Dive Brief:
- The Financial Accounting Standards Board (FASB) has agreed to move ahead with a project to set new standards for how companies account for environmental credits such as those obtained for carbon offset programs and renewable energy credits/certificates (RECs).
- The U.S. standard setter’s unanimous decision to add the project to its technical agenda signals a shift from 2019 when the board opted against addressing credits related to emissions trading and other environmental markets and comes amid increased interest from regulators, companies and investors in environmental, social and governance (ESG) issues.
- “Clearly this is a pervasive issue,” Board Member Frederick Cannon said during a meeting Wednesday. “ESG investment is growing very fast and this is at the intersection between the financial statements and ESG Issues.”
Dive Insight:
FASB is one of a number of standard setters and regulators worldwide that are working on moving to establish uniform rules that will ultimately guide CFOs with ESG-related business models and investments.
The International Sustainability Standards Board (ISSB) is seeking to build a consensus of regulators from the U.S., Europe, Japan and other jurisdictions on disclosures about climate risk and other ESG issues. In March the Securities and Exchange Commission (SEC) proposed that companies follow detailed rules for reporting climate risk, saying businesses will benefit from clear, uniform disclosures.
As part of a presentation before the board this week, FASB project manager Michael Lupo said he anticipated additional momentum for ESG stemming from the SEC’s move. The staff recommended adding the environmental credits project to the board’s active agenda.