Oklahoma State Treasurer Todd Russ is among those who believe politics about climate change has entered what are generally accepted accounting procedures. They want an end to the practice.
He and 25 other state financial officers wrote to the Financial Accounting Standards Board for its actions to politicize what is known as GAAP or Generally Accepted Accounting Principles. Russ and the others contend the politicizing is harmful when sustainability reporting standards are added.
“FASB should not politicize GAAP by adding sustainability or greenhouse gas (GHG) emissions reporting standards,” they wrote.
The financial officers were blunt in telling the FASB it should stay out of environmental politics.
“Adding prescriptive sustainability and GHG rules that apply far
more broadly is also inconsistent with the core GAAP principles of sincerity (because they promote a partisan agenda to achieve the goals of the Paris Agreement) and prudence (because they call for
speculation about the existence and impact of possible future climate-related laws and regulations).”
GAAP is traditionally used in the quarterly reports issued by utilities and oil and gas firms. But Russ and the other financial officers used the letter to address inconsistencies with core GAAP principles when requiring specific climate-reporting rules.
Noting lack of principles in:
- Materiality, as transition and physical risk is not material to corporate and commercial or residential real estate loans
- Sincerity, as it would promote a partisan agenda to achieve the goals of the Paris Agreement
- Prudence, as it calls for speculation about the existence and impact of possible future climate-related laws and regulations
Incorporating climate-disclosure rules into GAAP will politicize its standard-setting process making companies incur substantial expenses without any corresponding financial benefit to investors and risking significant litigation, according to Russ and the others.
Calling out the SEC climate risk disclosure rule, among other frameworks around the world, as regulations “the purport to be about financial reporting but in reality are about commandeering the financial system to advance a substantive climate agenda that has not been democratically approved in the United States.”
The treasurers and finance officers also pointed out, “Furthermore, the only part of our government having the authority to require these rules is Congress, who has chosen not to do so. It is not the job for the FASB to act unilaterally, imposing climate-related standards when safety and soundness should be their primary focus.”
The list of the other states objecting to climate politics in GAAP included: Alabama, Alaska, Arizona, Arkansas, Idaho, Indiana, Iowa, Kansas, Kentucky, Louisiana, Mississippi, Missouri, Nebraska, Nevada, North Carolina, North Dakota, South Carolina, Texas, Utah, West Virginia and Wyoming.
Source: press release