Accounting for climate change – the role of audit

ClientEarth asserts that KPMG and other auditors are failing to incorporate material climate-related financial risks into company audits, despite clear guidance from standard-setters like the IFRS Foundation and IAASB. Referencing a Carbon Tracker report, the letter highlights a systemic lack of transparency regarding climate-sensitive assumptions and a failure to align accounts with the Paris Agreement. ClientEarth warns that this creates a material information gap for investors and exposes KPMG to regulatory sanctions and legal liability in the UK and US.

• International accounting and audit standard setters, including the IFRS Foundation, IAASB, and FASB, have established that material climate-related matters must be integrated into financial statements and audits.
• A report by Carbon Tracker and the Carbon Accounting Project found that 80% of auditors for 107 carbon-intensive firms provided no indication of how they considered material climate-related matters, and 75% of those companies failed to disclose climate-sensitive quantitative assumptions.
• KPMG was responsible for the audits of 29 companies in the Carbon Tracker report, and 'significant concerns' were identified in relation to all of them.
• There is a notable discrepancy in audit reporting for companies listed in both the UK/Europe and the US, where climate references appeared in ISA audit reports but were omitted from PCAOB reports for the same company.
• Climate change is a material financial risk for carbon-intensive businesses due to transition risks, such as the need for 'no new oil and gas fields approved for development' to meet IEA net zero pathways.
• Failure to evidence the consideration of climate risks exposes KPMG to several legal and professional risks, including regulatory sanctions, shareholder claims for breach of contract, and potential criminal liability for misleading reports.

APA

ClientEarth (2021). Accounting for climate change – the role of audit. https://www.clientearth.org/media/xecneys2/encl-2-clientearth-letter-to-kpmg-on-audit-and-climate-change-8-decemb-_redacted.pdf

Chicago

ClientEarth. Accounting for climate change – the role of audit. 2021. https://www.clientearth.org/media/xecneys2/encl-2-clientearth-letter-to-kpmg-on-audit-and-climate-change-8-decemb-_redacted.pdf.

Wikipedia

{{cite press release |author=ClientEarth |title=Accounting for climate change – the role of audit |date=8 December 2021 |url=https://www.clientearth.org/media/xecneys2/encl-2-clientearth-letter-to-kpmg-on-audit-and-climate-change-8-decemb-_redacted.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@misc{clientearth2021accounting, author = {{ClientEarth}}, title = {{Accounting for climate change – the role of audit}}, publisher = {ClientEarth}, year = {2021}, month = dec, url = {https://www.clientearth.org/media/xecneys2/encl-2-clientearth-letter-to-kpmg-on-audit-and-climate-change-8-decemb-_redacted.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }