Tag: FASB climate guidance

Climate risk disclosure “glaringly absent” in financial statements? Will regulators act to require more?

In one of the illustrative comments in Corp Fin’s just published sample comment letter on climate issues, Corp Fin asks companies to explain what consideration they may have given to providing in their SEC filings the same type of expansive climate-related disclosure that’s in their corporate social responsibility reports. One place in companies’ SEC filings where climate-related disclosure is “glaringly absent,” according to this report from the Carbon Tracker Initiative, is in the financial statements.  Although many companies face serious climate risk, and many have even made net-zero pledges, the report “found little evidence that companies or their auditors considered climate-related matters in the 2020 financial statements.”  According to the lead author of the report, “[b]ased on the significant exposure these companies have to transition risks, and with many announcing emissions targets, we expected substantially more consideration of climate matters in the financials than we found. Without this information there is little way of knowing the extent of capital at risk, or if funds are being allocated to unsustainable businesses….” Financial statement disclosure was so deficient, the report concluded, investors were essentially “flying blind.”