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Sustainability & Its Emerging Corporate Infrastructure

A confluence of investor expectations on climate risk disclosures and impending SEC requirements on GHG emissions disclosures have led audit firms to demonstrate growing urgency to help their clients with climate assessment and audits.

As regulators, investors, and auditors build the corporate infrastructure to measure and assess climate change, technology companies have a great opportunity to create the software and product layer, which will go hand in hand in this new epoch of climate-related disclosures.

1. Auditors from the Big 4 accounting firms are getting ready to support their clients with impending climate-related disclosures and audits.
2. Crucially, audit firms globally view this as a market gap and a large revenue driver: most firms, public and private, don’t have sophisticated measures to make climate-related assessments on their business including the ability to make Scope 1, 2, or 3 GHG emission disclosures.
3. Per Carbon Tracker, 134 of the top multinational companies that account for 80% of corporate industrial greenhouse emissions had no mention of climate-related matters in their financial statements in 2021.
4. Here’s why it matters, even more: In March ’22, SEC released a proposed rule to enhance climate-related disclosures for publicly listed companies. Gary Gensler, the SEC chair, crucially noted that “today, investors representing literally tens of trillions of dollars support climate-related disclosures because they recognize that climate risks can pose significant financial risks to companies, and investors need reliable information about climate risks to make informed investment decisions.”
5. Post releasing the note in March ’22, the SEC opened it for public comments here. Though the climate change disclosure rules have been caught in bureaucracy and legal woes, there’s a growing sense that they may see the light of day in 2023, and no later than the 2024 presidential election.
6. This explains the urgency now being demonstrated by accounting firms — especially the Top 4 — to get their teams in order.
7. Underscoring the regulatory and associated audit push around climate is increased investor expectations and acknowledgment of climate-related risks: the investment community will expect companies to do more, as climate change presents a material risk, and a material opportunity, regardless of sector or asset class.
8. As we see the establishment of what we call — the corporate infrastructure for climate change — technology entrepreneurs need to step in, identify where software and product can support this growing corporate infrastructure, and build companies around it. A new epoch creates new opportunities where incumbents will be ill-positioned to move swiftly.