AICPA Comments on SEC Request for Public Input on Climate Change Disclosures

The American Institute of CPAs (AICPA) has submitted comments to the SEC following a request for public input on climate change disclosures.

In the attached nine-page letter, Susan S. Coffey, CPA, CGMA, AICPA Chief Executive Officer – Public Accounting outlines why the AICPA supports the SEC’s exploration of climate change and broader ESG disclosures.

“In today’s global economy, as much as 80% of the value of many companies is comprised of intellectual property, brand, customer value, and other intangible assets that are not fully valued on the balance sheet. It has also been noted that as much as 85% of a company’s costs are related to its people. In this context, it is increasingly important to investors that they have relevant disclosures about the collective drivers of short, medium, and long-term value, and investors having this information is critical to the effective functioning of our capital markets” said Coffey.

Specific areas of comment include:

Disclosures – The AICPA supports the SEC seeking input on climate-related disclosures to provide more consistent, and reliable information for investors and registrants.
Standards and Frameworks – The AICPA supports the proposition that any climate-related disclosures be based on existing frameworks and standards and be aligned with the Task Force of Climate Related Financial Disclosures (TCFD) framework, Sustainability Accounting Standards Board (SASB) standards and ultimately be compatible with emerging international developments, in particular, the formation of the IFRS Foundation International Sustainability Standards Board (ISSB) whose proposed objective is to set global sustainability standards under the Foundation’s governance structure.
Assurance –The AICPA supports the SEC’s consideration of assurance over climate-related disclosures, and says CPAs are uniquely qualified to enhance the reliability of ESG disclosures through assurance services.
Internal controls over ESG-related disclosure – The AICPA supports additional measures to ensure reliability, which includes having effective internal controls and processes in place with respect to ESG information. COSO’s Internal Control – Integrated Framework (ICIF) and the knowledge gained in using it, can be effectively leveraged and applied in the context of ESG disclosures.
Structured data – The AICPA calls for digitization of ESG data using XBRL to offer users a cost-effective manner to consume this information similarly to how they consume financial information.
Transition period – The AICPA says that a transition period may be necessary for issuers to report complete, accurate and reliable ESG information and suggests that a safe harbor from liability for forward-looking disclosures be considered.

In the letter, Coffey stresses that it is essential that all market participants work towards a comprehensive global reporting solution that provides insight into how an enterprise leverages its array of resources to create value over the long term, including ESG disclosures.

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