A global accounting body proposed guidelines on Wednesday to help companies better demonstrate the impact of climate change on their financial performance. The organization stated that standalone disclosures fail to provide investors with the clear information they need.
The guidelines, written by the International Accounting Standards Board (IASB), are adopted by publicly listed companies in over 140 jurisdictions, including the EU, Canada, Japan, and the UK, although the US has its own regulations.
On Wednesday, the IASB launched a consultation to offer guidance on how companies should apply the board's existing rules to report the impact of climate change or other uncertainties.
Regulators have started introducing sustainability disclosures for publicly listed firms, but these are published outside of financial statements and are subject to less stringent auditing.
These examples aim to show investors how sustainability disclosures, such as commitments to net-zero carbon emissions and transition plans, affect a company's financial data, including assets, liabilities, revenues, and expenses.
Investors have expressed interest in understanding whether assets will retain their value under the impact of climate change, for instance, through flood damage.
In a statement, the IASB said: “They are concerned about the lack of information in financial statements regarding climate-related uncertainties, or inconsistencies with information provided outside the financial statements.”
