My timing in issuing my new draft Financial Reporting Standard on Accounting for Environmental Change was exquisite, and quite by chance. Yesterday the International Financial Reporting Standard managed International Sustainability Standards Board issued its own first two exposure drafts:
- IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information
- IFRS S2 Climate-related Disclosures
I have not had a chance to read them all as yet, but want I have read is deeply disappointing. The tone might be appraised from this in IFRS S2:
Climate change affects all economic sectors. However, the degree and type of exposure and the current and anticipated effects of climate-related risks and opportunities on the assessment of enterprise value are likely to vary by sector, industry, geography and entity. In assessing an entity's financial and operating results and future cash flows, users of general purpose financial reporting want insight into the governance, risk management and strategic context in which such results are derived. Users also want to understand an entity's targets for managing climate-related risks and opportunities and the metrics the entity uses to measure progress towards meeting the targets.
I am staggered that in this they see opportunities.
But worse, the standard only suggests that a user of the financial statements of a company (who are only defined as potential or actual suppliers of capital to it, with everyone else's needs being met in an unspecified other way) need data on the environment in which conventional financial reporting is taking place, which information on the entity's approach to managing climate change apparently provides. There is no hint that the associated costs need be reflected in the accounts on a systematic basis not already available in existing accounting standards.
What the International Financial Reporting Standard clearly intends is that financial reporting focussed on profit maximising behaviour should not be interrupted by climate change.
Nor should the responsibility of business to the world that they abuse in making that profit be recognised.
The fight would seem to be on.
I will be responding, of course.
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Truth – if it were needed at all – that all the accountancy firms want to do is base their fat fees on these profits created from doing nothing or very little.
Morally and ethically bankrupt.
And these greedy pigs are also expected to carry out audits?!
There is so much pre-extinction behaviour at large in the world at the moment, don’t you think?
Clearly, the IFRS is in hock with the major fossil fuel companies and big 4 accounting firms. It seems business as usual is the rule and to hell how many out of control fires there are in California, Australia, etc, or how quickly the polar ice melts and the oceans rise causing devastating flooding to millions of people and billions of lost “assets”.
I’d see it as the IFRS just reflecting that there has been no change from the Friedmanite, ‘shareholder value is all that matters’, view of the world. Revenues and profits are their only concern, regardless of externalities be they environmental or social.
ESG has a very, very long way to go. There are far too few businesses taking it seriously and far too many paying lip service. IFRS, the accounting firms and of course the City are a massive drag on progress. That combined with their malign influence on the Tory government, not to mention their donations.
Agreed
Is there not some opportunity for some businesses in responding to the global life support system crisis? For example, there is a massive need for training in the skills needed to retrofit the housing stock, which is an opportunity isn’t it?
But that has not separately reportable accounting consequence not covered by existing standards
Unless / until we have a measurement system that includes within the organisation / government / society the full consequences of its existence then broader society is unlikely to appreciate the damage the entity wreaks on our collective futures. Whether the ‘handmaidens of the status quo’ can really adapt exploitative capitalism is clearly unknown.
Perhaps time to update Ruth Hines’ classic paper? Sadly that paper is not freely available. The closest I got was this https://www.youtube.com/watch?v=EfJYdPS7EBw
A friend sent me this link
https://obr.uk/docs/dlm_uploads/CCS0222366764-001_OBR-EFO-March-2022_Web-Accessible-2.pdf
I know you have already discussed this document somewhat, but I don’t think you commented on OBR’s statement that the Government debt has doubled. It seems that this is why the Chancellor believes that the Government should not borrow more.
Thanks very much
But the governments debt has not doubled, not after inflation and not after allowing for it owning £895 billion of it