We surveyed the 2021 and 2020 financial statements and auditor’s reports for entities listed on the Euronext Amsterdam stock exchange. We included all entities that are part of the AEX, AMX, AScX indexes plus a random selection of entities not included in one of the three indexes. In total 88 entities were included, a list of entities surveyed can be found in the Appendix 1.

Since companies did not always attach the same meaning to climate or climate change, we applied a broad notion, consistent with the definition used by the Taskforce for Climate-related Financial Disclosures (TCFD) of the Financial Stability Board (FSB), i.e. “the potential negative impacts of climate change on an organization”.³ These may consist of physical risks that are event-driven (acute) such as increased severity of extreme weather events or relate to longer-term shifts (chronic) in precipitation and temperature and increased variability in weather patterns (e.g., sea level rise). Climate-related risks can also be associated with the transition to a lower-carbon global economy, the most common of which relate to policy and legal actions, technology changes, market responses, and reputational considerations. This means we included all references to climate, climate change, climate-related risks, carbon footprint, carbon emissions and will refer to this as ‘climate-related’ risks. As explained in more detail in 2.2 we focused on the impact of climate-related risks on the financial statements as referred to in publications of the IASB. This means we include any signs of a negative impact of climate on financial statements such as impairments, shorter economic lives of assets and higher liabilities, but we do not include information about any investments in lower emitting assets, acquisitions of other companies with the aim to gain know-how that is climate-related etc.

Information from management about the impact of climate on an entity can be found in multiple places within the annual report. Typically an entity would explain the climate-related risks and opportunities, its strategy, actions taken and targets and metrics in the management report or in a separate sustainability report. In the financial statements one would expect disclosures explaining the impact of climate-related risks on the financial performance and position of the entity, such as potential impairments of financial and non-financial assets, including goodwill, shortening of economic lives of intangibles and factories, recognition of decommissioning liabilities, etc. Finally, the auditor may report on procedures followed and resulting findings during the audit of the impact of climate-related risks on the financial statements and the consistency between any information disclosed in the management report and the financial statements. This article focuses on the financial statements and the related auditor report.

The information disclosed in the management report and sustainability reports is the subject of the article authored by Kamp-Roelands and Looijenga (2022). The findings in the two articles should therefore be read in conjunction. Our article does not cover any climate-related information outside the financial statements and auditor report and therefore also does not cover assurance provided on sustainability information outside the financial statements. Where the auditor issued a combined report, the findings in this article are confined to the part of the auditor report that relates to the financial statements. Further information about the assurance provided on the sustainability information provided outside the financial statements by entities listed in the Netherlands can be found in Kamp-Roelands (2022). However, for this article we did look at any information about climate-related risks and opportunities in the rest of the annual reports when necessary to put the findings on the financial statements into perspective.

Table 1 provides an overview of the extent to which we found references to climate-related risks in the financial statements, the auditor report and the rest of the annual report, respectively. The rest of the annual report may comprise the management report, the sustainability report, the CEO letter, the report of the supervisory board, section with other information, etc.

From this table it immediately becomes apparent that climate-related risks received more attention in 2021 compared to 2020. This is most visible in the auditor reports with a spectacular increase from 2% in 2020 to 70% in 2021, and also in the references in the financial statements itself which increased from 9% in 2020 to 39% in 2021. Ultimately ‘only’ 5% of the entities made no reference to climate-related risks in their 2021 annual reports (so including the management report) compared to 16% in 2020. However, it is important to analyse the data in more detail to assess the usefulness of that additional information as we will discuss in sections 2 and 3.

Figure 1 depicts an analysis of the overall findings split between the three indexes and the other entities. This can serve as a proxy for the impact of the entity and the relevance for investors. Entities that are part of the AEX have a higher market capitalisation than those that are part of the AMX and the AScX, etc. The numbers show that larger entities tend to disclosure more information about climate-related risks. Larger entities tend to have a larger impact on climate and may be impacted more by climate, which may also explain the fact that they disclose more.

Figure 1. 

Percentage of entities referring to climate-related risks in their financial statements (by index).

Figure 2 provides an overview of the extent to which entities in various sectors reference climate-related risks in their financial statements. The analysis is performed by using the Industrial Classification Benchmark (ICB)⁴ to classify each entity. Not surprisingly, the energy sector ranks highest with 80%. It is noteworthy that the range is very high with Health Care (primarily entities in the pharmaceutical industry) ranking lowest with only 17%. We performed a similar analysis with the auditor reports. Also there the energy sector ranks highest with 100% of the auditor reports referencing climate-related risks. However, there is less variability between sectors (ranging between 50% and 100%) indicating that in a number of cases climate was referenced by default.

Figure 2. 

Percentage of entities referring to climate-related risks in their financial statements (by sector).

In the next sections we will analyse the findings and their background. In particular we will try to research the effect of the increased attention for climate-related risks. In section 2 we will discuss the relevant literature and findings in respect of climate-related risks in the financial statements while section 3 focuses on the relevant literature and findings in respect of the audit and auditor report. Section 4 contains conclusions and recommendations.

Reference has already been made to the many initiatives to set standards or metrics on sustainability including climate-related risks. Some explicitly require that information to be included in a particular document or section of a document. An example is the Corporate Sustainability Reporting Directive5 which requires the sustainability information to be included in the management report. Other initiatives leave it to the entity to find the most appropriate place to disclose the information. Examples include the TCFD recommendations and the proposed IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information by the ISSB. Both only refer to the information having to be disclosed as one package together with the annual financial statements and the ISSB suggests the management report is a logical place, but neither specify the location of the information, provided there is clear cross-referencing.6

So far little guidance has been provided on the impact of climate-related risks on the financial statements themselves. The most relevant guidance for entities listed on the Amsterdam Stock Exchange7 would come from Dutch and EU laws and regulations, the Guidelines of the Dutch Council for Annual Reporting (CAR) and IFRS Accounting Standards. The CAR has not issued any guidance, although it has set up a new CAR Working Group Sustainability Reporting in 20218, so this may change in the future. There are no specific Dutch or EU legal requirements. However, the IASB has issued some documents that may help entities reflect the consequences of climate-related risks in the financial statements, discussed below.

Representatives of large institutional investors had asked the IASB to address climate-related risks in IFRS thereby forcing companies to be more transparent on the impact of climate on financial performance and position. In November 2019 Nick Anderson, one of the IASB Board members, published an article on the IASB website (Anderson 2019) explaining that although climate is not specifically mentioned in the IFRS standards, that does not mean there is no guidance in IFRS on how to account for climate-related risks. It references various standards to illustrate that the general guidance already forces entities to consider the effects of climate. Examples include IAS 36 Impairment of Assets, on testing of goodwill and other assets for impairment, IAS 16 Property Plant and Equipment on the residual economic life of assets and decommissioning liabilities and IAS 37 Provisions, Contingent Liabilities and Contingent Assets on any onerous contracts and potential litigation.

Investors did not consider the article to have sufficient effect on practice in 2019. Representatives from international institutional investors9 issued an open letter in September 2020 calling upon companies to reflect the effects of climate change in their results. The IASB itself was reluctant to issue or amend standards, but in November 2020 the IASB staff published educational material (IASB Staff 2020) expanding on the article of Nick Anderson. It references more standards and provides more detail. According to the IFRS Foundation Due Process Handbook10, educational guidance is not authoritative literature in itself and shall not amend or add to standards issued. However, it is reviewed by Board members and can be seen as helpful guidance in the application of mandatory standards.11

Groups of large investors such as the Institutional Investor Group on Climate Change (IIGCC) and Principles of Responsible Investment (PRI) continued to express concerns about the lack of information about the effects of climate on the financial position and performance of entities. IIGCC sent a letter to 36 of Europe’s largest companies calling for more transparency, including the effects of Paris-aligned assumptions and called upon preparers and auditors to step up efforts. This is accompanied by a report issued by the IIGCC explaining investor expectations. It calls upon entities to perform the following five steps (IIGCC 2020, p. 11):

• Affirm that the goals of the Paris agreement have been considered in drawing up the accounts;
• Adjust critical assumptions and estimates;
• Disclose sensitivity analysis;
• Disclose implications of Paris-alignment for dividend paying capacity;
• Confirm consistency between narrative reporting on climate risks and the accounting assumptions, or an explanation for any divergence.

PRI instigated the report issued by Carbon Tracker and PRI in September 2021 surveying the 2020 annual reports and auditor reports of 107 publicly listed carbon-intensive firms. Just like IIGCC, their expectations go beyond or are at least much more granular than the guidance in the educational material of the IASB staff. For example, PRI calls for disclosing sensitivity analysis as well as the effect of Paris-aligned assumptions on impairment testing and liability recognition. On the 2020 financial statements it concludes that “70% did not indicate that they had considered climate matters when preparing their 2020 financial statements” and “none appeared to use assumptions and estimates that were ‘Paris-aligned’ or provided sensitivities to this”. On the 2020 auditor reports it states “80% of auditors provided no indication of whether or how they had considered material climate-related matters”. The survey was repeated in 2022 for the 2021 annual reports and auditor reports of 134 highly carbon-exposed companies (Carbon Tracker 2022). Carbon Tracker is disappointed in the progress made and reports “98% of these companies did not provide sufficient information to demonstrate how their financial statements include consideration of the financial impacts of material climate matters” and “No company used assumptions and estimates that were aligned with achieving net zero by 2050 or sooner”.

In April 2022 the IASB decided, as part of its Third Agenda Consultation, to add to its workplan a maintenance and consistent application project on climate-related risks (IASB Update, April 2022).

Pressure on preparers to increase the transparency around climate-related risks did not just come from the IASB and institutional investors. Also securities regulators called upon registrants to improve the disclosures around climate. Since 2018 the European Securities and Markets Authority (ESMA) has mentioned climate risks in the annual documents describing the European Common Enforcement Priorities (ECEP). From 2018 till 2020 climate is mentioned but not as a core enforcement priority. ESMA focuses on non-financial disclosures in the management report and references the European Commission’s (voluntary) Guidelines on non-financial reporting: Supplement on reporting climate-related information (European Commission 2019). However, in 2021 climate-related risks became a core enforcement priority covering both the IFRS financial statements as well as non-financial statements. In respect of financial statements mention is made of the need for consistency between the IFRS financial statements and non-financial information. Also, specific IFRS guidance such as on materiality, judgements and estimates, as well as impairments and provisions, is mentioned as relevant in assessing the financial impact of climate-related risks.

Finally, it should be mentioned that pressure also came from environmental lobby-organisations. On 13 January 2022 Milieudefensie sent a letter12 to the CEOs of 29 companies and pension funds. It calls upon these companies to have an action plan aligned with the Paris agreement. This was followed by a letter13 to the large audit networks of 26 September 2022 which calls upon auditors to also have a similar action plan, but in particular help achieve the goals through the audit activities.

When analysing financial statements, climate may impact the numbers and the disclosures in various ways. We have focused our analysis on the topics addressed by IASB staff, such as potential impairments, impact on residual value or residual economic life of tangible and intangible assets, additional climate-related provisions such as decommissioning liabilities, etc. Of course the effects of climate-related risks and opportunities go beyond those referenced so far. For example, many entities reported to have invested in energy efficient assets, changed their products or services, acquired other businesses to become more sustainable and performed research with climate-related goals. This will have its effect on the amounts of property plant and equipment, intangibles and research expenses, etc. Those investments are addressed in the management report or sustainability report and are partly covered in the article of Kamp-Roelands and Looijenga (2022) in this edition of ‘Het jaar verslagen’. In addition, entities make reference to any climate-related compensation of management (in cash or share-based) which means there may have been an effect on the amounts in the financial statements. We found seven companies (2020: five) that referred to share-based compensation linked to ESG goals including carbon emission reductions. We did not include this in our research as this is commonly addressed in the remuneration report outside the financial statements and the management report and there is no separate disclosure of the effect of meeting climate-related targets on compensation or share-based payment expenses.

Focusing on the financial statements (rather than the complete annual report), Table 2 provides an overview of references to climate-related risks found within the financial statements and to what extent it had an impact on the numbers in the financial statements. Of the 19 entities (2020: 3) that provide a generic disclosure about climate risk in the basis of preparation, 13 (2020: 1) explicitly state that climate had no material impact on the financial statements, 6 (2020: 2) do not make such an explicit statement but explain that climate-related risks have been considered. We presume this means management implicitly made such a statement by signing off the financial statements. However, one of those entities (2020: 0) states a full analysis will be made in the next year. Another 10 (2020: 2) companies state that climate has been considered when discussing specific items such as the goodwill impairment test or contingent liabilities and stated that there was no impact. ‘Only’ five companies (2020: three) linked a specific effect on financial performance to climate-related risks. We will discuss these in section 2.3. However, the overview in Table 2 already provides a more nuanced picture as most companies that refer to climate-related risks confine their disclosure to stating that climate-related risks have been considered without going into more detail.

Table 3 provides an overview of the location where the climate-related risk disclosure was included. A number of entities include references in more than one place, which explains the double-counting in the table. The balance sheet items companies consider most likely to be affected by climate-related risks are property plant and equipment, intangibles (mainly goodwill), financial assets and provisions.

It is clear from the data that the references to climate-related risks in the financial statements of this population of entities increased significantly from 9% in 2020 to 39% in 2021. There has been no change in regulation mandating entities to do so. The educational material from the IASB staff might have had an impact, although that was already published in November 2020, so before entities issued their 2020 financial statements, and therefore it seems less likely that these materials had such a major effect only in 2021. So the increase has most likely been caused by the call from investors, environmental lobbying organisations and regulators for more information.

The above findings show that the disclosed quantitative effect of climate on financial statements assets is minimal. This is to a certain extent driven by the business models of the entities surveyed. There is a growing number of entities that actually benefit from climate transition by offering goods and services that help other entities or consumers transition to a low carbon society. Other entities are affected, but refer to the long-term nature of climate transition, extending beyond the remaining useful lives of the current asset base, which explains why there is no immediate effect on residual useful lives of assets and the recoverability of their carrying-amounts. Still others refer to significant headroom in the impairment test, making it unlikely that climate-related risks lead to impairment in the short term. Another reason could be the way the impairment test under IAS 36 Impairment of Assets works. Assumptions to be used to assess the value in use of a cash-generating unit must be based upon the current use of assets and must be consistent with management’s best estimate of future cash flows. Management expectations may not necessarily be in line with ‘Paris-aligned’ assumptions. Moreover, when assessing fair value less cost of disposal, a market participant perspective needs to be taken. In assessing fair value, market data of the potential effect of climate on energy demand and prices as well as emission rights and other regulations differ significantly from one source to the other.14

It should be borne in mind, that our analysis excludes the effects of additional investments and expenditures incurred that are related to climate, nor does it include any additional revenues and income generated from climate-related activities.

Overall, entities can significantly improve the usefulness of financial statements by explaining the link between the commitments expressed in the management report and the assumptions used in the financial statements. This can be done by describing scenarios and/or disclosing price (ranges) and expected volumes and/or including sensitivity analyses. We also noticed that there is hardly any reference made to whether assumptions and estimates are ‘Paris-aligned’, as requested by investors.

There is no specific guidance in Dutch or international auditing standards on how to audit climate risks in financial statements. However, in January 2020 the Dutch Institute NBA issued a public management letter about climate risk. It reports various warning ‘signals’ and calls upon auditors to insist that significant climate risks are included in annual reporting. The report does not specify whether disclosures are included in the financial statements or the management report, even though the responsibility of the auditor for these two documents differs (as explained below). The NBA public management letter does, however, say that the auditor needs to consider climate risks in the assessment of continuity (going-concern). Finally the report mentions that the auditor will have to express an opinion on the reporting system used and the choices made for reporting, valuation and disclosure.

Staff of the International Auditing and Assurance Standards Board (IAASB) issued a Staff Audit Practice Alert in October 2020 following the calls on the auditing profession from institutional investors, regulators and other organisations to step up efforts. The IAASB staff explains: “While the phrase ‘climate change’ does not feature in the ISAs, the ISAs require that the auditor identifies and assesses the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for the auditor’s opinion. Depending on the facts and circumstances of an entity, climate-related events or conditions may contribute to the susceptibility to misstatement of certain amounts and disclosures in an entity’s financial statements.” The Alert refers to ISA 315 on identifying and assessing risks of material misstatements, ISA 320 on materiality, ISA 330 on the auditor’s responses to assessed risks, ISA 250 consideration of laws and regulations, etc. Within the context of this article which focuses on the auditor’s report on financial statements, the most relevant reminders are those of ISA 700, 701 and 720. The Alert reminds the auditor that climate-related risks could give rise to material misstatements (if uncorrected) in relation to:

• Appropriateness or adequacy of disclosures;
• Application of the entity’s accounting policies, for example if impairment calculations do not appropriately account for the effect of climate-related risks.

The Alert also reminds the auditor that climate-related risks may require the inclusion of a Key Audit Matter (matter that, in the auditor’s professional judgement, is of most significance in the audit of the financial statements of the current period) in the auditor report. Such a decision would be affected by significant audit judgements, such as the potential impact of climate change and the transition to renewable energy sources on an entity in the energy sector, and specific events or transactions, for example changes to laws and regulations with respect to the use of fossil fuels.

The Alert also reminds the auditors of the responsibilities relating to other information included in an entity’s annual report, which requires the auditor to consider any material inconsistency between the management report, including any climate-related information contained therein, and the financial statements or between the management report, including any climate-related information contained therein, and the auditor’s knowledge obtained in the audit (ISA 720 par. 11).

As already briefly mentioned in 2.1. the call from institutional investors for improved transparency around the impact of climate on the financial performance of entities was not just directed to reporting entities, but also to their auditors. The November 2020 IIGCC report on expectations of investors referred to above also contained the four steps they expect auditors to take (p. 12):

• Consider material climate risks and confirm that critical accounting estimates or judgements reflect material climate risks, in line with accounting standards;
• Confirm as to whether or not these critical assumptions and estimates can be considered consistent with a 2050 net zero emissions pathway and, if not, whether Paris-aligned assumptions have been adequately considered in the notes to the financial statements. If not, the auditor should indicate what reasonable Paris-aligned assumptions would be;
• Alert shareholders to any inconsistency between the narrative disclosures around climate risks, the company’s strategy and the financial statements;
• Confirm that capital maintenance/solvency tests have appropriately considered climate risks.

The first and third bullet points are consistent with the IAASB Staff Alert, but the second and fourth bullet go beyond what Staff’s view is on the auditor’s responsibilities.

In October 2021 Eumedion issued their Focus Letter 2022.15 Just like earlier years climate was mentioned as one of the focus points, for which Eumedion expects disclosures in the management report. This year, though, it contained an appendix directed at the auditors of listed entities, calling upon them “to review the company’s climate-related disclosures and to report in the auditor’s opinion on the climate risk assessment and the auditor’s response to the risks identified. Furthermore we request the external auditors of companies that are expected to be materially impacted by climate change to assign the impact of climate risk and the energy transition as a key audit matter.” In November 2021 Sarasin & Partners sent an open letter16 to the large four audit firms in the UK reiterating the expectations laid out in the IIGCC report, but going even further and stating: “From next voting season, you should increasingly expect to see investors vote against […’s] reappointment as auditor where you fail to meet the expectations we have clearly set out in our previous correspondence, the November 2020 IIGCC paper and underlined again here.” This is geared to a United Kingdom (UK) environment, but some entities listed on the Amsterdam Stock Exchange are headquartered in or audited out of the UK.

The results of our survey show that the reference auditors make to climate-related risks in their auditor reports on the 2021 financial statements has increased dramatically compared with 2020. Where in 2020 only two of the 87 auditor reports (2%) surveyed refers to climate-related risks, this number jumps to 61 of 87 (70%) in 2021. Since the impact of climate change on companies has not changed that much from 2020 to 2021, the question is what has caused this change in behaviour. There has been no change in Dutch or international auditing standards. The IAASB staff Audit Alert was already issued in October 2020, so before the 2020 financial statements audits were completed. That makes it most likely the increase has been the result of an increased call from investors, environmentalists and regulators upon auditors to step up their efforts to address climate-related risks and report on the results. The increased number of references in itself, though, does not necessarily mean users get more information, so we need to take a closer look at what exactly the auditors report on.

3.2.2. Content of the auditor report

In Table 5 the KAMs found are analysed in more detail. One (2020: one) KAM was entirely devoted to the impact of climate risks. This is the auditor report on the financial statements of Shell PLC which covers three pages and references management disclosures about the impact of climate-risks and explains the additional procedures the auditor has gone through during the audit. There is no explicit statement that Shell’s assumptions used are Paris-aligned, as requested by IIGCC and Sarasin, but the auditor does acknowledge having considered the expectations of investors as laid down in the IIGCC report and Sarasin letter. The KAMs in other auditor reports mention climate risk as a material consideration in the audit of certain elements of the financial statements. Not surprisingly, of the seven remaining KAMs five KAMs (2020: one) reference climate-related risks in relation to impairment testing of non-financial assets. The remaining two are on the assessment of the fair value of investment properties and the incorporation of climate risks in the expected credit loss model for loan portfolios.

As mentioned above, most auditor reports that reference climate-related risks do so in a separate paragraph explaining how the auditor considered climate risks. Table 6 provides an overview of the content of those paragraphs. Most common features in that paragraph are:

Table 6.

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Content separate paragraph on climate-related risks in auditor reports 2021.

	2021
	#	%
General reference to management assessment in management report or financial statements	33	38%
Reference to assessment management that there is no material impact on the company	3	3%
Reference to assessment management that there is no material impact on the financial statements	11	13%
Reference to assessment management that there is no material impact on the financial statements, but there may be a very material effect on the company itself	1	1%
Auditor explicitly assesses impact climate-related risks on financial statements is not material	3	3%
Auditor confirms absence of inconsistencies between information about climate-related risks in management report and financial statements	21	24%
Auditor reports on own audit procedures in relation to impact of climate on financial statements	55	63%
Auditor references assessment of need for a KAM to address climate-related risks	29	33%
Total # of references	156
Total # of references in auditor reports excluding double-counting	57	65%
No reference to climate-related risks in general paragraphs of auditor report	30	34%
No auditor report	1	1%
Total	88	100%

• a reference to management’s assessment of climate-risks (48 times);
• a confirmation of the absence of inconsistencies between the financial statements and other information disclosed in the annual report about climate-related risks (21 times);
• an overview of additional procedures the auditor went through in addressing climate-related risks, discussed in more detail below (55 times);
• a confirmation that the need to include a KAM on climate-related risks was considered (29 times);
• an explicit statement that climate-related risks had no material effect on the financial statements (3 times).

Interestingly, in those last three cases where the auditor explicitly stated that climate-related risks had no material effect on the financial statements, the auditor went further than management as we could not find a similar statement from management (either in the financial statements or the management report). One of those three entities did not discuss climate-related risks at all. One other entity of the three just stated in its management report that it was in the process of analysing the impact of climate-related risks. The third entity explains its strategy and risk management in relation to climate risk. Of course, by signing off the financial statements management implicitly confirms that climate-related risks have been taken into consideration and would not require material adjustments to the financial statements, but that is not the same as explicitly stating climate-related risks had no effect on the financial statements.

The additional procedures referred to in the auditor reports in relation to climate-related risks have been assessed in more detail. An overview can be found in Table 7. Overall, the additional attention climate-related risks received from the auditors and the additional procedures performed by auditors are encouraging. Still a significant number of auditor reports do not reference climate-related risks at all and only 12 (13%) auditor reports reference the use of climate or sustainability specialists by the audit team. A good example illustrating the various additional procedures reported by auditor is the auditor report on the annual report of Just Eat Takeaway.com 2021 by Deloitte (see Figure 7).

Table 7.

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Additional procedures on climate-related risks reported in auditor reports 2021.

	2021
	#	%
Assessment of climate-related risks	55	63%
Discussions with management and those charged with management, challenging management’s assessment	36	41%
Reading the management report and any other materials that might include information about management’s intentions and commitments	33	38%
Involvement of specialists to assess risks and management’s risk management	12	14%
Seeking assistance from component auditors	1	1%
Total # of references to additional procedures in auditor reports excluding double-counting	55	65%
No reference to additional procedures in the auditor report	32	34%
No auditor report	1	1%
Total	88	100%

Figure 7. 

Good practice of description of additional procedures on climate risks in general paragraph of auditor report: Just Eat Takeaway.com NV, Annual report 2021, p. 257. https://www.justeattakeaway.com/annual-reports.

When comparing the findings to the requests from investors as described in section 3.1, it shows that auditors have responded by increasing the references to climate-related risks in their auditor reports. However, the investors also requested auditors to report on the alignment of assumptions used in the financial statements with the Paris Agreement, in other words, assumptions necessary to limit global warming to 1.5C. In particular, if a company does not use Paris-aligned assumptions, the auditor should indicate what reasonable Paris-aligned assumptions would be. We have found only one auditor report (2020: one) explicitly referring to the Paris Agreement. In that auditor report the auditor did not confirm whether the assumptions used were Paris-aligned (same in 2020). However, in the absence of any accounting or auditing standard requiring the company or the auditor to do so it would be difficult for the auditor to express such an opinion and indicate what reasonable assumptions would be, if financial statements themselves do not reference assumptions being aligned with the Paris agreement.