LONDON (Reuters) - Most company accounts are not meeting the needs of investors in factoring in the related risks of climate change, Britain’s audit watchdog has told the boards of British firms.
The Financial Reporting Council said in the letter published on Thursday that it expects them to do a better job of assessing areas such as the impact on asset impairments and fair value.
Some financial statements did not mention climate change even though narrative reporting elsewhere in a company’s annual report suggested it could be having “a significant impact on key financial statement assumptions”, the FRC said.
The move follows a campaign by some investors to push companies including oil majors BP and Shell to better reflect climate risk in their accounts.
Ahead of the next reports from companies the FRC said that where relevant financial statements should show how climate risk impacted key assumptions and disclosures.
As well as how climate impacts the impairment of individual assets and cash generating units, their fair value and likely useful economic life, other key data could include the potential scale and timeline for provisions.
Among other issues, the FRC said it also wanted companies to describe the impact of their businesses on the environment, including their supply chains - a key focus for investors as they look to manage climate risk in their portfolios.
Reporting by Simon Jessop; Editing by Alexander Smith
Our Standards: The Thomson Reuters Trust Principles.