The American Institute of CPAs and the Center for Audit Quality submitted comments to the Securities and Exchange Commission expressing support for improved climate change disclosures by companies. The SEC requested input regarding expanded climate change disclosure requirements in a public letter in March.
The SEC is ramping up its efforts to align its Environmental, Social, and Governance (ESG) standards with the corporate world’s changing views on climate change. In order to allow for an easier adoption of these climate-related disclosures, the SEC is proposing that these disclosures be based on existing frameworks and standards.
The AICPA said it supports the SEC’s exploration of wider ESG disclosures. “We appreciate the SEC exploring issues related to climate-change disclosure, and more broadly ESG disclosure through a formal request for information,” wrote AICPA CEO of public accounting Susan Coffey. “As the SEC considers climate change disclosures, we think it is essential that all market participants work towards a comprehensive global reporting solution that provides insight into how an enterprise leverages its array of resources to create value over the long-term, including ESG disclosures.”
In its letter to the SEC, the AICPA emphasized the importance of ESG information being easily accessible and therefore digitized, stating that reporting, accessibility, and analysis through electronic financial reports could be achieved for ESG disclosures. It also touched upon the necessity of a transition period, in which organizations are given safe harbor from liability for providing forward-looking disclosures.
The CAQ’s letter expressed similar views, with one key point being the importance of scalability. “It is important that any potential ESG reporting requirements be scalable to public companies of all sizes and consider the differences in the potential ESG risks and opportunities of different industries and geographies,” Catherine Ide, Vice President of Professional Practice at CAQ, wrote in the correspondence.
Other organizations are also supporting potential changes to ESG disclosure requirements. As of Tuesday, 59 organizations and three leading securities academics had submitted comments to the SEC, urging the agency to “move quickly to propose, adopt, implement, and enforce detailed disclosure requirements” on climate change and other ESG issues such as political spending, tax, and lobbying practices. The signers included financial watchdogs, national and local climate and environmental organizations, labor unions, investor advocates, impact investment firms, environmental justice and indigenous rights advocates, and academics. If the SEC follows through on its proposal, ESG disclosures could become a more prominent and consistent part of financial reporting, as many companies are beginning to pay more attention to climate change and the impact organizations have on the environment. 