Accountants commit to improve corporate climate disclosure

A group of prominent accounting bodies, representing over 2.5 million accountants globally, have signed an “urgent” call to action pushing the profession to agree standards on climate change.

The 14 bodies and 13 chief executives, who are all members of the Prince of Wales’s Accounting for Sustainability Project (A4S) Accounting Bodies Network, have called on their industry to help the companies they work with respond to climate change with the “urgency and scale required”.

The bodies - which include the ICAEW, Chartered Accountants Australia and New Zealand, Association of International Certified Professional Accountants, and International Federation of Accountants - believe the accountancy profession has a vital role in achieving climate change mitigation and adaptation at individual businesses, industry sector and economy-wide levels.

“We acknowledge that these are
multifaceted challenges and will work with other professions and stakeholders
in pursuit of solutions,” the bodies’ CEOs said in a joint statement.

“Our profession can contribute positively,” they continued. “Professional accountants have a responsibility to act in the public interest. Many argue that this responsibility must now include helping organisations to address climate change.”

The associations are pushing for increased ESG disclosures to help investors make better informed decisions, drive efficient allocation of capital and support a smooth transition to a net-zero greenhouse gas emission economy.

“We frequently use our skills and
expertise to help deliver meaningful change and we are now applying these to
the uncharted challenges that climate change presents,” the joint statement
declared.

“Identifying material risks with financial consequences and providing the information needed to make decisions are the domain of the accountancy profession,” it continued. “This includes providing relevant financial and strategic analysis, disclosure, scenario analysis and assurance to help organisations generate and preserve value.”

The statement lays out eight actions for accountants to take in response to the climate emergency.

These include providing “sound advice
and services” as organisations, capital markets and governments develop and
implement plans for climate change mitigation and adaptation.

Other recommended actions for accountants include contributing to company efforts to integrate climate change risk into organisational strategy, finance, operations, and communications; using existing and developing reporting frameworks such as the International Integrated Reporting Council and the Task Force on Climate-related Financial Disclosures (TCFD); and supporting sustainable decision-making within companies by allocating budgets and resources and by developing timely information and insights.

Accountancy body CEOs will also commit to a set of principles, including providing members with the training and infrastructure needed to apply their skills to the challenge; supporting relevant market-based policy initiatives, regulation, and more useful disclosure; and providing sound advice to help governments create policies necessary for a just transition to a net-zero carbon economy.

To help encourage business investment
in technology and innovation, decarbonisation strategies, budgets and targets
must be established to allow for effective planning, the bodies warned.

“Policy certainty is essential if we
are to attain motivating action across the private sector,” their statement
said. “Both transition to net-zero emissions and climate change adaptation
measures are clearly linked to other areas of public policy, especially those
directed at economic development.”

The organisations committed to advocating and supporting a more integrated approach to policy development so as to be consistent with net-zero emissions and climate change adaptation goals.

The accountancy sector’s push for improved ESG standards and disclosures comes amid growing investor frustration over a lack of reliable and consistent climate change data.

A major survey by the Global Sustainable Investment Alliance last December found that nearly nine in 10 investment professionals doubt climate risks are being correctly priced into company valuations.

Disbelief
was highest in the US and UK (97% and 95%, respectively) and lowest in Japan
(77%, with 23% unsure).

The poll,
which comprised responses from nearly 300 asset managers, asset owners and
advisors from around the globe, sought to explore whether the investment
industry is successfully implementing the influential TCFD.

According to the survey, while the number of organisations supporting the TCFD recommendations has grown, investors are generally dissatisfied with publicly-traded companies’ climate-related disclosures.

Globally,
59% of respondents expressed being “very” or “somewhat” dissatisfied with these
disclosures, while just 16% were “somewhat satisfied”.

Not a single
asset manager or investor reported being “very satisfied.”