Climate-Related Financial Reporting

For questions about this research topic, email: fasab@fasab.gov.

Outreach: AGA and AFERM released a podcast featuring Robin Gilliam, assistant director, about climate-related financial reporting. Click the link here to listen.

Project Objective:

In August 2021, the Board approved transitioning the research topic titled climate-related impacts and risk reporting to an active project on the technical agenda titled climate-related financial reporting.

The objective of the climate-related financial reporting project is to provide guidance for reporting entities on reporting the financial impact of climate-related matters in financial statements. First the Board will prepare implementation guidance on existing standards with no amendments. The Board will then review standards for any necessary amendments.

Please submit technical inquiries to help staff understand climate-related scenarios of concern and assist the Board in understanding what standards might need to be amended.

History of Board Deliberations

October 22, 2024

The Federal Accounting Standards Advisory Board (FASAB or “the Board”) agreed to move the climate-related financial reporting project from active projects to a research topic because the two phases to address the project objective are complete.

• On May 17, 2022, during the first phase, FASAB staff developed and released a non-authoritative staff paper titled Statements of Federal Financial Accounting Standards That May Be Relevant to Climate-Related Financial Reporting.
• On September 27, 2024, during the second phase, FASAB issued Statement of Federal Financial Accounting Standards (SFFAS) 64, Management’s Discussion and Analysis: Rescinding and Replacing SFFAS 15, to use as the framework for reporting climate-related financial information in management’s discussion and analysis (MD&A).
• Staff will update the paper from the first phase to include this information.
• Staff is developing training and implementation guidance for how to report significant risks along with climate-related risks. (See the MD&A project for more information.)

Climate-related research will remain a priority and focus on federal financial reporting concepts and the climate-related financial reporting vision statement. Staff will monitor items such as, other governmental financial reports, federal statement of net costs, required supplementary information other than MD&A, climate reports outside of financial statements, and any changes in climate-related policy or legislation to determine next steps for the Board’s consideration. Staff will provide updates to the Board in the non-agenda memorandum.

Briefing Materials – Topic B

August 20-21, 2024

At the August 2024 meeting, members received an education session and reviewed the updated proposed climate-related financial reporting framework. The education session included subject matter experts from four agencies to address five questions.

Education Session

How the Federal Emergency Management Administration (FEMA) distinguish a climate-related event from a natural disaster or non-climate-related event?

Mr. Jesse Rozelle, FEMA’s program manager for Natural Hazards Risk Assessment Program, said that FEMA does not differentiate between climate-related events and non-climate-related events. FEMA focuses on impacts to communities and how to lessen those impacts, with a focus on climate resilience.

Has the federal government defined what a climate-related event is?

NOAA’s Chief Scientist Sarah Kapnick said that NOAA’s mission is to produce the science and provide public access to scientific data.

NOAA does not say if an extreme event is a climate event versus a weather event. Science explains extreme events through a field called “extreme event attribution.” This field of science assesses whether global warming contributed to a mix of factors that led to that extreme event rather than it being caused by solely one event.

What are climate services?

Climate Adaptation Program Lead for the Bureau of Land Management (BLM) Julian Reyes answered this question. He was formerly the deputy director for services at the U.S. Global Change Research Program (USGCRP) and the assistant director for climate services at the White House Office of Science and Technology Policy.

Dr. Reyes explained that climate-services work is catalyzed from Executive Order 14008, Executive Order on Tackling the Climate Crisis at Home and Abroad, published January 27, 2021. Paragraph 211.d called for the expansion and improvement of the nation’s climate information and products for the public. In October 2021, Climate Information and Services for the Public was published, which articulated a vision for the future where every American, every community, and every business has access to usable climate services that empower them to prepare or respond to be resilient to climate change.

To operationalize the vision, in September 2022 the Executive Office of the President formed the Fast Track Action Committee (FTAC). In March 2023, FTAC published A Federal Framework and Action Plan for Climate Services, which called for developing a coherent and durable framework for coordinating federal climate services to ensure that both users and producers are at the same table and that no single agency can or should own climate services. Effective and equitable climate services include feedback from users, decision-makers, and communities to drive improvements in climate services as shown in A Federal Framework and Action Plan for Climate Services, Figure 2.1. Core links in the knowledge value chain for climate services (slide 26).

What is the availability of climate-spending information for climate-related events, and do agencies have the capabilities to report spending for climate-related events?

Assistant Director Joe Thompson and Senior Analyst Zoe Need from GAO’s Natural Resources and Environment team addressed these questions.

Mr. Thompson said an important distinction is that financial reports are backward looking and event-based, providing a historical perspective. Auditors are familiar with how to total up damages from individual events that occurred, but that is not sufficient for climate adaptation work because adaptation is forward looking.

Ms. Need said GAO will be issuing a paper soon on climate resilience. GAO found that climate economics information is limited because it is a developing field.

• For FY 2024, GAO found the federal government could spend an additional $26 billion to $134 billion annually (in 2021 dollars) through the late century due to costs from crop insurance, coastal disaster relief, health care expenditures, and wildland fire suppression spending.
• GAO found that tax revenues may fall due to decreases in real estate values and household income, and that expenditures are expected to increase. The National Flood Insurance Program could have additional future cost of $3.9 billion in annual losses by 2050.
• GAO found there is limited climate-related financial information and it varied across different agencies.
• GAO found limited information. These agencies published information on budgetary needs for mission-related climate activities to address climate-related financial risks.

In the upcoming report, GAO recommends an “organizational arrangement” to prioritize climate resilience investments through 1) a national climate change strategic plan; 2) a national climate information system; 3) expansion of the use of climate economics information; 4) a consistent approach for prioritizing federal climate resilience investments; and 5) a community-driven climate migration pilot program.

The Board engaged in a Q&A with the panelists.

Review of Updated Proposed Climate-Related Financial Reporting Framework

Members appreciated the informative education session and discussed the updated proposed framework.

Members wanted to know what additional climate-related information could be reported in a separate RSI section considering the information panelists shared during the education session.

Members questioned why climate is being singled out for reporting when there are a number of other risks to discuss, such as improper payments and cybersecurity.

Members discussed whether to continue this project if all significant climate-related information could naturally be reported through proposed MD&A guidance.

Members discussed that research is being done at a macro-economic level. whereas FASAB wants to report at a climate-related event level for reporting entities. Members learned from the panel that agencies have little capacity or the right amount of data to provide climate spending information in federal financial reports.

Members discussed that there is no federal definition for climate-related events and asked whether federal financial reports are the right place for this information. Will these updates to the financial reports support climate-related decision making?

Members did not reach any conclusions on RSI reporting for climate-related information or the updated proposed climate-related financial reporting framework. Mr. Scott directed staff to continue the conversation at a future meeting.

Briefing Materials – Topic D and education session slides

June 11-12, 2024

At the June 2024 meeting, members reviewed which International Financial Reporting Standards (IFRS) S2, Climate Related Disclosures, (S2) disclosures may be relevant for FASAB’s climate-related financial reporting framework.

Staff determined its recommendations by analyzing the results of the climate survey staff had conducted from January 12-February 29, 2024; reviewing the climate information included in fiscal year 2023 agency financial reports; and comparing the approximately 158 S2 disclosures to the Board’s climate-related financial reporting vision.

Staff merged the 11 recommended disclosures into the following three proposed disclosures for deliberation:

1. Discuss the material effects of climate-related events that have occurred on
   1. the reporting entity’s financial position, financial condition, or key performance results for the reporting period; and
   2. the potential estimated financial effects going forward. Estimates may be disclosed in a single amount or a range.
2. Explain material impacts to the reporting entity’s financial position, financial condition, or key performance results from adaptation, mitigation, or resilience activities undertaken to manage climate-related risks or opportunities for physical, transition, or credit portfolio risks.
3. Discuss climate-related spending which occurred during the reporting period, the funding instruments used (i.e., loans or grants), and the climate-services provided. If actual costs are not available, the explanation should include obligations incurred or associated outlays.

Members discussed possible types of climate-related information for federal reporting, including climate-related events that occurred, adaptation and mitigation for resilience of agency infrastructure, property, plant and equipment, and climate services for mission-based programs.

Members discussed the proposed reporting items and provided staff with the following comments, recommendations, and research requests.

Member Comments

• Keep the framework at a high level.
• Consider that reporting estimates may be problematic for climate-related risks due to uncertainty and a lack of available information.
• Keep in mind that agencies have challenges separating climate-related spending from other operational costs for accrual accounting.
• Understand why the Board is considering climate as separate from other risks.
• Keep cost/benefit in mind when developing this framework.
• Include reporting of material changes, significant opportunities, and significant risks as part of the MD&A process.

Member Recommendations

• Include trend information to report how climate related costs are increasing over time.
• Promote flexibility to allow agencies to tell their story.
• Report climate-related information in required supplementary information (RSI).
• Understand how much of a material change is climate related.
• Include a separate RSI section in MD&A about forward-looking information.
• Address this project in a multi phased approach.

Member Requested Research

• Define climate services and climate-related events.
• Determine how the Federal Emergency Management Agency distinguishes a climate-related event from a non-climate-related event.
• Research the availability of information to report federal spending for climate related events.
• Research the capability of agencies to report spending for climate-related events.
• Determine which standards the Board should amend to address climate-related reporting.
• Determine if GASB’s modified approach for infrastructure assets could be beneficial.
• Ascertain what climate-related types of information federal entities are including in their financial reports.
• Determine which agencies include climate-related costs in the statement of net cost.
• Research which states include climate-related information in their financial reports.

Briefing Materials – Topic D

January 12, 2024

On January 12, 2024, staff launched a survey to assist FASAB in developing the federal climate-related financial reporting framework. The purpose of this survey was to gain information from reporting entity preparers and providers on the level of effort needed to include TCFD information in fiscal year 2023 agency financial reports. Survey questions are based on section II.4.10.3, Optional Governance, Strategy, Risk Management, and Metrics Information, in OMB Circular A-136. Staff anticipates Board briefings beginning in April 2024 with the survey results and recommendations on what to include from TCFD (IFRS S2) in the federal framework.

December 12-13, 2023

At the December 2023 meeting, members reviewed a draft vision statement to guide the Board in developing the climate-related financial disclosure framework.

Members discussed including “relevant information” to focus reporting on only climate-specific information.

Members discussed whether to include both climate-related events and investments. Staff explained that reporting for climate-related events provides financial information about losses from events that have happened. Reporting for investments provides financial information about adaptation and mitigation for climate-resilience. Members agreed to remove the word “investments” because it is included in financial condition, financial position, or operating performance.

Members agreed to keep the phrase “current and potential” because “potential” will provide forward-looking information. Members agreed to include “impact of climate-related events and risks” because both impact financial condition, financial position, and operating performance.

Members agreed on the following vision statement:

The Board’s vision for climate-related financial reporting is to provide users relevant information on the current and potential impact of climate-related events and risks on a federal reporting entity’s financial position, condition, and operating performance.

Members agreed that the vision statement should be concise yet broad enough to include future discussions about reporting for items such as climate hazards, and investments for adaptation, mitigation, and climate resilience.

Briefing materials – Topic B

October 17-18, 2023

At the October 2023 Board meeting, staff recommended an approach for adapting the International Financial Reporting Standards (IFRS) S2, Climate Related Disclosures, to develop the federal climate-related financial disclosure framework. The recommended approach would first identify and adapt IFRS S2 defined terms and then core content that is relevant to FASAB’s mission and reporting objectives.

Members agreed to first develop a vision statement to determine the Board’s objective and scope for what information to include for climate-related financial reporting. Then the Board will use relevant content from IFRS S2 to begin developing the federal framework.

Staff then recommended developing the framework first for government-wide standards and then component reporting entity standards based on funding from the Inflation Reduction Act (IRA) and Bipartisan Infrastructure Law (BIL), also known as the Infrastructure Investment and Jobs Act (IIJA).

Members want to focus on climate-related expenditures and not just the funding provided by IRA and BIL/IIJA. They want financial information that addresses both climate-risk and accomplishments to understand how reporting entities are utilizing expenditures in relation to climate risk. Members agreed with developing government-wide requirements in tandem with component reporting entity requirements. Climate-related terms will be defined in conjunction with developing the framework.

Staff presented a proposed project plan, which included the development of a single Statement of Federal Financial Accounting Standards over a period of 5+ years. Members did not agree with this proposal. They want to look beyond developing only level-A generally accepted accounting principles (GAAP) and consider smaller deliverables based on gaps in existing GAAP. This includes an omnibus for amendments to existing standards or guidance for existing standards at lower levels of GAAP. A review of the non-authoritative staff paper titled Statements of Federal Financial Accounting Standards That May Be Relevant to Climate-Related Financial Reporting and task force input could help to determine what level(s) of GAAP is/are needed. Staff will not update the proposed project plan at this time.

Briefing materials – Topic E

August 16-17, 2023

At the August 2023 meeting, staff reviewed the project history for the climate-related financial reporting project. During the June 2022 meeting, members had agreed to analyze the Task Force for Climate-Related Financial Disclosures (TCFD) recommendations as a starting point for developing the federal framework. From December 2022 through June 2023, staff had presented education sessions to help members learn more about TCFD and which organizations are adapting it.

Staff then recommended the International Sustainability Standards Board (ISSB) International Financial Reporting Standards (IFRS) S2, Climate Related Disclosures (IFRS S2 or S2), as a model to begin developing the federal climate-related financial disclosure framework.

The Board considered five factors for using IFRS S2:

• IFRS incorporated all TCFD requirements into its S2 standards. TCFD requirements are currently being adopted worldwide.
• IFRS S2 includes authoritative terms such as climate resilience, climate-related physical risks, and climate-related risks and opportunities.
• IFRS S2 requires reporting only on material climate-related risks and opportunities.
• IFRS S2 addresses preparer burden by recognizing an organization’s capacity for gathering necessary climate-related information.
• The International Public Sector Accounting Standards Board (IPSASB) will develop public sector climate-related disclosures using the IFRS S2 model.

Staff presented an education session from the IPSASB to explain its decision to use IFRS S2.

Presentation slides are posted below. Presentation details are in the meeting minutes.

Member and staff discussions with the panelists included some of the following topics.

• IFRS S2’s multiple references to reporting about resource capacity/limitations.
• IPSASB consultation paper feedback on managing the disclosure burden in accordance with resources.
• TCFD/S2 reporting and its connection with financial reporting.
• How to adapt S2 reporting for different size entities.
• Baseline for eco-friendly use of energy.

Members agreed that IFRS S2 was a good starting point to develop the federal climate-related financial disclosures but had the following comments and concerns:

• S2 (TCFD) reporting includes an extensive list of requirements.
• The Board should determine what requirements from S2 are appropriate for FASAB’s mission and concepts.
• The Board should focus on a principles-based approach.
• Do S2 standards include a financial connection?
• The Board should determine if and how to disclose quantitative financial effects.
• What information is relevant and where should it go in the general purpose federal financial report—management’s discussion and analysis or required supplementary information?
• How will the information be audited?
• Should the Board consider long-term projections, similar to the statement of social insurance?
• Will entities report all necessary information if the Board includes the S2 requirement that preparers can use judgment in considering undue cost or effort to report the information?
• What should agencies report to provide relevant information at the government-wide level?
• Should the Board consider a phased approach?
• The Board should not create a compliance model that becomes a checklist.

Next steps: Staff will review a project plan with members to determine the steps necessary for the Board to analyze S2 in relation to FASAB’s mission and concepts.

Briefing materials – Topic A & slides

June 13-14, 2023

At the June 2023 meeting, staff presented an education session on climate change risks with subject matter experts from the Government Accountability Office (GAO) and the U.S. Global Change Research Program (USGCRP). Mr. Joe Thompson, assistant director from the Natural Resources and Environment team at GAO, presented information on the GAO High-Risk List. GAO added “limiting the federal government’s fiscal exposure by better managing climate change risks” to the list in 2013. Dr. Fred Lipschultz presented information about the forthcoming  fifth National Climate Assessment (NCA5).

GAO: Limiting the Federal Government’s Fiscal Exposure by Better Managing Climate Change Risks

GAO focuses on limiting the federal government’s fiscal exposure by better managing climate change risks in five areas:

• Federal government as a leader of a national climate strategic plan
• Federal government as a property owner
• Federal insurance programs
• Technical assistance to federal, tribal, state, local, and private-sector decision makers
• Disaster aid and resilience

If the government does not address the first four areas, it will incur huge bills for disaster assistance. GAO’s overall goal is to decrease that disaster assistance bill to the nation. Therefore, GAO created the Disaster Resilience Framework to focus on reducing the federal fiscal exposure to climate change.[1] GAO has been applying this Framework to federal programs to learn how a program works, where the access points are to manage climate-change risk within that program, and what options programs have to reduce fiscal exposure to climate change. GAO has issued a series of reports on this work.

USGCRP:  Fifth National Climate Assessment

Congress mandated the USGCRP in the Global Change Research Act of 1990 “to assist the Nation and the world to understand, assess, predict, and respond to human-induced and natural processes of global change.” Major themes of the draft assessment include how the federal government is addressing climate change, how it experiences climate change, what is at risk, where the federal government is going, and how it moves forward. The USGCRP expects to finalize and publish the NCA5  in the fall of 2023.

Two climate science chapters look broadly at adaptation and mitigation, as well as what the government is learning about those topics. Three new features of the NCA5 include scientific advances, a greater understanding of how climate change affects people, and practical examples of proven climate solutions.

The NCA5 includes a new economics chapter. It discusses the effects on markets, budgets, and economic opportunities, and provides examples of economic effects of extremes in climate change. In addition to the economics chapter, the economics of mitigation and technology will be available in the mitigation chapter. The NCA5 includes dollar amounts approximately 150 times and GDP approximately 30 times to quantify costs nationally.

Q&A

Members: What key factors could provide a better perspective on the financial position and financial condition of the federal government and the sustainability of its programs for historical accounting events and future climate risk?

Mr. Thompson: Information should be consistent for comparison of climate-related priorities across agencies. A climate-related disclosure framework should help agencies to understand how to stress test what climate change means for their operations and the best way to incorporate safety factors to manage that financial risk within their systems. Economic information from the NCA5 will be helpful to understand climate costs to federal agencies.

Dr Lipschultz: Understanding disaster risk reduction is important. Accounting for what happened to agency buildings or infrastructure because of a past disaster and understanding the impact on the operation of the agency’s mission can help to reduce future related risk. Liabilities exist for funding repairs and maintenance from disasters. As climate change causes cascading risks (increase in disasters), related liabilities are going to increase unless agencies buy down the risks in preparation for these disasters. The best approach to managing future risk is through adaptations and mitigation today. This will prevent vast costs in the future. 

Members: Can agencies identify climate risk areas that could reasonably have a significant financial effect on the financial statements?

Mr. Thompson: GAO does not currently know how to quantify climate risk for agencies. However, a system for agencies to report and track costs consistently could help to understand how to buy down climate risk for the federal government. What information can agencies actually access and understand and how does enterprise and risk management support these priorities?

Member: To what extent is climate risk modeling for future financial projections reliable?

Dr. Lipschultz:  Climate modeling is uncertain, especially the cascading and interrelated economic and human pieces. Output from climate models may show how hot it could get when no adaptations or technology changes have occurred to estimate the cost of, for example, human health in Phoenix.

Disaster risk reduction is important. Accounting for what happened to agency buildings or infrastructure because of a past disaster and understanding the effect on the operation of the agency’s mission can help to reduce future related risk. Liabilities exist for funding repairs and maintenance from disasters. As climate change causes cascading risks (increase in disasters), related liabilities will increase unless agencies buy down the risks in preparation for these disasters. Adaptation and mitigation are the best approach today to buying down future risk to prevent vast costs in the future. 

Member: Should the FASAB climate-related disclosure framework be from an agency view or a top-down approach looking at the government as whole?

Mr. Thompson: Both are recommended. Given how Congress and the appropriations process works, and how agencies actually operate, disclosures should provide information on how reporting entities are investing resources to integrate climate risk management into how they operate.

 Member: Are agency enterprise risk management (ERM) processes addressing preexisting climate risk functions and is data available to set priorities agency-wide?

Mr. Thompson: There are no ERM models at this time to show that this is possible.

Next steps: Staff plans to finish presenting education sessions and begin development of the draft framework in the fall of 2023.

Briefing materials – Topic A & slides

[1] GAO, Disaster Resilience Framework: Principles for Analyzing Federal Efforts to Facilitate and Promote Resilience to Natural Disasters, GAO-20-100SP (Washington, D.C.: October 23, 2019).

April 18-19, 2023

At the April 2023 meeting, staff presented research to help develop the climate-related financial disclosure framework by addressing Board questions. Fourteen agencies from the climate task force provided information to address the following questions:

What types of reporting are agencies currently using to comply with the various federal climate-related legislative acts and presidential executive orders?

The climate task force agencies reported on six federal legislative acts and eight presidential executive orders that are driving agency climate-related activity and reporting. Sustainability.gov includes the agencies’ climate adaptation and resilience plan, sustainability plan, and climate annual progress report.

What information are agencies reporting in financial reports based on the Office of Management and Budget (OMB) Circular A-136, Financial Reporting Requirements, for optional and required climate-related reporting?

Staff consolidated information from the 24 Chief Financial Officer (CFO) Act agencies to present the following research on OMB Circular A-136

• Section II.2.6 Forward-Looking Information – recommends that agencies report climate-related, forward-looking information in the MD&A.
  Staff analysis showed that 54% of the CFO Act agencies discussed forward-looking information in MD&A, 33% included climate-related information in MD&A without specifically referencing it as forward-looking, and 13% did not discuss climate in MD&A.

• Section4.10.1 Required Hyperlinks to Reports
  Because this was an OMB Circular A-136 requirement, all agencies included hyperlinks to climate action plans, sustainability reports, implementation plans, and other reports with information relevant to climate-related risk or climate-related financial risk that they had issued during fiscal year (FY) 2022.

• Section II.4.10.2 Optional Budget Information
  Staff analysis showed that 13% of the CFO Act agencies reported budget information in Other Information (OI).

• Section II.4.10.3 Optional Governance, Strategy, Risk Management, and Metrics Information
  Staff analysis showed that 17% of the CFO Act agencies included detailed information for TCFD-like reporting, 63% included general information on TCFD-like reporting, and 20% did not report any TCFD-like information.

Can FASAB leverage and reference current agency climate-related reporting, including climate-related risks, to help users understand the reporting entity’s ability to sustain operations?

According to staff’s research, agencies are capable of reporting climate-related activity and its effect through

• quantitative budget information and explanations about what they expect to achieve;
• quantitative net cost information;
• qualitative TCFD-like information as it relates to government operations; and
• quantitative and qualitative information about loan and loan guarantees affected by climate-risk.

There is additional information members would like staff to research to help develop climate-related financial disclosure framework:

• What challenges do agencies have with reporting TCFD?
• How can the framework summarize or reference information from sustainability.gov?
• How can budget and expense information inform climate-related priorities?
• What information is available to understand climate-related financial risks?
• Are MD&A-specific reporting requirements necessary for climate-related risks?
• Should the Board focus first on government-wide reporting for climate-related financial risks?
• What valuable information do users want to understand climate-related financial risks?

Briefing materials – Topic A

February 22-23, 2023

At the February 2023 meeting, staff presented research to help develop the climate-related financial disclosure framework by addressing the Board’s question about the Security and Exchange Commission (SEC) proposal titled Enhancement and Standardization of Climate-Related Disclosures.

Two panelists from SEC—Luna Bloom, chief of the Office of Rulemaking, Division of Corporation Finance, and Larry Yusuf, a professional accounting fellow, Office of Chief Accountant—addressed the highlights of the proposal and comments received.

The SEC is proposing the following:

• A climate-related disclosure in a separately captioned section to improve the consistency of and accessibility to information that investors can identify and analyze
• An attestation for the climate-related disclosures, such as the financial metrics in the S-X proposed amendments, which would be included in the financial statement footnotes and be subject to the standard audit
• An attestation (outside of the proposed attestation in the financial statements) for the greenhouse gas (GHG) emissions scopes 1 and 2 metrics
  • There is a phased-in requirement, which starts with a limited assurance in fiscal years two and three, after the scope 1 and 2 emission disclosure compliance date. Then there is a reasonable assurance for fiscal year four and beyond.
  • This attestation would be applicable to accelerated filers and large accelerated filers.

The Board agreed that research should include the following:

• how to leverage and reference other required federal climate-related reporting to focus on what information is relevant for financial statements financial report
• how to include financial impacts for climate-related risks
• how to include climate-related risks related to the ability to continue with operations
• how to present climate-related risks in financial reports (for example, is RSI appropriate?)
• whether tiered reporting is an option for reporting entities in relation to size or how much activity each focuses on for managing climate-related risks compared to the reporting entity’s mission
• whether GHG emission scopes 1, 2, or 3 are useful for climate-related federal financial statement disclosures 

Briefing materials – Topic A & slides

December 13-14, 2022

At the December 2022 meeting, staff presented research to help with the development of the climate-related financial disclosure framework by addressing the Board’s question about which governments use the Task Force on Climate-related Financial Disclosures (TCFD) framework for disclosures in their financial reports.

Staff reviewed the TCFD recommendations, the make-up of the FASAB climate task force, and research done to date. The task force includes 65 preparers, users, auditors, and climate subject matter experts. Staff divided the task force into two working groups. The agency working group is collecting data about the agency’s climate-related activity and reporting that staff will present to the Board at a future meeting. The TCFD working group provided research for this meeting.

The TCFD research showed that, while many countries now require commercial entities such as banks, insurance companies, and a pension fund to adapt TCFD reporting to educate investors about climate-related risks and opportunities, only Canada is disclosing climate-related information in its financial reports. Research for this presentation focused on the Canadian cities of Toronto, Mississauga, Montreal, and Vancouver, which are voluntarily reporting TCFD.

Two panelists addressed how the cities are implementing TCFD, the challenges of implementation, and the lessons learned. Ms. Corinne Dougherty, a partner with KPMG Environmental, Social, and Governance (ESG), presented government climate reporting research and Mr. Wes Anderson, manager of business planning and finance at the City of Mississauga presented, Mississauga’s ESG Reporting Journey.

The Board learned that 1) TCFD was not the only model the cities used—some cities created their own framework from multiple models to report on ESG and not just climate; and 2) the cities determined the scope of ESG/climate reporting by understanding what is material and relevant to stakeholders.

Members agreed that staff should continue to analyze TCFD recommendations and monitor the standardization of other climate reporting standards to find the balance between relevant information for users and preparer burden. Staff will present information to help identify the purpose, goals, and scope of climate reporting within the FASAB reporting model. Members want to understand how agencies calculate and track the cost and budget information for climate and what information Chief Financial Officer Act agencies are reporting based on the optional Office of Management and Budget Circular A-136 TCFD recommendations.

Briefing materials – Topic A & slides

September 2022

On July 21, 2022, staff sent a news release calling for task force (TF) members to help develop the climate-related financial disclosure framework. Staff has received approximately 60 requests to join the TF and is mapping each participant’s area of expertise to working groups. Working groups will provide education sessions about 1) common themes from the 10,000+ response letters SEC received on the proposed climate-related disclosure rules; 2) what agencies are doing and reporting on in relation to climate-related executive orders; and 3) other governments’ [for example, Canada and California] experience and lessons learned on implementing TCFD for reporting climate-related disclosures in their financial statements.

June 22-23, 2022

Members approved the second phase of the project to develop a climate-related financial disclosure (CRFD) framework. The project plan is tentative until members determine a clear direction. FASAB completed the first phase on May 17, 2022, with the publication of the staff paper Statements of Federal Financial Accounting Standards That May Be Relevant to Climate-Related Financial Reporting on the FASAB website.

Members agreed to analyze the Task Force for Climate-Related Financial Disclosures (TCFD) model as a starting point for developing the FASAB CRFD framework. TCFD is for commercial industries to help investors understand financial risk from climate changes and will need to be modified for the federal government. At this time, only Canada and California have implemented TCFD for government reporting. Members requested an education session to learn about California and Canada’s experience with implementing TCFD, how the information is being used, and any lessons learned.

Recruitment is underway for a climate task force to support this project. task force members will include users of climate-related information, preparers and auditors, and subject matter experts. Members are interested in the following information from the climate task force to help develop the CRFD:

• Climate-related government executive orders (EOs) and other reporting
  • What are agencies doing and reporting in response to the climate-related EOs?
  • What information is available to agencies or is under development that could inform FASAB’s efforts and help determine drivers for financial disclosures?
  • What information will agencies provide in relation to recommendations and requirements in Circular A-136, Financial Reporting Requirements?
  • Do agencies presently have systems to capture climate-related financial information for EO reporting and/or for financial impacts?
  • What would be the burden (cost/benefit) to capture meaningful climate-related financial information?
  • How could climate-related issues affect FASAB guidance for contingencies?
  • What are the common themes resulting from the 10,000+ responses to the Securities and Exchange Commission’s proposed climate-related financial disclosure rules?

• Information and decisions
  • What decisions will users make from climate-related financial disclosures?
    • What information do users need from CRFD for those decisions?
    • Does current FASAB guidance identified in the staff paper provide enough information for climate-related decisions?
  • Are disclosures at certain agencies more important than from other agencies? If so, which agencies?
  • Will management use information from CRFD to make decisions? If so, what information/reports will management need?
  • What historical data is available for amounts spent on past climate-related activities?

• TCFD model
  • How can each piece of the TCFD model be translated to federal user needs instead of investor needs? What are the pros and cons and is anything outside of FASAB’s remit?
  • How does FASAB define transition risks, opportunities, and physical risks, and the overall applicability as related to federal financial impact?
  • Are there commonalities across reporting entities for the TCFD risks and opportunities?

Briefing materials – Topic D

April 26-27, 2022

At the April meeting, members reviewed the staff paper titled Statements of Federal Financial Accounting Standards That May Be Relevant to Climate-Related Financial Reporting. Members provided a few minor edits. No members objected to posting the document to the website. This document is now posted to the top of this project page.

Briefing materials – Topic A

February 2022

Members provided edits for the non-authoritative FASAB staff paper titled Generally Accepted Accounting Principles Applicable to Climate-Related Financial Reporting. Staff incorporated these edits in preparation for the Board’s final review at the April 2022 Board meeting. If a majority of members do not object, the staff paper will be posted to the FASAB website.

December 14, 2021

Environmental, Social, and Governance Education Session

Corinne Dougherty, a partner at KPMG’s Washington, DC office, presented an environmental, social, and governance (ESG) education session to introduce the Board to ESG and connect the topic to climate. The presentation slides can be found at attachment 1 of the December meeting minutes.

Briefing Materials – Topic A

Topic B Discussion

Members reviewed the draft staff education paper that will address generally accepted accounting principles applicable to climate-related financial reporting. This document will catalog the GAAP that preparers and users of federal financial reports can use as a reference tool when accounting for and reporting impacts from climate-related events and climate-related financial risks. This staff educational paper is not an authoritative pronouncement and does not change or modify existing GAAP.

Staff will make the following edits:

• Update the introduction section with the scope information
• Remove references to definitions
• Streamline paragraph references to contextualize and connect to climate-related matters
• Update the topic titled “arrangements” to “other”
• Remove social insurance, tax expenditures, sustainability reporting, and social insurance in MD&A

Briefing Materials – Topic B

October 26, 2021

At the October meeting, the Board reviewed the draft format presented in the topic B memorandum and provided staff with feedback on how to proceed with the document that will catalog existing standards to provide guidance on accounting for and reporting of climate-related financial risk.

What format does the Board prefer?

The Board agreed on a hybrid format with topics, such as assets, liabilities, and sustainability, organized with questions and answers. Assets could include property, plant, and equipment that was damaged, impaired, or needs deferred maintenance. Liabilities could include clean-up costs. Sustainability could include the standards that account for economic effects and assumptions.

Staff will provide an introduction in the next draft, which will include the following context:

• What this document hopes to accomplish  
  • Who the audience is
  • Why this document does not create new standards
  • What current standards are included and why and how they apply
• How climate-related matters may affect financial statement line items
• Definitions to establish boundaries around terms such as “matters” and “impact”
• An explanation about the relationship between weather events and climate change

Members also wanted to be sure that this document did not add any burden or extra work for preparers.

Which standards does the Board want to include?

Members did not want to remove any standards from the draft. However, members will assess whether Statement of Federal Financial Accounting Standards (SFFAS) 59, Accounting and Reporting of Government Land, should remain after reviewing future drafts.

Members agreed to add the following standards: SFFAS 3, Accounting for Inventory and Related Property; SFFAS 17, Accounting for Social Insurance; SFFAS 38, Accounting for Federal Oil and Gas Resources; and SFFAS 49, Public-Private Partnerships: Disclosure Requirements.

Which document type does the Board prefer?

In August 2021, staff only presented a Staff Implementation Guidance (SIG) as a proposed document type. However, the other standard setters published non-authoritative documents (see the August meeting minutes for a list of documents). Therefore, at the October meeting staff presented the available non-authoritative documents and documents at a lower level of the GAAP hierarchy for the Board to consider. The Board reviewed the following options: staff paper, SIG, and Technical Release (TR). Members also discussed the GAAP hierarchy level and due process for each document.

A staff paper is non-authoritative with no required due process by the Board. A SIG is level D in the GAAP hierarchy and has a moderate level of due process and Board involvement. A TR is level C in the GAAP hierarchy and is deliberated by the Accounting and Auditing Policy Council (AAPC) before the Board reviews. None of these documents amend existing standards.

Members decided on a staff paper because it is non-authoritative, which follows precedent from other standard setters. However, Board members will review and provide comments during the document’s development.

Briefing materials – Topic B

August 24-25, 2021

At the August Board meeting, the Board approved this project as an active project and moved it to the technical agenda.

On May 20, 2021, President Biden signed Executive Order (EO) 14030: Climate-Related Financial Risk. Sections 2(a) and 5(a) provide an expanded scope beyond the property, plant, and equipment (PP&E) focus presented at the December 2020 meeting.

Staff presented the following work completed and in progress by standard setters and other organizations.

OMB published Climate Change: The Fiscal Risks Facing the Federal Government-A Preliminary Assessment in November 2016. The report states, “The impacts of climate change will also affect the Federal balance sheet.”

In 2017, the task force for climate-related financial disclosures (TCFD) published the Final Report – Recommendations of the Task Force on Climate-related Financial Disclosures. TCFD recommendations for disclosures include the following:

Other organizations have provided TCFD implementation guidance. The Climate Disclosures Standards Board (CDSB) and the Sustainability Accounting Standards Board (SASB) published a TCFD Implementation Guide in May 2019. CPA Canada published Enhancing Climate-related Disclosure by Cities: A Guide to Adopting the Recommendations of the Task Force on Climate related Financial Disclosures (TCFD) in October 2019. The following Canadian cities are implementing TCFD guidance by CPA Canada: Edmonton, Montreal, Toronto, and Vancouver (unaudited).

Five organizations—Disclosure Insight Action, CDSB, Global Reporting Initiative, International Integrated Reporting Council, and SASB—collaborated to publish Reporting on enterprise value: Illustrated with a prototype climate-related financial disclosure standard in December 2020. This is a joint statement outlining how existing sustainability standards and frameworks can complement generally accepted accounting principles.

The CDSB published Accounting for climate: integrating climate-related matters into financial reporting in December 2020. The U.S. Securities and Exchange Commission issued a 90-day call for public comments on climate disclosures on March 15, 2021.

Some standard setters have provided guides identifying relevant climate standards. The Financial Accounting Standards Advisory Board published a Staff Education Paper titled Intersection of Environmental, Social, and Governance Matters with Financial Accounting Standards in March 2021. The International Public Sector Accounting Standards Board (IPSASB) published a Staff Questions and Answers document titled Climate Change: Relevant IPSASB Guidance in June 2020. The International Financial Reporting Standards Foundation (IFRS) published education material titled the effects of climate-related matters on financial statements prepared applying IFRS standards in November 2020.

The Board agreed to move forward with the following plan:

Briefing materials – Topic F

December 15-16, 2020

At the December meeting, staff coordinated an education session to inform members about the fiscal exposure and climate risk for the federal government. There were four subject matter experts on the panel:

Climate Education Session: Fiscal Exposure and Climate Risk for the Federal Government Briefing materials – TAB F

At the December meeting, staff also proposed a technical plan for a climate impact and risk reporting project due to an extensive history of staff outreach and interest concerning climate impact on federal property, plant and equipment (PP&E).

Staff outreach included a toolbox of available standards for a presentation titled Federal Accounting for Climate-Related Events. (Please see appendix A in tab G to view the slide deck.) Staff has presented this toolbox numerous times with continued requests from many organizations.

In addition to the extensive staff outreach on this topic, the U.S. Commodity Futures Trading Commission (CFTC) issued a report titled Managing Climate Risk in the U.S. Financial System, with the following [7B] recommendation related to FASAB:

United States should direct the Federal Accounting Standards Advisory Board to study and pilot the development of climate-related federal accounting standards, disclosure procedures and practices for U.S. Government departments, agencies, and administrative units.                         

Members deliberated and came to the following agreements:

Briefing materials – TAB G