Jorja Siemons writes on the Bloomberg Law website on the politicisation of climate-related financial disclosure in the US. Support for international climate-reporting standards is now being portrayed by Republican state officials as potentially incompatible with auditors’ independence.
Big Four’s Past Climate Reporting Support Draws State Scrutiny
More than a dozen Republican state attorneys general told the Big Four accounting firms Monday that they may have violated state laws by asserting independence while signaling support for climate-related disclosures in corporate financial reporting.
Deloitte, Ernst & Young, KPMG, and PricewaterhouseCoopers’ commitments “to push for climate-related disclosures” may run afoul of state consumer protection laws by misrepresenting the firms’ independence to customers when performing audits, according to a letter by a coalition of 16 attorneys general, including those of Alaska and Texas.
The Big Four also may have violated state contractual terms, which could result in penalties and contract terminations, the letter said. The companies were asked to provide copies of all contracts signed since 2020 with state or municipal bodies.
The state officials pointed to several of the Big Four’s commitments, including to the International Sustainability Standards Board. The firms joined other businesses and trade groups in 2023 in signing a declaration committed to advancing the adoption or use of ISSB’s climate-related reporting at a global level.
About 45 jurisdictions have said they intend to use ISSB reporting, aimed at helping investors understand how companies are performing on climate and other sustainability issues. The US is not among them.
Burdensome climate disclosures “drive up the costs of their services and place onerous requirements on farmers and small businesses,” Nebraska Attorney General Mike Hilgers, a co-leader of the coalition, said in a statement Monday.
Deloitte, EY, and PwC didn’t immediately respond to a request for comment. KPMG declined to comment.
Securities and Exchange Commission Chairman Paul Atkins has criticized the accounting industry’s past support of climate-related disclosures. The SEC under the Trump administration has moved to scrap Biden-era regulations that would have required public companies to report climate-related risks to their operations.
Accounting firms were set to benefit under the rules by providing services to Wall Street clients focused on detailing climate concerns.
Firms continue to help clients around the world comply with international climate-related rules, however. Demand for environmental, social, and governance-related services is growing, KPMG Australia said in annual results released Monday.
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Energy in Demand - Sustainable Energy - Rod Janssen 