For someone who has been warning about the importance of accounting for environmental and social factors for some time, I am embarrassed to admit that I missed an insightful report on the subject. In September, think tanks Carbon Tracker and Climate Accounting Project released a study showing how little even the largest and most exposed companies in the world include climate considerations in their financial statements.
‘Flying blind: The glaring absence of climate risks in financial reporting’ makes for staggering reading. For anyone else who didn’t discover the report at the time, here are the key findings: “there is little evidence that companies incorporate material climate-related matters into their financial statements” and “most climate-related assumptions and estimates are not visible in the financial statements”. Or, in numbers: more than 70% of the 107 publicly-listed carbon-intensive companies examined by the research failed to disclose such risks in their 2020 financial statements. As did 80% of those companies’ auditors, which did not appear to consider the effects of material climate-related financial risks and only rarely commented on inconsistencies — even when they were “considerable” — between what companies share as part of their “other information” disclosures and the financial statement.
