Financial officers from 22 US states have expressed opposition to the FASB over the proposed inclusion of the SECs climate-disclosure rules in US accounting standards.
According to Environmental Finance, the officers contend that for the majority of loans, climate-related risks are not substantial enough to merit inclusion in the standards, with physical risks not being material for roughly 99% of commercial and residential loans, and transition risks non-material for 98% of corporate loans.
This assertion is supported by recent findings from the US Federal Reserve’s climate scenario analysis. The analysis, which included participation from six major US banks, highlighted minimal transition risks for most corporate loans, pegging it at a mere 0.5% or less. However, it also revealed significant data gaps, indicating a potential challenge in accurately assessing climate-related financial risks.
Despite these findings, the letter insists that where physical risks are significant, they are already accounted for under the current Generally Accepted Accounting Principles (GAAP) set by FASB. The states’ officials, predominantly from Republican-led regions, urge FASB to avoid politicising GAAP by incorporating climate standards into it without congressional mandate, arguing that such regulatory adjustments should solely reside with Congress.
This plea comes amid ongoing legal battles faced by the SEC regarding its climate regulations, underscoring a significant policy rift between state financial officers and federal regulatory bodies.
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