Felicity Hawksley, journalist

As governments rally to protect their economies from the worst impacts of Covid-19, it seems as though some at least have learned from the fallout of another, barely older, economic crash: the global financial crisis (GFC).

After the shock of 2008, governments across the world invested in infrastructure as a means of bootstrapping their economies out of recession with policies that created jobs, increased demand for materials and boosted trade.

Against a purely short-term financial scorecard, these policies worked. Against a broader scorecard, the story was different.

Mark Carney, former governor of the Bank of England and now a UN climate finance adviser, revealed that, during the GFC, only one dollar of every six in the trillions of state aid was spent on sustainable infrastructure projects. He implied that spending into the recovery can get one result, but likely at the expense of another: climate change.

Weakened green incentives

The absence of ‘green strings’ (where states demand a level of consideration for the climate, in exchange for bailout money) during the GFC potentially weakened incentives to develop a greener economy, according to one study by the Organisation for Economic Co-operation and Development. Businesses were ‘reluctant to introduce [green] innovations because it [was] much more difficult to reap a price premium’.

There is a lot of room for companies to make only the minimum of changes to reduce their climate impact, yet still receive substantial state investment

Additionally, as the price of credit – and of oil – declined, there were fewer incentives to switch to cost-reducing green innovations or alternative fuels. With the price of oil recently negative and still low, and interest rates scraping along close to zero, there is a risk that, where governments have not opted to use green strings – particularly for carbon-intensive industries – history will repeat itself.

A few countries have already moved quickly on some of the most prominent emitters. Both Air France and Austrian Airlines have environmental conditions attached to their bailouts, including a combination of reductions on emissions for domestic flights, reduction of total emissions and some use of alternative fuels by 2025.

Canada, meanwhile, has required companies to file TFCD (Task Force on Climate-related Financial Disclosures) reports in order to gain access to Covid-19 bailout funds.

But these countries are the exception. National governments appear reluctant to make state bailouts conditional on climate credentials.

EU moves

So far, the EU’s approach seems most ambitious. Its new €1 trillion budget and €750bn recovery plan both come with environmental conditions attached. European Commission president Ursula von der Leyen’s announcement in May reserved 25% of EU spending in both its regular and recovery budgets for ‘climate-friendly’ initiatives.

All spending by the EU is to be guided by a ‘sustainable finance taxonomy’ that acts as a screening criteria for investment. Money must go towards businesses that ‘substantially contribute’ to at least one of six environmental objectives, do ‘no significant harm’ and comply with minimum safeguards.

The European Anti-Fraud Office says it has already observed a growing trend in fraud involving EU funds for environmental and sustainable projects

But the plans come with a warning from the European Court of Auditors, which suggested that the EU was ‘at risk of overstating climate spending without a reliable tracking method’.

The ‘tagging’ element in particular has been criticised. This is where investments are separated into classes of 0%, 40% and 100% green content, meaning that fractionally green projects end up tagged as 40% green. In short, there is a lot of room for companies to make only the minimum of changes to reduce their climate impact, yet still receive substantial state investment.

Step up, accountants

For those companies serious about reducing their climate impact, accountants will have a significant role to play. But they will need more guidance on both how to measure and report environmental contributions and compliance.

Help may be on the way. In September, the Big Four accountancy firms threw their collective weight behind an environmental, social and governance framework for reporting standards. While the Global Reporting Initiative and the Sustainability Accounting Standards Board have endorsed similar metrics for some time, there is hope that strong support from the likes of EY and PwC will help to mainstream sustainability accounting.


Beyond mainstreaming standards, though, accountants of both public and private companies will have a further job: spotting fraud.

With the sheer amount of money in play, the risk of fraud is intensified. The European Anti-Fraud Office stated in September that it had already ‘observed a growing trend…over the last few years in fraud involving EU funds for environmental and sustainable projects’.

What’s certain is that whether legitimate or illegitimate, accountants will be required to enhance what the Corporate Leaders Group described as the ‘clarity, focus and accountability’ of how both EU funds and green-strings funds elsewhere will be managed.

Further information

Read ACCA insights on public sector related issues