The International Accounting Standards Board (IASB) has launched a new project aimed at exploring changes to requirements for firms to disclose climate risks in financial statements.
The IASB said the new project follows feedback to its recent Agenda Consultation, a public consultation held by the board every five years on its activities and work plan, with responses calling for enhancements to the reporting of climate-related risks in financial statements.
According to ESG Today, while the current standards don’t refer explicitly to climate-related matters, firms are required to consider climate-related issues in their financial statements if their effects of them are material to investors.
The feedback found that respondents reported climate-related risks are often perceived as remote and may not be considered appropriately in financial statements. Furthermore, investors need better information about the impact of climate-related risks on the carrying amounts of assets and liabilities.
Andreas Barckow – IASB chair – underlined some of the key questions he received from stakeholders on this reporting topic.
This included why companies that are expected to be affected by climate-related risks do not provide information about these effects in their financial statements, why companies that have made net zero commitments do not recognise liabilities or impair the value of their assets as a result of those commitments, and how companies should factor long-term uncertainties into the measurement of amounts in the financial statements.
Barckow said that the project will start by ‘by exploring, through research and outreach, the nature and causes of stakeholder concerns about the reporting of climate-related risks in the financial statements’ and added that it will not be seeking to develop an IASB Standard on climate-related risks, but rather that the potential outcomes of the project would be narrow in scope, such as minor amendments to the standards or new application guidance.
The Institutional Investors Group on Climate Change (IIGCC) recently launched a climate initiative aimed at scaling and accelerating climate-related corporate engagement.
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