ACCA: Companies Must be Aware of the Financial Impact of Climate-Related Risk

The Association of Chartered Certified Accountants has welcomed the recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD) as an important step towards the better allocation of capital, by incorporating the effect of climate change in investment decisions.

“The four thematic areas of the TCFD’s recommendations – governance, strategy, risk management and metrics and targets – provide a useful framework for disclosure,” says Yen-pei Chen, subject manager – corporate reporting at ACCA.

“The detailed implementation guidance in the annex will be particularly helpful for companies preparing to report under the EU’s Directive on the disclosure of non-financial and diversity information.

“Climate-related disclosures, in our view, will be best integrated into the reporting of the impact of other material factors within the four thematic areas.”

ACCA also welcomed the inclusion of references to the financial impact of climate-related risk, and the ensuing recommendation that this be reflected in companies’ financial statements.

“In particular, climate-related risks could affect the carrying value of assets and goodwill, and in some cases the going concern status of the business,” adds Chen.

“Accounting standard setters such as the IASB should be giving greater priority to closing the long-standing gap that exists in reporting the effect of pollutant pricing or emissions trading systems.”

Professional accountants play an important role in helping companies to manage and report climate-related risks more effectively. This is particularly clear in light of the EU adoption of non-binding guidelines for non-financial information reporting, which is another example of the global momentum towards better-informed capital markets and companies fit for the challenges of today’s world.


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