COP 26 will begin in three days. There are many topics that will be covered in this event. One that probably won’t receive enough coverage although it deserves serious attention is the relationship between climate change and financial audits. This is admittedly not as easy to relate to as the pressing need to reduce carbon emissions and invest in renewable energy, but it is a way to help ensure the capital markets are playing as big of a role as they can. Work has already been done here from the perspective of both International Financial Reporting Standards (IFRS) and U.S. Generally Accepted Accounting Principles (U.S. GAAP). For the former, I relied heavily on the work of Mr. David Pitt-Watson. For the latter, I did the same with respect to Ms. Samantha Ross.

Since I wrote these pieces an interesting and important report has been published by the think tank Carbon Tracker: “Flying blind: the glaring absence of climate risks in financial reporting.” The simple answer to the question in this title of this post is “No.” Or, to elaborate just a bit more, “Over 70% of some of world’s biggest corporate emitters failed to disclose the effects of climate risk in 2020 financial statements. 80% of their auditors showed no evidence of assessing climate risk when reporting.” Elaborating still further, Rob Schuwerk, Executive Director of Carbon Tracker and one of the report authors stated that: “These are disappointing findings, especially considering that these same companies acknowledge that their results will likely be negatively impacted by the energy transition.”

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