01 October 2021

IFAC and ACCA: Climate Literacy and Collaboration Agreed Key to Plugging Net-Zero Information Gap

“Climate literacy and collaboration, both within an organization and with stakeholders, are both essential to enact plans that will result in businesses setting and achieving net-zero goals.”

A recording of the event and takeaways are now available.  

Key Takeaways

Climate change is unprecedented in scale and presents a complex and interrelated set of risks and opportunity on which a large number of companies still do not report. There is still a long way to go decarbonize economies, but accountants are positioned to help close the information gap between business and investors.

Here are a few key takeaways from the event.

There’s no time to lose sight of the fact that climate change is already having a profound effect on people’s lives.

“Bangladesh like many other low-lying coastal nations is often referred to as ground zero for climate change with two thirds of the country lying less than five meters in elevation above sea level and nearly 28 of the population residing in coastal areas. It's estimated that the current rate of global emissions, 17 percent of the country's landmass will become submerged dispersing 35 million Bangladeshis between the years 2050 and 2100, but that isn't to say that the effects of climate change aren't already having a profound impact on the lives of my countrymen.” - Munazzeel Riasat

There’s no quick fix towards achieving climate commitments but companies need to understand and communicate their climate-related risks and opportunities.

“There’s a lot of hard work here. Accountants need to translate risks and opportunities into numbers. Without quantification of the risks and opportunities, companies will find it very hard to evaluate the financial impact and the resilience of the business.” - Kevin Dancey

Investors want corporate engagement and comparable data.

Investors and asset managers are looking to engage with businesses around actions to address climate change. Their focus is on companies setting relevant targets, relaying transition plans and strategies, and supporting efforts to harmonize and standardize reporting and metrics.

“[At Goldman Sachs Asset Management, we] encourage companies to do good public disclosure. We like TCFD. We like SASB. And of course the Climate Disclosure Project. We like consistent, comparable data. There's a whole bunch of different things you have to think about. Everything's always going to be case by case, but we're very much thinking about those frameworks as being a good way to go... The baseline issue is that some companies just aren’t reporting this at all.” - Jen Sisson

“You can’t wait to be ready with the information. It’s about being progressive with what you disclose. You have to engage with investors. You have to engage with stakeholders. So while you are still in a journey of getting to grips with your own numbers and disclosures and narrative, you need to act now.

 [Accountants] are the front line in dealing with investors... We need to be courageous and engage with the marketplace and learn each other’s perspectives.” - Wan Shamilah Saidi

“For investors, it's not just about what gets reported, but it's the engagement discussions we have, and it's how management talks to driving value or mitigating risk through integration.” - Richard Manley

The creation of the ISSB will bring much needed consistency and comparability to sustainability reporting.

There was broad support for the development of global sustainability standards under the IFRS Foundation and the formation of a International Sustainability Standards Board.

”We don't have a single industry report the same metric on the same basis and have it third party assured anywhere in the world. We've got a long way to go. It feels like we're still 1920s financial reporting in the ESG arena, but I don't doubt we'll see considerable process in the in the next couple of years ahead... The IFRS foundation setting up the ISSB has further accelerated momentum [to harmonize standardization]." - Richard Manley

"We will be looking to guidance from the ISSB when when it's formed.” - Munazzeel Riasat

“There isn't a specific framework we are in the process of adopting, but we do look to the guidance of standard setters, like the ISSB, when it issues its standards. We look to adopting those measures as soon as possible, at least on a private basis.” - Wan Shamilah Saidi

Finance function stewardship and collaboration across departments is required to advance climate commitments with enhanced disclosure.

Working effectively across functions is needed to ensure the development of short, medium, and long-term plans to meet NetZero emissions targets. Companies are also turning to finance functions to integrate climate and sustainability at all levels including strategy, planning, capital allocation and reporting. In their stewardship role, finance functions also ensure that climate-related information for decision-making and reporting is of high quality.

“Sustainability reporting and financial reporting are really cross-functional in nature. They are company goals and not just goals of any one department. [Etsy’s] accounting and reporting team took over the sustainability reporting from the sustainability team to streamline the work and marry up both the financial and non-financial information, and we work very closely with IR in having them be able to communicate that message to the investors.

We are one of the few companies that reports our ESG information in our 10-K. We don’t look at our business and our impact on the world and sustainability as two separate things. From a governance perspective, it’s both that our sustainability agenda is managed both from the top down, meaning board, CEO, management team, as well as the bottom up. It’s integrated across the company. This is really near and dear to our employees’ hearts.” - Merilee Buckley

There’s no quick fix towards making climate commitments and achieving them.

“There’s a lot of hard work here. Accountants need to translate risks and opportunities into numbers. Without quantification of the risks and opportunities, companies will find it very hard to evaluate the financial impact and the resilience of the business.” - Kevin Dancey

Climate literacy is essential to plugging the information gap.

Developing the climate awareness and literacy of climate matters among finance and accounting professionals and preparing the leaders of tomorrow is now a priority. Accountants need to expand their knowledge of  climate and sustainability language and issues.

“As accountants are serving in a public interest capacity, I think they have an additional responsibility toward the businesses, and as financial advisors, to be up to date on all the salient issues in relation to climate change, and drive the conversation in terms of transitioning to that net zero target, a very ambitious target by the way because 2050 isn’t that far away.” - Munazzeel Riasat...

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