United States: SEC Acting Chief Accountant Highlights Importance of Climate Disclosures
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This week, SEC Acting Chief Accountant Paul Munter issued a statement regarding “high-quality financial reporting in a complex environment.” This statement covered a number of issues, including the implementation of accounting standards, recovery rules and the role of auditors. Notably, however, the very first issue that Munter addressed was that of climate disclosures in the context of the SEC’s regulatory activities. Indeed, âclimate risk disclosuresâ have been identified as an âitem on the rule-making agenda.”which should be” highlight[ed]”like” have[ing] an impact on accounting or auditing matters.
Specifically, Munter said that the climate “disclosures may be required as part of a description of a company’s operations, legal proceedings, risk factors, and management’s discussions and analyzes of financial condition and financial position. results of operations â. Munter also highlighted “international developments on th[is] subject â, including in particular theâ formation of a global sustainability standards board â, namelyâ the International Sustainability Standards Board (‘ISSB’) to define IFRS standards for sustainability disclosure.
Besides the fact that Munter, as interim chief accountant, chose to highlight the issue of climate risk disclosure, another particularly noteworthy development is how Munter chose to define Why the issue of climate risk disclosure is important. Munter said that âthe total mix of information requested by investors continues to evolve to include new types of information, such as climate risk disclosures. “(emphasis added) Indeed, Munter states that, in the opinion of the SEC, climate risk has become Equipment depending on the degree of investor interest in the subject. And the fact that a given item is important has enormous consequences, both in the enforcement of regulation by the SEC and in private securities litigation.
Given the dynamic nature of our capital markets, the total mix of information requested by investors continues to evolve to include new types of information, such as climate risk information. At this point, President Gensler said, âSometimes investors in our financial markets tell us theyâ¦ want something a little different. When it comes to climate risk disclosure, investors are raising their hands and asking regulators for more. “ President Gensler has since asked staff to develop a proposed climate risk disclosure rule, taking into account comments received earlier this year.
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