Quantification the next big issue in climate accounting

Speaking to Accounting Times about her team’s recently published meta-analysis, climate finance expert Dr Mona Mashhadi Rajabi said that the next big challenge in climate accounting isn’t defining what should be included in reports, but quantifying the costs of climate change.

“We know how we should report, we have a benchmark, we have a standard and everyone knows what we should include,” Rajabi said.

“Now the main challenge is how we should measure and quantify all that is needed based on TCFD, IFRS requirements, and how these processes can be done by the companies.”

The study reviewed 108 academic articles on climate-related financial risk reporting published between 2010 and 2025. It sought to understand how the literature has evolved as international standards and legislative requirements have changed.

Since the Task Force on Climate-Related Financial Disclosures (TCFD) was assembled in 2015, international standards on reporting climate-related financial risks and opportunities have developed significantly.

For example, the International Financial Reporting Standards (IFRS)’ sustainability reporting standards, IFRS S1 and IFRS S2, were released in June 2023 to provide guidance on the climate-related information companies are expected to include in their financial reports.

As such, Rajabi said that the issue of what should be included in climate-related financial disclosures was largely settled. However, she noted there was no consensus yet on how companies could quantify their climate risks in a consistent, comparable and accurate way.

As previously reported by Accounting Times, climate risk accounting expert Dr Tanya Fiedler said further work was needed to translate complex data from climate models into decision-useful information for businesses.

She added that businesses were feeling pressured to quantify climate risks for individual assets, but current models could not accurately predict risks across such small spatial scales.

Dr Rajabi said quantification was important because it would allow companies to understand the financial costs of climate change and weigh them against the costs of mitigation. She also hoped that a consensus would be found in terms of quantification techniques, so that the information in financial reports could be consistent and comparable.

“The main idea is to have some specific approach that all the companies in the same industry at least use that specific approach, so the results that they are providing can be comparable.”

“There are different approaches that companies are using. For example, they are considering an estimation approach or a production-based approach. But at least at this point, we can say that it is not that developed yet. We have to find a unified and comparable measurement approach to help us to quantify the climate risk.”

While some accountants have been concerned about the additional compliance burdens posed by Australia’s mandatory climate-related financial disclosure rules, Rajabi stressed that the policy was important because it would give companies a clearer view of the climate costs that they were facing and allow them to plan more realistically for future risks.

“I think the most important thing is to accept that we are now paying the cost of climate change. So at this point, when we are paying the cost of climate change, it is better to accept that this quantification is just the first step to help us understand the money that we are paying,” she said.

Her team’s study also found that companies that made climate disclosures typically saw better financial performance, as investors had greater confidence in them.

“We found that the companies that have disclosed climate risks and identified the policies that they are going to use to combat these risks; their financial performance improved after this disclosure because the investors thought that they knew the problem and they could solve the problem," she said.

“The companies that try to ignore or not disclose these climate risks, they are the ones who are negatively impacted financially and investors are not confident enough to invest in those companies.”

Rajabi and colleagues’ research article, Climate-related financial disclosures: a meta-theoretical synthesis for accounting research and practice, was published in the Meditari Accountancy Research journal in January 2026.