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Webinar: Do accountants have a role to play in climate related reporting?
1. October 19 | Tweet @CDSBGlobal
The role of accountants in climate-related
reporting
Webinar will start soon.
2. October 19 | Tweet @CDSBGlobal
Gemma Clements
Project Manager, CDSB
The role of accountants in climate-related
reporting
Karen McWilliams
Business Reform Leader, Chartered Accountants
Australia and New Zealand
3. October 19 | Tweet @CDSBGlobal
Board
Technical Working Group (examples)
To provide decision-useful environmental
information to markets via the mainstream
corporate report
4. October 19 | Tweet @CDSBGlobal
Climate-related financial disclosure e-learning courses 4
CDSB Framework
• 7 guiding principles
• 12 reporting requirements
• Fully aligned with the TCFD recommendations
• Complementary to existing reporting provisions
(CDP, GRI, SASB) and existing regulations
• Referenced in the EU NFRD guidance and stock
exchange guidance globally
For reporting environmental information, natural
capital and associated business impacts
cdsb.net/Framework
6. October 19 | Tweet @CDSBGlobal
What is happening
now?
6
7. October 19 | Tweet @CDSBGlobal
Update in Australia
• ASIC Report on Climate Disclosure by listed entities
» Consider climate risk
» Develop and maintain strong and effective corporate governance
» Comply with the law
» Disclose useful information to investors
• Updated Regulatory Guides for OFR and Prospectuses
• Effective Jan 2020 – ASX Corporate Governance Principles and Recommendations 4th
edition
» Greater guidance on climate risk – recommendation 7.4
Implementing the TCFD recommendations 7
8. October 19 | Tweet @CDSBGlobal
Update in New Zealand
• Government Response to Productivity Commission low emissions report:
Agree material financial climate risks and opportunities should be disclosed
Endorses TCFD
Considering mandatory climate-related disclosure requirements
» Where, who, what?
Consultation with stakeholders expected
Implementing the TCFD recommendations 8
9. October 19 | Tweet @CDSBGlobal
2019 Status Report
Climate-related financial disclosure e-learning courses 9
825
supporters globally, with
market capitalisation of more
than $9 trillion.
A
Introduction
B
Climate-Related Risks,
Opportunities,and
Financial Impacts
C
Recommendationsand
Guidance
D
Scenario Analysisand
Climate-Related Issues
E
KeyIssuesConsidered and
Areasfor Further Work
F
Conclusion
Appendices
Figure 12
Implementation Path (Illustrative)
organizations’ risk management and strategic planning processes. As this occurs, organizations’
and investors’ understanding of the potential financial implications associated with transitioning
to a lower-carbon economy and physical risks will grow, information will become more decision-
useful, and risks and opportunities will be more accurately priced, allowing for the more efficient
allocation of capital. Figure 12 outlines a possible path for implementation.
Widespread adoption of the recommendations will require ongoing leadership by the G20 and its
member countries. Such leadership is essential to continue to make the link between these
recommendations and the achievements of global climate objectives. Leadership from the FSB is
also critical to underscore the importance of better climate-related financial disclosures for the
functioning of the financial system.
The Task Force is not alone in its work. A variety of stakeholders, including stock exchanges,
More complete, consistent, and
comparable information for market
participants, increased transparency,
and appropriate pricing of climate-
related risks and opportunities
Final TCFD
Report Released
Companies already reporting under other frameworks implement the Task
Force’s recommendations. Others consider climate-related issues within
their businesses
Organizations begin to
disclose in financial filings
Greater adoption, further development of
information provided (e.g., metrics and
scenario analysis), and greater maturity in
using information
Five Year Time Frame
AdoptionVolume
Climate-related issues viewed as
mainstream business and investment
considerations by both users and
preparers
Broad understanding of the concentration of
carbon-related assets in the financial system and
the financial system’s exposure to climate-related
risks
10. October 19 | Tweet @CDSBGlobal
Current state of disclosure
Disclosure of climate-related financial
information has increased since 2016, but is
still insufficient for investors.
Implementing the TCFD recommendations 10
More clarity is needed on the potential
financial impact of climate-related issues
on companies.
Of companies using scenarios, the majority
do not disclose information on the
resilience of their strategies.
Mainstreaming climate-related issues
requires the involvement of multiple
functions.
11. October 19 | Tweet @CDSBGlobal
The role of the
accounting profession
11
12. October 19 | Tweet @CDSBGlobal
Domain of professional accountants
• All risk can have financial consequences
• TCFD disclosure in financial filings
• Decision useful information
• Financial regulators and standards setters
• Cross-functional teams
• Materiality
• Transparency and Trust
13. October 19 | Tweet @CDSBGlobal
Relevant skillset
• Identify, assess and manage risks
• Understand the business
• Analyse information to provide strategic insights and advice
• Rigorous reporting processes
• Professional judgement – estimates and assumptions
• Use of experts
• Evidence backed disclosures
• Up to date with regulations and requirements
14. October 19 | Tweet @CDSBGlobal
AASB and AUASB practice statement
Implementing the TCFD recommendations 14
15. October 19 | Tweet @CDSBGlobal
Where to from here?
Implementing the TCFD recommendations 15
16. October 19 | Tweet @CDSBGlobal
Introduction to online
courses
16
17. October 19 | Tweet @CDSBGlobal
Aims
Climate-related financial disclosure e-learning courses 17
Why do we need online courses?
Specific
courses for
specific topics
or audiences
TCFD second
status report –
not enough
disclosure
Understanding
of the reporting
landscape
remains
“confused”
Don’t leave
the
laggards
behind
18. October 19 | Tweet @CDSBGlobal
TCFD Knowledge Hub
Climate-related financial disclosure e-learning courses 18
www.tcfdhub.org
Resources
Contribute
Case studies
Break down of the
recommendations
Introduction to the TCFD
and scenario analysis
19. October 19 | Tweet @CDSBGlobal
Online courses
Climate-related financial disclosure e-learning courses 19
• Self paced
• Activities and quizzes
• Video interviews
• Examination
• Feedback
• Forum for discussion
• Certificate of completion
20. October 19 | Tweet @CDSBGlobal
Course 1
Learning objectives
• To explain the drivers for reporting climate change and environmental
information and build understanding of how it can be material to your
organisation.
• To provide definitions and explanations of key concepts in relation to
the reporting of climate-related information.
• To introduce the corporate reporting landscape – including regulations,
standards, frameworks and initiatives for reporting climate-related
information.
Climate-related financial disclosure e-learning courses 20
Introduction to climate-related disclosures - starting your climate journey
21. October 19 | Tweet @CDSBGlobal
Course 2
Climate-related financial disclosure e-learning courses 21
Understanding the recommendations of the TCFD
Learning objectives
• To introduce the four core elements (Governance, Strategy, Risk
Management, Metrics and Targets), key principles and the specific
eleven recommended disclosures of the TCFD.
• To consider the recommendations and how they can be used to
improve reporting process to produce consistent, comparable and
reliable climate-related information to enhance the efficient allocation
of capital within the financial market.
22. October 19 | Tweet @CDSBGlobal
Course 3
Climate-related financial disclosure e-learning courses 22
Embedding climate change into financial management - climate-related reporting
for accountants
Learning objectives
• To establish the role of accountants in identifying, measuring,
managing and presenting information on climate-related risk and
opportunities.
• Identify where existing accountancy practice (including financial
accounting standards), processes and expertise could be applied in
the context of climate change.
23. October 19 | Tweet @CDSBGlobal
Developed with insights from experts:
Climate-related financial disclosure e-learning courses 23
1. Introduction to climate-related disclosures – starting your climate journey
2. Understanding the recommendations of the TCFD
• Aviva Investors
• Unilever
• Japan Stock Exchange
• GARP Risk Institute
• World Business Council for Sustainable
Development
• International Federation of Accountants
• Association of Chartered Certified Accountants
• Chartered Accountants Australia, New Zealand
• Institute of Chartered Accountants in England and
Wales
• Australian Accounting Standards Board
• Japan’s Financial Services Agency
• Deloitte
• KPMG
• CFA Institute
• Durham University
24. October 19 | Tweet @CDSBGlobal
Climate-related financial disclosure e-learning courses 24
Earn badges of
success
Select from the
library of courses
25. October 19 | Tweet @CDSBGlobal
Climate-related financial disclosure e-learning courses 25
Keep track of
completed tasks
Understand the
learning objectives
and outcomes
26. October 19 | Tweet @CDSBGlobal
Climate-related financial disclosure e-learning courses 26
Work your way
through the lessons
Complete the lessons
to receive a badge of
success
27. October 19 | Tweet @CDSBGlobal
Climate-related financial disclosure e-learning courses 27
Complete the quizzes
and watch the videos
28. October 19 | Tweet @CDSBGlobal
Climate-related financial disclosure e-learning courses 28
Pass the exam to
complete the
course and receive
a certificate
29. October 19 | Tweet @CDSBGlobal
What’s next?
Implementing the TCFD recommendations 29
Sign up to the
newsletter for
updates
• Register and enrol in the courses at
learn.tcfdhub.org
• New courses coming soon:
o Governance
o Risk management
o Water
o Biodiversity
30. October 19 | Tweet @CDSBGlobal
Q&A
Gemma Clements
Project Manager
gemma.clements@cdsb.net
Sign up to e-learning:
learn.tcfdhub.org
Visit TCFD Knowledge Hub
tcfdhub.org
Karen McWilliams
Business Reform Leader,
Chartered Accountants Australia
and New Zealand
Notas del editor
Gemma
Gemma
Gemma
Gemma
Pass to Karen
Karen
ASIC’s report encourages listed companies and their directors and advisors to:
adopt a probative and proactive approach to emerging risks, including climate risk;
develop and maintain strong and effective corporate goverance which helps in identifying, assessing and managing risk;
consider how best to comply with the law where it requires disclosure of material risks; and
disclose meaningful and useful climate risk related information to investors – the voluntary framework developed by the Taskforce on Climate-related Financial Disclosures can assist in this regard.
ASIC has updated its guidance to, amongst other things:
incorporate the types of climate change risk developed by the G20 Financial Stability Board’s Taskforce on Climate Related Financial Disclosures (TCFD) into the list of examples of common risks that may need to be disclosed in a prospectus appearing in Table 7 of RG 228;
in RG 247.66, highlight climate change as a systemic risk that could impact an entity’s financial prospects for future years and that may need to be disclosed in an operating and financial review (OFR);
in RG 247.66, reinforce that disclosures made outside the OFR (such as under the voluntary TCFD framework or in a sustainability report) should not be inconsistent with disclosures made in the OFR; and
make a minor update to INFO 203: Impairment of non-financial assets: Materials for directors to highlight climate change and other risks that may be relevant in determining key assumptions that underly impairment calculations.
RG 247 has also been updated to make clear our general view that the risk of directors being found liable for a misleading or deceptive forward-looking statement in an OFR is minimal provided the statements are based on the best available evidence at the time, have a reasonable basis and there is ongoing compliance with the continuous disclosure obligations when events overtake the relevant statement made in the OFR.
Recommendation 7.4 - A listed entity should disclose whether it has any material exposure to environmental or social risks and, if it does, how it manages or intends to manage those risks.
7.4 commentary
Commentary - How an entity manages environmental and social risks can affect its ability to create long-term value for security holders. Accordingly, investors increasingly are calling for greater transparency on the environmental and social risks faced by listed entities, so that they in turn can properly assess the risk of investing in those entities.
To make the disclosures called for under this recommendation does not require a listed entity to publish an “integrated report” or “sustainability report”. However an entity that does publish an integrated report in accordance with the International Integrated Reporting Council’s International <IR> Framework, or a sustainability report in accordance with a recognised international standard, 67 may meet this recommendation simply by cross-referring to that report.
the Council encourages entities to consider whether they have a material exposure to climate change risk by reference to the recommendations of the Financial Stability Board's Task Force on Climate-related financial Disclosures (TCFD) and if they do, to consider making the disclosures recommended by the TCFD.
Karen
Rec 7.3 The Government should endorse the recommendations of the Task Force on Climate related Financial Disclosures as one avenue for the disclosure of climate risk.
The Commission was tasked to identify options of how New Zealand can reduce its domestic greenhouse gas emissions
The Government agrees that material financial risks and opportunities associated with climate change should be disclosed. In June 2017, the TCFD published a set of recommendations for disclosing clear, comparable and consistent information about the risks and opportunities presented by climate change. Several other governments have endorsed the TCFD’s recommendations. The New Zealand Government also endorses them as one avenue for the disclosure of climate change financial reporting.
Responsible agencies: Ministry of Business, Innovation and Employment and the Ministry for the Environment
Responsible Ministers: Minister of Commerce and Consumer Affairs and the Minister for Climate Change
Rec 7.4 The Government should implement mandatory (on a comply or explain basis), principles-based, climate-related financial disclosures by way of a standard under section 17(2)(iii) of the Financial Reporting Act 2013. These disclosures should be audited and accessible to the general public.
The Government agrees with the comments of the Productivity Commission that investment needs to be redirected towards low-emissions investments to ensure New Zealand’s economy remains resilient to the impacts of climate change. High quality disclosures will help investors, lenders and insurers make more informed decisions. They will also provide reporting entities with incentives to manage risks and take advantage of opportunities.
To achieve this further consideration is required in relation to the following matters:
1. Whether the Financial Reporting Act is the most appropriate means for implementing climate-related disclosure requirements.
2. Consideration of the classes of entities the disclosure requirements should apply to. Subject to consultation, the Government considers that listed issuers, registered banks and licensed insurers should be covered. It is less clear whether any other classes of entities should also have climate-related disclosure requirements.
3. What, specifically, the disclosure requirements should require entities to disclose and whether the disclosures should be different for different classes of entity.
Officials will work closely with a range of stakeholders on these issues over the coming months.
Responsible agencies: Ministry of Business, Innovation and Employment and the Ministry for the Environment
Responsible Ministers: Minister of Commerce and Consumer Affairs and the Minister for Climate Change
Timeline: Decisions will be made on approach to this in July 2019
Gemma?
With the release of the second status report, the TCFD had over 825 supporters globally with a market capitalisation of over $9.3 trillion. 65 Australian and 2 New Zealand based organisations, plus CA ANZ trans-Tasman.
The TCFD implementation path suggests that at this point, information should now be starting to be disclosed in financial filings and should be seen as a mainstream business and investment issue. However, we are not seeing this across all organisations.
Gemma?
Karen
The history of accountancy is a story of responding to new market opportunities, changing demands and expectations, and new legal requirements. Climate change is increasingly becoming an
important consideration as capital providers better understand that the climate change presents both material risks and opportunities to all businesses in the short-, medium- and long-terms. Climate change can no longer be viewed in isolation from business processes, functions or reporting channels, presenting both new challenges and opportunities for the accountancy profession.
Companies and investors are looking towards accountants to provide the expertise on how to incorporate climate-related issues into financial planning.
Accountants are already well-equipped to play an essential role in preparing company policies, developing business cases, and in identifying, measuring and managing climate-related business
risks. This includes developing and using management accountancy systems to collate climate- related data and information with the same rigour as financial data and information. Accountants
can guide reporting entities to meet the demands of increased transparency, by helping to provide and present relevant and reliable information in a meaningful, consistent and comparable manner.
there is a tremendous opportunity for the accounting profession to step up.” As part of this, we need to decide how value is measured and how it is being delivered. The purpose of disclosure is to meet the need for information, which is growing by the day as stakeholders, particularly investors, demand more detailed, meaningful and useful data. The reliance and need for ESG information is increasing. ESG considerations therefore need to be institutionalized into business and organizations, which represents a call to action to the profession.
Karen
Impact of climate-related risks and opportunities on business.
Material risks – whether financial or non-financial can have financial consequences.
Financial filings are typically the domain of professional accountants as preparers and auditors.
Drive for the reporting is coming from investors – who want robust, reliable and comparable information for decision making – like they have previously had in the financial statements
Financial regulators such as ASIC are engaging with this and the accounting and assurance standard setters are making it clear that given the impact of the materiality definition is such that entities may need to consider climate-related risks in the context of their financial statements.
Finance, risk, sustainability and engineering skillsets need to collaborate
Determining what is material is important and accountants are already skilled at determining materiality.
Build transparency and trust in climate-related reporting. – Professional Accountants act in the public interest
Karen
Whether in practice or business, tax, audit or consulting – professional accountants already have the necessary skillsets.
Risk management is key – looking beyond typical financial risks. Look at how external environment impacts on the organisation, such as climate change.
Important to understand the business so know how climate risks will impact it – accountants already know their business/clients
Analysing data to provide strategic insights and advice. Already do for financial information, same approach for non-financial information.
To provide decision useful information, need robust internal controls throughout the reporting process to ensure the data can be relied upon
Scenario analysis for example will require assumptions and judgement. Assessing the reasonableness of them and estimates.
Managing multi-disciplinary teams and using the work of experts
Ensuring that disclosures have appropriate evidence to support them and evaluating the quality of disclosures
Keeping up to date with current reporting and regulatory standards and requirements.
Karen
This is an example of where existing accounting standards can be used in the disclosure of climate-related risks. The AASB and AUASB released a paper earlier this year demonstrating how Practice Statement 2 on assessing materiality can be applied to climate change.
Karen
Where do we see this going?
What do we want to see?
How can accountants upskill and get involved?
Any new legislation or upcoming publications/expert panel recommendations on the cards for 2020 and beyond?
Who do we need to influence to see accountants take a more proactive role with disclosure?