifically, we are in favor of a global framework as global issues need global solutions, and many large companies have global supply and value chains.”

Institutional Shareholder Services (ISS), a firm that advises funds and other investors on proxy votes, including a vote in favor of electing dissident shareholders to Exxon Mobil’s board earlier this year, echoed those concerns by imploring the SEC to “take the lead” on standards. ISS compiles and analyzes ESG disclosure data gathered by sources including governments’ environmental agencies and groups like CDP. 

“Standards should not be static, as this could be detrimental to innovation. They need to evolve and adapt over time,” ISS wrote in a June letter to the SEC. “We believe the SEC should take the lead and be responsible for modifying and improving disclosure requirements.”

Some firms may already be facing legal consequences.

The U.S. Justice Department has told Deutsche Bank that the German lender’s asset business, called DWS Group, may have violated a criminal settlement when it didn’t tell prosecutors about an ESG-related, internal criminal complaint that said DWS overstated how it used ESG criteria to manage assets, the Wall Street Journal reported earlier this month.

‘Evolving specifics’

Carbon disclosure may be the easiest place to start, Columbia Business School’s Rajgopal says. Defining other slices of ESG, like social, may be more difficult.

“Maybe, maybe we can come around on something like carbon. Maybe. That’s probably a little easier to get some agreement around,” Rajgopal says. “But you touch anything else—water, for instance, is a very local problem. And what does ‘S’ in ESG mean? There are so many complications.”

Some stakeholders worry that as enforceable, mandatory climate disclosure standards shift with better science, companies could be left open to lawsuits for previous reporting under old rules.

Firms like Dell that already follow TCFD disclosure guidelines for greenhouse gas emissions expect the new rules—no matter what the jurisdiction—to come with regulatory bite.

“Both the IFRS and SEC are reputable governing bodies with strong track records for setting accounting standards, so we believe that the new standards and involuntary reporting will carry just as much weight as financial and accounting standards,” Garber says.

Companies that don’t yet voluntarily report climate risk are starting to pay attention. They’re considering costs to hire disclosure staff and ensure they have the right systems in place, Ropes & Gray’s Littenberg says.

“Companies that aren’t as far up the curve on climate risk and reporting are starting to think about these issues, more than ever,” Littenberg notes. “Although the specifics are still evolving, mandatory reporting is coming in some fashion, both in the United States and abroad.”