Sixteen GOP state attorneys general are probing KPMG, EY, PwC and Deloitte over their membership to organizations that pushed to advance climate-related financial reporting.
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Dive Brief:
- A coalition of 16 Republican state attorneys generalsent letters toKPMG, Ernst & Young, PricewaterhouseCoopers and Deloitte last week alleging the firms have violated their duties of independence by supporting climate-related financial disclosures.
- The Aug. 24 letter takes issue with the firms — colloquially known as the “Big Four” — and their participation in sustainability-focused organizations and initiatives, including the now-disbandedNet-Zero Financial Service Providers AllianceandTask Force for Climate-related Financial Disclosures.
- The letter opens a new front on the narrative war and Republican AGs’ push to use antitrust laws to pressure the financial sector to eschew climate-related disclosures and climate-risk analysis.
Dive Insight:
Since President Donald Trump’s return to the White House in January last year, Republican state attorneys general and state finance officials have pushed for the Securities and Exchange Commission and Department of Labor toissue anti-ESG rules, for U.S.asset managers to denounce climate commitmentsand forcredit rating agencies to explainwhether fossil fuel and state ratings downgrades were based on ESG factors.
The Aug. 24 letter is co-led by Nebraska AG Mike Hilgers, Alaska Acting AG Cori Mills, Florida AG James Uthmeier and Texas AG Ken Paxton and was also sent to SEC Chair Paul Atkins and the director of the SEC’s enforcement division. The same four state AG offices led an April letter to credit rating agencies Moody’s, Fitch and S&P and theiralleged incorporation of ESG risk factors. Last week, a group Democratic state AGssent a letter to the SEC,pushing back on the Republican-led probe into the credit rating agencies.
The AGs said in the letter to the financial services firms that they “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.”
Beyond their membership in the disbanded NZFSPA and TCFD, the letter also takes issue with the firms being signatories to the 2023COP28 declaration of supportto advance the International Sustainability Standards Board’s climate-related reporting. Signatories agreed to advance the adoption or use of ISSB’s climate reporting framework as a global baseline and recognized that “climate risks are increasingly having a real effect on companies and capital.”
“The Big 4’s climate commitments force clients to make burdensome climate-related disclosures that drive up the costs of their services and place onerous requirements on farmers and small businesses,” Hilgers said inan Aug. 24 press release. “These costs will ultimately be passed onto consumers.”
The letter argues that the firms may have violated state and federal laws requiring independence “in both fact and appearance” during audits through their climate commitments and affiliations.
The AGs letter asks for the firms to explain the impact of their affiliations “on small businesses or farmers that are part of the supply chain for public companies” and provide “all documents related to the time horizons [they] use or have used for climate‑related disclosures in audits or assurances.” The letter also requests responses to other questions related to the firms’ membership in the NZFSPA and TCFD, and as signatories to the ISSB declaration.
NZFSPA disbanded in January, while TCFD was absorbed into the ISSB in 2021 and disbanded after its final progress report in 2023.
State attorneys general for Alabama, Arkansas, Idaho, Iowa, Mississippi, Montana, North Dakota, Ohio, Oklahoma, South Carolina, South Dakota and West Virginia also signed the letter.
KPMG declined to comment on this story. PwC, EY and Deloitte did not respond to a request for comment as of press time.
Filed Under:Sustainability,Reporting,Regulations,Finance
