Deloitte, Ernst & Young, KPMG, and PricewaterhouseCoopers constitute the Big Four accounting firms. It’s no secret that the Big Four have updated their offerings to provide assurance for climate-related disclosures. Additionally, these firms have proven instrumental partners for standard setters. It is common for the Big Four to engage in public feedback with groups like the TCFD and ISSB. Now, anti-ESG is arguing that this behavior violates a number of fiduciary duties and runs afoul of state consumer protection laws. In a recent letter authored by 16 Republican attorneys general, the state officials argue that the Big Four:
“appear to have violated their professional duty of independence by committing to push for climate-related disclosures in financial reporting, contrary to professional standards of materiality, neutrality, and error avoidance. The Big Four also have created potential conflicts of interest that would violate their professional duties of integrity and objectivity through their (1) climate-related commitments, such as requiring climate-related disclosures “independent of a materiality assessment,”1 and (2) financial incentives to push companies to incorporate more detailed and expensive climate-related disclosures into financial reporting. These actions may render the Big Four’s advertising about their claimed independence, integrity, and objectivity deceptive under state unfair and deceptive acts and practices (“UDAP”) laws, and may also violate state contractual provisions requiring compliance with applicable law.”
Threatening letters alleging various violations are a key tool for anti-ESG. We frequently see letters like this one accompanied by interrogatories asking for information on the alleged wrongdoings. Sometimes these issues fizzle out, but other times they result in investigations and ultimately litigation.
Yesterday, I covered a similar correspondence to large credit rating firms. While anti-ESG likely doesn’t have the resources to take on both financial credit rating agencies and the Big Four accounting firms, the letters create pressure that they might choose to pursue costly legal action. That fear may be enough to sway these organizations. However, in the case of the Big Four, giving up their ESG practices would forfeit certain international markets where climate-related reporting is mandatory. This growing section of the global economy needs firms to provide assurance of ESG data. If the Big Four want access to these markets, they’ll need to hold steady against anti-ESG.
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