SEC Chair Paul Atkins attended the Inaugural OECD Roundtable on Global Financial Markets last week as part of OECD’s Financial Markets Week 2025. In his keynote address, he took shots at sustainability, ISSB and CSRD’s double materiality standard:
“With respect to accounting standards, U.S. companies must prepare their financial statements in accordance with U.S. GAAP, or Generally Accepted Accounting Principles. During my previous tenure at the SEC as a Commissioner in 2007, I voted to support rule changes to permit foreign companies to present financial statements prepared in accordance with the International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board (IASB), without reconciliation to U.S. GAAP.
When the SEC eliminated the reconciliation requirement, it noted that ‘the IASB’s sustainability, governance and continued operation in a stand-alone manner as a standard setter are significant considerations in [eliminating the reconciliation requirement], as those factors relate to the ability of the IASB to continue to develop high-quality globally accepted standards.’ The SEC specifically noted the ability of the IASC Foundation, which was the predecessor to the IFRS Foundation, to obtain ‘stable funding’ for the IASB.
In 2021, the IFRS Foundation announced the formation of the International Sustainability Standards Board (ISSB), and its Trustees are now responsible for securing funding for both the IASB and the ISSB. This recent expansion of the IFRS Foundation’s remit cannot divert its focus from its long-standing core responsibility of funding the IASB. In turn, the IASB must promote high-quality accounting standards that are focused solely on driving reliable financial reporting and are not used as a backdoor to achieve political or social agendas. Reliable financial reporting is critical to supporting capital allocation decisions. We all have a strong interest in the IASB’s being fully funded and operational, and I encourage the IFRS Foundation to meet its goal for ‘stable funding’ that prioritizes the IASB and its focus on standards for financial accounting, rather than specious and speculative issues.
If the IASB does not receive full, stable funding, then one of the underlying premises for the SEC’s elimination of the reconciliation requirement for foreign companies in 2007 may no longer be valid, and we may need to engage in a retrospective review of that decision.”
Turning to materiality:
“Of course, in addition to high-quality accounting standards, regulation based on financial materiality is another pillar of maximizing the efficient flow of capital. A focus on financial materiality means that disclosure requirements, corporate governance standards, and other regulations are aimed at interests of investors, who, after all, provide the capital to power the products, services, and jobs created by the corporation. In contrast, a regulatory regime based on double materiality considers other non-financial factors.
In the EU, two recently passed laws—the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD)—promote a double materiality regulatory approach. These laws also impact U.S. companies with operations in the EU.
I have significant concerns with the prescriptive nature of these laws and their burdens on U.S. companies, the costs of which are potentially passed on to American investors and customers. While I am encouraged by the EU’s recent commitment to ensure that these laws do not pose undue restrictions on transatlantic trade, as well as efforts to streamline and simplify these laws, further work remains to refocus regulatory regimes on the principle of financial, instead of double, materiality. Indeed, as Europe seeks to promote its capital markets by attracting more companies and investment, it should focus on reducing unnecessary reporting burdens on issuers rather than pursuing ends that are unrelated to the economic success of companies and to the well-being of their shareholders.”
Last week, I blogged on a related item included in the newly-published SEC Unified Agenda that bears on Atkins’ OECD comments:
“If this does indeed move ahead, I wouldn’t expect it to follow in the EU’s footsteps on double materiality and explicit sustainability disclosures. To the contrary, I think it would meaningfully underscore the need for corporate sustainability activities to manifest in business fundamentals – not operational metrics.”
This looks like a pretty good bet.
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