Since 2018, Sarasin & Partners has encouraged companies and auditors to integrate material climate consequences into financial reporting and auditing. We believe that properly reflecting the real-world impacts of climate change and the transition will support more effective risk management.
The principle of ‘what gets measured, gets managed’ remains highly relevant.
We are pleased to announce the re-launch of the Investor Expectations for climate-aware accounting, a framework originally published in 2020 and led by Sarasin & Partners in collaboration with the Institutional Investors Group on Climate Change (IIGCC). As lead author, Sarasin has worked with global investors to articulate clear expectations on how climate-related risks should be reflected in financial reporting.
Updated to reflect the evolution of the regulatory environment, accounting standards and market practice, the refreshed report “Investor Expectations: Integrating Climate-related Risks and Uncertainties in Financial Statements” highlights the important role of company finance directors, auditors and Audit Committee directors in ensuring climate-related effects and decarbonisation considerations are appropriately reflected in company accounts.
If climate-related considerations are absent from accounting, they risk being overlooked in decision-making. Whether it’s an auto manufacturer faced with the electrification of transport; an oil and gas company forecasting future demand for gas to power grids; or a bank considering whether to offer long-lived mortgages in flood prone regions. They may face overlooked financial risks in company balance sheets, if climate related factors are not considered.
As long-term investors we depend on accurate and comprehensive financial statements. We therefore encourage finance directors, audit committees and auditors to ensure that material climate-related considerations are reflected in financial reporting, so that investor capital can be properly protected.
The publication of these Investor Expectations follows the International Accounting Standards Board publishing its final “Illustrative Examples”, which clarify how material climate-related factors need to be considered under existing International Financial Reporting Standards.
This document is intended for retail investors and/or private clients. You should not act or rely on any information contained in this document without seeking advice from a professional adviser.
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