Momentum for Non-Financial Standards builds

Posted on September 18, 2020 by Editor

Climate change poses complex risks for financial systems that regulators don’t yet fully understand. In order to properly assess how physical risks and transition risks will interact with each other and other economic vulnerabilities, we need good quality, standardised non-financial data. 

A recent US Commodity Futures Trading Commission (CFTC) report on Managing Climate Risk in The US Financial System calls for US financial regulators to move urgently to measure, understand and address climate risks. The report argues that today’s data and analytic tools are a critical constraint, and proposes improved access to climate data in order to better monitor, analyse and quantify climate risks.

The CFTC report joins the growing number of voices calling for better non-financial data disclosure. Recently, progress towards enhanced, global non-financial reporting has accelerated, with Accountancy Europe, the European Commission, the IOSCO Task Force and existing leading sustainability disclosure frameworks pushing for unified non-financial reporting standards.

This week The International Federation of Accountants (IFAC) also called for a global sustainability standards board to be established. IFAC suggest, similar to Accountancy Europe’s proposal, that the new sustainability standards board should exist alongside the IASB under the remit of the IFRS Foundation. They envisage the new board adopting, unifying and leveraging the existing main sustainability disclosure initiatives to speed up implementation.

Global standards for non-financial reporting are an opportunity to give stakeholders useful, comparable, and consistent data about a company’s long-term exposure to climate risk and opportunities. With the momentum building, especially in Europe, we hope to see regulators looking to the XBRL standard as a solution in this area soon.

Read more about IFAC’s proposals here and the CFTC report here.

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