Accounting watchdog to probe companies on climate change

Britain’s companies will have to ensure that their climate reporting is up to scratch as the accounting watchdog launched a major review into the issue, while pressure ramps up from both environmental activists and investors.

The Financial Reporting Council (FRC) said it intends to probe both firms and auditors, and it could increase standards if necessary.

The regulator said that it will look at the level of resources that auditors such as Deloitte and KPMG have to help their staff assess the climate change impact of the firms they audit.

It hopes to complete the review by the autumn.

“Not only do boards of UK companies have a responsibility to report their impact on the environment and the risks of climate change to their business, but investors expect them to operate sustainably,” said Sir Jon Thompson, the chief executive of the FRC.

“Auditors have a responsibility to properly challenge management to assess and report the impact of climate change on their business.

“The FRC has high standards for company disclosure, including regarding climate change.

“Company reports and accounts are essential to understanding how the corporate world is responding to the challenge of climate change.”

Officials will do spot-checks on the quality of company reports and accounts in several different industries to see if they are meeting the reporting requirements on climate change.

Already last year the regulator signalled an increased focus on climate change, as a new code forced investors to take responsibility for the climate impact of the shares they own, and how they hold firms to account.

Companies have been facing increasing calls from both activists and investors to increase transparency and do more to combat climate change.

Last week oil major BP unveiled a new plan to become a carbon neutral company, by some measures, by the middle of the century.

Later the Royal Bank of Scotland said it would stop funding major oil and gas companies who do not have a credible plan to become compliant with the Paris Agreement on climate change by 2021.

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