A coalition of 16 state attorneys general is intensifying the political fight over corporate climate transparency, warning that support for climate-related disclosures could expose the Big Four accounting firms to liability under state law.
The letter, led by officials in Florida, Texas, Nebraska, and Alaska, takes aim at Deloitte, EY, PwC, and KPMG, adding uncertainty to efforts meant to help companies, investors, and communities gauge the financial risks of the warming world.
Here's what to know
The publicly released letter argues that support for climate-reporting initiatives may be at odds with accounting firms' obligations to maintain independence, objectivity, and integrity.
According to ESG Today, the attorneys general focused on the firms' involvement with the Task Force on Climate-Related Financial Disclosures, the now-disbanded Net Zero Financial Service Providers Alliance, and their endorsement of the International Sustainability Standards Board's climate-reporting standard.
The states say those commitments could create conflicts of interest if the firms are promoting disclosures that boost demand for their own accounting and auditing work. They also contend that the firms' public statements about independence and integrity may raise concerns under state unfair and deceptive acts and practices laws.
The letter says that any violations could have implications for state and federal contracting, warning that they "could result in penalties and termination of the Big Four's contracts," ESG Today reported.
TCD Picks » Quince Spotlight
💡These best-sellers from Quince deliver affordable, sustainable luxury for all
The attorneys general asked for records and responses concerning their support for climate-reporting efforts and related pledges, including questions about effects on farmers and small businesses in public-company supply chains as well as independence, conflicts, advertising, and disclosure of those commitments.
The letter was also signed by the attorneys general of Alabama, Arkansas, Idaho, Iowa, Mississippi, Montana, North Dakota, Ohio, Oklahoma, South Carolina, South Dakota, and West Virginia.
More background
The letter fits into a Republican-led campaign against climate-related disclosure rules in the United States and abroad.
U.S. Securities and Exchange Commission Chair Paul Atkins has said the agency could reconsider rules allowing foreign issuers to file under International Financial Reporting Standards because the IFRS Foundation backs the ISSB, ESG Today noted.
In the states' view, climate reporting adds costs for farmers and small businesses that are part of public-company supply chains.
What's being done?
Among other things, the letter asks the firms to spell out their ties to climate-reporting initiatives, explain how those commitments square with auditor independence requirements, and describe the potential effects on smaller businesses, according to ESG Today.
Even so, the wider push for disclosure continues. Many companies, regulators, and investors still view climate-risk reporting as a practical way to identify physical and financial vulnerabilities, especially as weather-related disruptions grow more expensive.
"The Big 4's climate commitments force clients to make burdensome climate-related disclosures that drive up the costs of their services and place onerous requirements on farmers and small businesses," Nebraska Attorney General Mike Hilgers said, per ESG Today. "These costs will ultimately be passed onto consumers, who will be forced to bear the burden of increased prices for food, energy, and other everyday products."
Where can I learn more?
This clash over climate transparency stretches well beyond the states' warning to the Big Four. California is pressing ahead with broad disclosure mandates even as federal regulators and Republican-led states try to weaken, block, or roll back similar rules elsewhere.
• California's new corporate disclosure laws could force major companies to reveal climate risks nationwide.
• At the SEC, moves to erase climate reporting rules could leave investors with less clarity.
• In Texas, officials barred a major bank from local contracts over climate commitments.
• In Florida, lawmakers backed deleting climate change references from state law.
The larger tug of war is one reason the pressure campaign directed at Deloitte, EY, PwC, and KPMG bears watching.
Get TCD's free newsletters for easy tips, smart advice, and a chance to earn $5,000 toward home upgrades. To see more stories like this one, change your Google preferences here.
