UK watchdog to scrutinize how companies, auditors calculate climate risk

in #hive-1752548 months ago

UK watchdog to scrutinize how companies, auditors calculate climate risk (Reuters)

  • The Financial Reporting Council (FRC) released a statement detailing its plans to increase scrutiny on climate risk reporting, stating that “[a]uditors have a responsibility to properly challenge management to assess and report the impact of climate change on their business”.
  • The move comes in response to increasing pressure from policymakers for companies to step up their efforts to achieve a transition to a low-carbon economy and rising concerns from asset managers around the usefulness of the information they are given by companies on climate risks.
  • The FRC reportedly plans to review the extent to which British companies and auditors are responding to climate-related issues to ensure reporting requirements are met and will audit company reports regarding their compliance with reporting requirements.

Analysis and Comments

  • Alongside the European Taxonomy and the pending update of the Non-Financial Reporting Directive this is yet another development showcasing how accurately measuring and incorporating longer-term risks posed by climate change is increasingly a key concern of policymaker and investors.
  • Currently, UK companies and their auditors have three main reporting responsibilities regarding climate change: 1) listing all the principal risks and uncertainties they face, 2) a duty to report the impact of their activities on the environment and 3) a new requirement to report energy use and carbon emissions.
  • Looking at the direction of travel, a form of more specific mandatory reporting requirements on climate change seems increasingly likely (a question of when rather than if) with a framework proposed by the Task Force on Climate-related Financial Disclosure (TCFD) a possible starting point (given the UK government and BoE governor Mark Carney have already hinted it may become compulsory).
  • The TCFD was set up by the Financial Stability Board (FSB) in 2015 and is led by Mark Carney (who will be leaving the BoE soon to become climate envoy at the UN) and US businessman Michael Bloomberg.

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Dear @vlemon

Interesting topic. However I would really like to read your own conclusions and view on all those bullet points.

Upvoted already :)
Yours, Piotr

Hello 👋 there !

I believe this is important as finance has been taking into account these ESG measures as other indicators apart from financial results.

It pushes companies to invest in solutions to reduce their carbon footprints and ecological impacts.

Investors are looking for funds that take these into account. Most money flows to ESG funds nowadays, therefore the auditor job is evolving and this is important.

Best,

@vlemon

For me, manufacturing companies will find it difficult as most of them create more carbon into the environment. Creating a low-carbon economy will be good and probably placing more taxes on companies that are destroying the environment will be a good way to start correcting the damages.

Resteemed already @vlemon. Upvote on the way.

Thank you 🙏