FERF ESG Report Finds Organizations Aligning For SEC’s Climate Proposal Requirements
TEMPE, Ariz., March 7, 2023 -- Persefoni, a global leader in climate data disclosure and management, today released the findings of its latest Environmental, Social, and Governance (ESG) Report, How Corporate Finance is Preparing for Climate Disclosure & Best Practices. This report is a joint effort with The Financial Education & Research Foundation (FERF)—the independent non-profit research affiliate of Financial Executives International (FEI).
The report examines how ESG continues to hold an important and growing role for companies, how the Securities and Exchange Commission’s (SEC) prioritization of ESG reporting has impacted reporting efforts, and how finance functions are evolving in response to the SEC’s climate proposal. In expectation of the new requirements, financial teams are taking a close look at their existing and planned infrastructure for reporting, as well as addressing the challenges posed by reporting on climate, a subject still challenging to many organizations.
The survey results, coupled with insights obtained from interviews with finance executives, point to a strategy in various key areas to meet the necessary requirements, as outlined by the SEC, as well as relevant concerns, including:
Building infrastructure and putting the right processes and systems in place
Addressing the talent gap and enhancing training
Incorporating SEC’s proposal on climate
Understanding the role of climate and sustainability as part of a company’s governance
While still under review, the SEC’s proposed regulation would mean several aspects of ESG reporting will no longer be voluntary, but regulated, requiring businesses to adhere to certain disclosures related to climate in financial statements and filings as well as other regulatory statements. It creates additional complexity from how climate change might affect the organization. Companies are still navigating the complexities of ESG and their efforts at implementing a strategy are nascent, with only eleven percent of S&P 500 companies listed among signatories of the Taskforce on Climate-related Financial Disclosures (TCFD), as of December 2022.
Establishing controls over climate-related data is of great concern, with fifty-eight percent of those surveyed expressing concern regarding the complexity (and accuracy) of their climate data according to the report. Now more than ever, ESG becomes an integral part of an organization’s digital transformation journey – creating a digital infrastructure and process that reinforces the data’s integrity should improve the quality of reported data in the short term and in the long term, it would increase the automatability of the ESG data and processing.
“It is clear that there is a new sense of urgency to ESG in light of the SEC’s proposed climate disclosure rules,” said Andrej Suskavcevic, CAE, President and CEO of Financial Executives International and Financial Education & Research Foundation. “Our latest ESG report is specifically designed to help our members better navigate these uncharted waters. We expect that this latest research will serve as an essential guide for all financial teams and organizations working to develop best practices and implement the most relevant metrics and controls needed for accurate and transparent financial reporting.”
Key Findings Include:
Finance teams are laser-focused on building an ESG reporting ecosystem: Finance is working to control ESG (100%), developing oversight of ESG reporting (97%), and increasing its role in preparing disclosures related to the SEC’s proposal (93%).
Eyes on the process: Eight out of ten finance professionals reported being most keenly focused on building the complex processes needed to address organizational ESG reporting.
Climate data continues to perplex many: Respondents named difficulties in obtaining scope 3 data (77%) and the general complexity of the climate data (58%) as the most significant challenges to meeting the SEC’s climate proposal.
“There are no organizations more respected among the world’s financial leadership than FEI, and we are honored they trust Persefoni to share climate accounting and decarbonization strategies with their members,” said Persefoni CEO and co-founder Kentaro Kawamori. “As CDO of a Fortune 300 at the end of the last decade, it was apparent to me that Finance teams were quickly going to play a critical role in ESG; engaging even deeper with FEI members and sharing our market learnings is exactly what Persefoni is built for.”
Methodology and Sources
FERF and Persefoni collaborated to develop the survey and interview questions designed to uncover which ESG frameworks and standards organizations are increasing their focus on in the next year, prepare readiness for various components of the Securities and Exchange Commission’s Climate Proposal, the biggest challenges in the proposal, how finance functions are evolving to support increased ESG reporting, and the key technological adoption trends to meet the proposal’s ESG requirements.
The report and its findings are based on a survey distributed to finance professionals from US-headquartered, publicly traded companies. In total, more than 50 chief accounting officers and controllers from some of the largest US companies participated in the survey. A subset of those participating in the survey (6) also participated in more in-depth qualitative research interviews.
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About Financial Education & Research Foundation, Inc.Financial Education & Research Foundation (FERF) is the non-profit 501(c)(3) research affiliate of Financial Executives International (FEI). FERF researchers identify key financial issues and develop impartial, timely research reports for FEI members and nonmembers alike, in a variety of publication formats. FERF relies primarily on voluntary tax-deductible contributions from corporations and individuals, and publications can be accessed at https://www.financialexecutives.org/Research.aspx.
About FEIFinancial Executives International (FEI) is the leading association and advocate for the views of corporate financial management. Its members hold policy-making positions as chief financial officers, chief accounting officers, controllers, treasurers, and tax executives at companies in every major industry. FEI enhances Member professional development through peer networking, career management services, conferences, research, and publications. Members participate in the activities of local Chapters in the U.S. FEI is located in Morristown, NJ. Visit www.financialexecutives.org for more information.
About PersefoniPersefoni's Climate Management & Accounting Platform (CMAP) provides businesses, financial institutions, and governmental agencies with the software fabric for managing their organization's climate-related data, disclosures, and performance with the same level of rigor and confidence as their financial reporting systems. The company's software enables users to simplify the calculation of their carbon footprint, identify decarbonization strategies and perform climate trajectory modeling aligned to temperature rise scenarios set forth by the Paris agreement, and benchmark their impact by region, sector, and/or peer groups.
Persefoni is a proud signatory of The Climate Pledge and Carbon Call to achieve a net zero carbon future by 2040.
For more information about Persefoni, please visit https://persefoni.com/.