Date posted: 26/03/2020 5 min read

Members support CA ANZ’s climate change advocacy

Karen McWilliams FCA says the world’s consumers, investors and regulators are pushing the same message – ‘We want you to act on climate change.’

in brief

  • Survey shows Chartered Accountants in Australia and New Zealand back CA ANZ’s active role on climate change
  • CA ANZ has joined other professional accountancy bodies in call to action on climate change
  • There are compelling reasons for accountants to act on climate change

Chartered Accountants in Australia and New Zealand strongly support CA ANZ taking an active role on climate change and an even greater number want to know more about how to do their bit, as shown by a recent survey of members.

Late last month CA ANZ joined 13 other professional accountancy bodies around the world, representing 2.5 million accountants, in call to action on climate change.

This was followed by a few strongly worded statements from members, either supporting or questioning CA ANZ's role, or whether accountants had any part to play in tackling climate change at all.

Whether or not you believe the science, there are compelling reasons for accountants to act on climate change. Take it from the recently deceased former head of GE, Jack Welch. While not a climate change denier, he was a supporter of "more balanced" policies. He said: "If you're in a company, you'd better be pushing those [green] products because the world wants these products."

As well as the world's consumers, investors and regulators are pushing the same message – 'We want you to act on climate change.'

"There's an enormous opportunity…whether you believe in global warming or not…"
Jack Welch, former head of GE.

Carrots from investors

Earlier this year, the world's largest asset manager Blackrock signed up to Climate Action 100+, an investor initiative that engages with the world's largest corporate greenhouse gas emitters to take action on climate change. BlackRock joined 370 global investors already signed up to the scheme, bringing total assets under management to over US$41 billion.

Investor activism on climate change is on the march. Businesses which rely on equity markets or debt will have to answer investor and financial institutions questions about their climate action and strategy.

And their words will have to be backed by actions.

In an echo of Jack Welch's comment, Geoff Summerhayes, Executive Board member of Australia's Prudential Regulatory Authority (APRA) explained why APRA is taking action against businesses on the impacts of climate change.

He said his organisation couldn't say with 100 percent certainty that climate scientists were right, "but what I can tell you with absolute certainty is that the transition to a low-carbon economy is underway and moving quickly. The weight of money, pushed by commercial imperatives such as investment, innovation and reputational factors, is increasingly driving that shift, rather than scientists or policymakers."

Regulatory stick

In New Zealand, Chapman Tripp, engaged by the Aotearoa Circle, released a legal opinion concluding that directors and scheme managers must assess climate risk as they would any other risk. Aotearoa Circle is partnership of public and private sector leader committed to sustainable prosperity.

The New Zealand Government recently consulted on how best to incorporate climate-related financial disclosures into the country's existing financial reporting regime.

Additionally, the Australian Securities and Investments Commission (ASIC) is taking a proactive approach towards climate risk disclosures, commencing surveillance of compliance by large businesses in Australia. ASIC chair James Shipton has clearly stated that in the corporate regulator's opinion "all risks can have financial consequences".

Core domain

The International Financial Reporting Standards (IFRS) require companies to make materiality judgements in decisions about recognition, measurement, presentation and disclosure. The Australian Accounting Standards Board (AASB) / Auditing and Assurance Standards Board (AUASB) joint bulletin Climate-related and other emerging risk disclosures: assessing financial statement materiality using AASB/IASB Practice Statement provides some guidance to support the inclusion of (and subsequent assurance of) climate-related disclosures in financial statements.

This bulletin has been recognised by the International Accounting Standards Board (IASB). It notes that climate-related risks could affect the general presentation of financial statements, impairment and fair value of both tangible and intangible assets, financial instruments as well as provisions and contingent liabilities and assets.

As our call to action states: "Identifying material risks with financial consequences and providing the information needed to make decisions are the domain of the accountancy profession. This includes providing relevant financial and strategic analysis, disclosure, scenario analysis and assurance to help organizations generate and preserve value."

Standard setters, policy makers and voluntary frameworks are already addressing disclosures and leading companies are beginning to report.

Professions have a commitment to work in the public interest, to be ethical, socially responsible and environmentally responsible. All the while leveraging the work of experts.

As investors seek to rely on climate change disclosures for their decision making, there will be increasing demand for assurance over the information. Professional accountants are well placed to respond with independent, quality assurance.

Chartered accountants have the skills and expertise to apply to climate change. This is an opportunity for businesses and practices.

As Jack Welch noted, getting behind climate change action – like it or not – makes good business sense.

Microsoft established an internal carbon price in 2012 to hold all business divisions financially responsible for reducing their carbon emissions. The collected fees are pooled in a central fund used for green energy investments and offsets. In addition to emissions saved, Microsoft has also reported significant energy cost savings.

Additionally, Coca Cola Hellenic Bottling Company, a case study in the UK's Finance for the Future Awards, have implemented a new capital expenditure process which incorporates factors such as water and carbon on a monetised basis. This enabled better decision making and as a result the financial payback for capital expenditure projects reduced from 5.3 years to 0.5 years.

As our survey shows, the majority of our members understand these opportunities for businesses.

It is also why CA ANZ, in conjunction with other global accountancy bodies, is raising awareness with members of the important role they can play in helping organisations mitigate and adapt to climate change.

Member survey pie chart

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