How are ESG factors reflected in financial reporting?
While new disclosure standards and requirements appear to be on the horizon, we’ve seen different perspectives this week on how environmental, social, and governance (ESG) factors are reflected in current reporting. Workiva reports on an analysis of the terminology used in the text of 10-K filings in the US (the annual financial reports submitted to the Securities and Exchange Commission). It has found that the use of ESG-related language has grown dramatically, with some terms showing up three times more often than two years ago. Trending terms include “net zero,” “gender” and “our values.” Read more here.
The Center for Audit Quality (CAQ) has published a resource examining the current reporting responsibilities of management and auditors under US GAAP, or generally accepted accounting principles. Titled ‘Audited financial statements and climate-related risk considerations,’ it explores where such risks may have a direct impact on financial statements, an indirect impact, or no impact at all. Read more here and here.