XBRL News about ESG and the USA
Here are the three most relevant developments in the world of structured reporting we became aware of in the course of last week.
1 SEC adopts final amendments under the Holding Foreign Companies Accountable Act
In December 2020, the Holding Foreign Companies Accountable Act, co-sponsored by Senators John Kennedy, a Republican from Louisiana, and Chris Van Hollen, a Democrat from Maryland, was signed into law. The HFCAA amended SOX to prohibit trading on U.S. exchanges of public reporting companies audited by audit firms located in foreign jurisdictions that the PCAOB has been unable to inspect for three sequential years.
The new amendments are weaponising enriched XBRLium with enhanced disclosures in the XBRL files regarding audit status etc.
2 ESG data industry takes new shape
Increasingly focused on the ESG performance of their portfolios, growing investor demand for decision-useful sustainability data has been akin to throwing a lit match on a powder keg. With an annual growth rate of 20%, the ESG data market is forecast to approach US$1 billion by the end of this year, according to a recent report by UK-based research analytics provider Substantive. But there is too much choice, with investors often overwhelmed by the sheer diversity.
It definitely should not be business as usual for ESG ratings providers. Fundamental data standardisation will have a disruptive impact, and even though XBRL is not mentioned in that piece, the format will be an important contributor to that impact.
3 U-M, city of Flint partner on fiscal pilot reporting program for transparency, better governance
The lead-in-water crisis in Flint and the bankruptcy in Detroit were separate events that had a common theme: They had been caused in part by fiscal challenges decades in the making. Avoiding or limiting similar problems in the future could be tied to greater transparency in local fiscal reporting, say University of Michigan experts.
Hats off to this initiative, the likes of which are particularly hard to pull off in federalist systems without top-down guidance.
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Christian Dreyer CFA is well known in Swiss Fintech circles as an expert in XBRL and financial reporting for investors.
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