European Investors’ to Include Climate-Risks Factors in Audit

Several European investors having a combined worth of more than $ 1.28 trillion are taking serious initiatives for the climate change-related risks. According to Reuters, a letter had been issued from investors to the so-called Big Four: EY, Deloitte, KPMG and PwC, the largest accounting organizations.

In the letter, the investors pressurized the audit companies to take climate-related risks into account, as it could bring more damage than the financial crisis.

The public statement for strict auditing was released, as the investors planned to widen their campaign for a sustainable environment in businesses.

Considering the risks associated with climatic factors in the audit, Natasha Landell-Mills, who leads the campaign by 29 investors expresses, stated: “The overarching thing is that we don’t want another financial crisis, and this could be a lot worse.”

The target of Oil & Gas Companies

The investors basically targeted the audit committees of leading oil & gas companies and demanded that they need to implement a strict approach for climate change risks.

It means that the oil and gas company must negotiate its policies for long-term profit and focus on implementing low-carbon production as per the directions are given by the Paris Agreement of Climate Change, 2015.

The International Accounting Standards Board (IASB) revealed on November 28, 2019, that the board has taken the matter of the investors seriously and would address the concerning issues.

Nick Anderson, a broad member of IASB commented, “We would expect management to report on environmental and societal issues to the extent necessary for primary users of financial statements to form their own assessment of the company’s longer-term prospects and management’s stewardship of the business.”

Audit Companies’ Responses

The two audit companies, EY and Deloitte, gave positive responses regarding the existing concerns of the investors and pledged to continue serving the needs of the investors and for the public interest.

Deloitte launched a website with the initiatives by the Institute of Chartered Accountants in England and Wales, dedicated to the climate change issues and risks involved.

As explained by Deloitte officials, the launch of the website would educate “ICAEW members, finance professionals, and non-executive directors” which will then have a significant impact on the decision making of the company.

Focusing responsibility of the audit companies toward clients, Ingrid Holmes, the Head of Policy and Advocacy at Hermes Investment Management explained that the Big Four audit companies needed “to play their role in helping us to shift the economy onto a more sustainable footing”.

I’m Roshan, a journalist, blogger and music lover. I like covering global news related to finance, business, and technology. Focusing on the collection of true and reliable information, I rely on working by conducting interviews with business leaders and talking to the inside sources of companies.

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