The International Valuation Standards Council (IVSC), a global standards body chaired by accounting industry veteran Sir David Tweedie, has launched a consultation aimed at shaping its agenda and technical work, which could lead to the inclusion of sustainability topics – such as the impact of climate change – in the valuation of businesses and assets.
Among the IVSC’s Agenda Consultation Paper there are topics that could affect ESG practitioners and investors.
For example, the IVSC is looking for input on non-financial liabilities, an area which could be related to accounting standards such IAS 36 (impairment of assets) and IAS 37 (provision, contingent liabilities and contingent assets).
Other topics of the IVSC’s consultation are the valuation of biological assets and extractives, which could strike a chord with ESG concepts such as natural capital and stranded assets.
In addition, “sustainability and renewable energy” have been identified by the council’s standard-setting boards as “topics for potential future projects”.
The consultation, which ends on August 15, comes at a time when the international professional body for actuaries, the IFoA, has warned its members that climate change poses a material risk and as such, their responsibility is to consider how affects the advice they are providing.Likewise, the Climate Disclosure Standards Board is investigating how accounting standards, such as IAS 36 and 37, can be used as a starting point to deliver the forthcoming final recommendations of the high-level climate taskforce, the TCFD.
Asked whether the emerging international valuation profession would follow suit, IVSC Standards Review Board Chairman Mark Zyla told RI: “If stakeholders believe there needs to be more guidance, it’s certainly something the IVSC would take into consideration. [Climate change] is an important issue because it impacts valuation.”
The IVSC’s mission, and immediate priority, is to create common international valuation standards, which thereafter are used by preparers of financial information.
Zyla said: “Valuation is the underpinning for the fair value measurements that enter on the financial statements. Investors look eventually at this information after it goes through the audit process.”
Despite being at the core of the financial reporting chain, the valuation profession is still highly fragmented.
Tweedie, the former chair of the International Accounting Standards Board (IASB), took over as chair at the IVSC in late 2012. He presided over the international expansion process of IFRS in about 100 countries, including the EU bloc.