Standard setters work to close climate accounting gaps

Standard setters work to close climate accounting gaps

Investors are increasingly calling on companies to reflect climate-related risks in their financial results. In September 2020, global investor groups representing more than $103 trillion wrote an open letter asking companies and their auditors to include climate-related risks in financial reporting.

Accounting standard setters and international auditing boards are also requesting that firms pay more attention to future climate risks when they produce their financial results.

"There has been a big kind of anomaly there, almost a loophole, that climate has not been taken into account," David Pitt-Watson, executive fellow at Cambridge University's Judge Business School, tells us.

We also interview International Accounting Standards Board (IASB) Vice Chair Sue Lloyd about plans for a new international sustainability standards board.

"I still talk to a lot of investors who are surprised that there isn't more information in the notes to the financial statements about the assumptions that have been used," Sue says.

And we speak to Veronica Poole of Deloitte for an auditor's point of view. She says recent guidance the International Auditing and Assurance Standards Board (IAASB) issued on the topic of climate-related risk "is extremely valuable, and I think certainly should be looked at and used by auditors in their work as they challenge the assertions made by clients around the impact of climate change risks and opportunities on their business."

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