The Institute of Internal Auditors Applauds Release of Proposed Climate Disclosure Rule by U.S. SEC

The types of disclosures covered by the proposed rule include:

• Climate-related risks and their actual or likely material impacts on a company’s business, strategy, and outlook;
• A company’s governance of climate-related risks and relevant risk management processes;
• A company’s greenhouse gas (“GHG”) emissions, which would be subject to assurance for larger companies;
• Certain climate-related financial statement metrics and related disclosures in a note to a company’s audited financial statements; and
• Information about climate-related targets and goals, and transition plans, if any.

Anthony Pugliese, CIA, CPA, CGMA, CITP, President and CEO of The IIA stated, “As climate-related and other ESG company disclosure requirements are introduced, we urge regulators such as the U.S. Securities & Exchange Commission to apply a consistent approach to the identification and role of the independent internal audit function for such disclosures. Investors and other stakeholders require consistent, comparable and reliable information for investment decision-making and risk assessment. An organization’s independent internal audit function plays a central role in providing assurance that the organization has effective internal control and risk management systems around its climate change and other ESG data following the “Three Lines Model.”

The IIA has previously weighed in on this topic, noting that internal audit plays a critical and collaborative role in ESG reporting.

“Many companies already disclose climate-related information that is material to their business,” added Pugliese. “The internal audit function will continue to provide the internal assurance around those disclosures like it has been doing. For companies beginning their efforts around climate disclosure, internal audit should be part of the process to ultimately build trust and confidence in climate disclosures through the assessment of effective controls, good data governance and effective risk management.”

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About The Institute of Internal Auditors

The Institute of Internal Auditors (IIA) is an international professional association that serves more than 215,000 global members and has awarded 180,000 Certified Internal Auditor (CIA) certifications worldwide. Established in 1941, The IIA is recognized as the internal audit profession's leader in standards, certification, education, research, and technical guidance throughout the world. For more information, visit https://www.theiia.org.