Sustainable finance, green finance, environmental, social and governance (ESG) investment strategies and greenwashing – it is easy to get confused as to what all these terms that are being bandied about mean for us in our day-to-day lives and business.
At ACCA’s recent International Assembly, held virtually over Zoom, Peter Bakker, president and CEO of the World Business Council for Sustainable Development, reminded delegates of the challenges that face the business world and the accounting profession in meeting the UN’s strategic goals on climate change.
With the ESG sector one of the star performers of 2020, investors are increasingly looking to invest in ESG strategies. The importance of this trend is underlined by asset management firms such as Brookfield appointing Mark Carney, former chair of the Bank of England and current UN special envoy on climate change, as its head of impacting investing to lead its ESG investment strategy. Brookfield is the world’s second largest investor in climate-friendly businesses behind Blackstone.
Assurance is key
As consumers and investors demand more transparency in supply chains, fairer trade conditions and a more sustainable economic development, companies will need to provide more assurance. Measures need to be identified and validated, which is where our profession steps up.
Firms will have to redesign their enterprise risk management frameworks to provide governance and measures on aspects of their business such as vendor management, supply chains, operational resiliency and the impact of climate change events on their operations, to name but a few.
It is not just large multinational companies that will be impacted, but also all those SMEs around the world that provide raw materials, distribution channels and customers – they, too, will need to be involved.
Measures need to be identified and validated, which is where our profession steps up
To assess how companies are performing, we need a standard mandatory set of rules applied globally. In April 2020, the European supervisory authorities issued a joint consultation paper on ESG disclosures, setting out the proposed technical standards on sustainable finance disclosure regulation. As the regulator of the financial markets in Europe, the European Securities and Markets Authority published several papers supporting and promoting this demand for sustainable finance by ensuring the integration of ESG factors into decision-making.
The Task Force for Climate-related Financial Risk Disclosures was set up in 2015 to increase transparency, make markets more efficient, and economies more stable and resilient. It is a voluntary framework which raises awareness of the various measurements that provide assistance to investors in making decisions.
As ACCA members, we need to participate in these conversations and be at the forefront of the changes required, leading and helping our companies, our practices and our clients to navigate those changes. Are you ready to save the world?