SEC Request for Input on Climate Change Disclosures
Friday, June 11, 2021
In March 2021, the Securities and Exchange Commission (SEC) issued a request for input on climate change disclosures. The auditing profession has acknowledged the value of ESG information to investors and other market stakeholders and in their public interest role play a part in the flow of reliable information for decision making. The reliability of ESG reporting is just one critical issue to aid investors in evaluating ESG information; comparability also proves essential to investor trust and confidence. A CAQ analysis found that 11% of S&P 100 companies obtain some degree of ESG reporting assurance from a public company auditor.
In our comment letter to the SEC, we voiced support for the SEC’s efforts to seek input on climate disclosures and other ESG matters to meet investors’ information needs. In the letter, the CAQ:
- Emphasized the need for any climate-related or other ESG disclosure requirements to be focused on the information needs of investors.
- Voiced support for a globally accepted ESG reporting system built from existing standards and frameworks that can be adapted to meet the needs of investors in different jurisdictions.
- Highlighted its view that a global standard setter is likely necessary for a globally accepted ESG reporting system to be implemented and to operate effectively.
- Acknowledged that if the SEC determines that it is appropriate to require issuers to make certain climate-related disclosures, the SEC should consider the aspects of implementation, including transition periods, needed for issuers to reliably report such information.
- Underscored its belief that the value of assurance over ESG-related reporting by an independent public company auditor offers increased investor protection compared with other forms of third-party assurance or verification.
In addition to the comment letter response, the CAQ convened a roundtable to discuss the SEC’s request for input, and brought together 20 participants representing board members, public company management, institutional investors and public company auditors. A summary of the discussion was submitted to the SEC to serve as a broad view of the perspectives across the financial reporting ecosystem. Download the summary of the roundtable discussion to understand stakeholder views on the following topics:
- ESG Frameworks and Standards
- SEC Disclosure Requirements
- Independent Assurance
Download the CAQ’s full comment letter here.