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Canada, Nunavut Territory, Repulse Bay: Polar Bear stands on melting sea ice at sunset near Harbour Islands
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What CPAs need to keep an eye on at COP 28

With CPA Canada attending COP 28, here’s a snapshot of discussion items of interest to CPAs at this year’s conference

Canada, Nunavut Territory, Repulse Bay: Polar Bear stands on melting sea ice at sunset near Harbour Islands A recent UN Climate Change report indicates that national climate action plans fall short of limiting the global temperature increase to 1.5°C (Getty Images/ Paul Souders)

From November 30 to December 12, the 28th UN Climate Change Conference (COP 28) will take place in the United Arab Emirates. While COP 27 focused on planning initiatives, this year’s agenda prioritizes climate finance, technology and innovation, frontline communities and inclusion. And for the first time, CPA Canada will have a presence at the conference.

“CPA Canada President and CEO Pamela Steer is attending COP 28 to engage with stakeholders, government officials and others in the global accounting profession about the progress and challenges to date in meeting the goals of the Paris Agreement,” says James Richardson, CPA Canada’s principal, government relations. “With the focus turning to measuring progress and holding countries and industries accountable, the value of the accounting profession will play a crucial role.”

As Richardson emphasizes, the importance of standards and the role of assurance will be increasingly a part of COP negotiations—making it vital for global accounting leaders such as CPA Canada to ensure the profession’s expertise is considered.

Here’s a snapshot of what CPAs can expect at COP 28 and what issues to put on your radar.

CLIMATE ACTION GOALS ARE (STILL) FALLING BEHIND

A hot topic of discussion at COP 28 will be the first global stocktake—a review of where the world stands in implementing the Paris Agreement goals. It will look at how well everyone is doing, identify gaps and areas for improvement and set new goals for the future.

“The Global Stocktake report released by UN Climate Change this year clearly shows where progress is too slow,” wrote Simon Stiell, executive-secretary of UN Climate Change, in a press release. “But it also lays out the vast array of tools and solutions put forward by countries. Billions of people expect to see their governments pick up this toolbox and put it to work.”

Indeed, the report indicates that national climate action plans fall short of limiting the global temperature increase to 1.5°C. Recent research suggests the world would need to reach net zero emissions by 2034 for a 50 per cent chance of containing warming to 1.5°C—far sooner than the global goal of 2050.

“We’re not doing enough,” says David-Alexandre Brassard, CPA Canada’s chief economist. “We’re on track for a global temperature rise of 2.6°C by 2100, which does not align with the Paris Agreement. It highlights the importance of action.”

FAST TRACKING THE ENERGY TRANSITION AND SLASHING EMISSIONS BEFORE 2030

The science is clear: the world needs to rapidly shift to cleaner energy sources to keep the planet livable. That means using less coal, oil and gas and tripling the use of renewable energy sources—wind, solar, hydro and geothermal power—by 2030. But the transition must be done in an organized, just and equitable way that accounts for energy security, as well as ensures that every community can access funds and technology to enable the switch.

“The idea is that we want to phase out oil, gas and high-emission industries—or at least modify them—but the most impacted communities aren’t in Toronto or Ottawa,” says Brassard. “If you’re more than 100 kilometres from an urban centre and there are fewer postsecondary institutions, switching jobs is much harder. We want to make sure that people can transition from one job to the next.”

Brassard’s recent CPA Canada paper explores the particularities of Canadian communities with higher reliance on heavy emission industries. It also delves into public policy implications for achieving a fair and smooth shift.

TRANSFORMING CLIMATE FINANCE AND ADVANCING GLOBAL STANDARDS

To meet the Paris Agreement goals, nations require an estimated $2.4 trillion annually for climate action by 2030. A big challenge lies in making climate finance “affordable, available, and accessible” to developing nations—which means not just increasing funds but also ensuring strategic and fair allocation. Transparent and credible data will be needed for effective capital reallocation and attracting new investments.

“If we want money to go into transition, it comes from big pockets—institutional investors, like pension funds, insurance company, mutual funds and insurance companies,” says Brassard. “They’re the ones that we want to bring into the journey, but they need returns and clear standards so they can target their investments.”

The International Sustainability Standards Board (ISSB), created in 2021 at COP 26, recently published its inaugural standards—IFRS S1 and S2—designed to provide a comprehensive global baseline of sustainability and climate information for the capital markets.

Many jurisdictions, including Canada, are evaluating the standards and international developments to chart a path forward.

“There are inconsistent and questionable climate-related claims in the market right now. Reporting standards coupled with third-party assurance play a critical role in creating a level playing field and building trust in that information,” says Rosemary McGuire, CPA Canada’s vice-president, research, guidance and support.

Attention is now shifting to education and training to accelerate adoption of the standards. “As an active member of the IFRS Foundation’s Partnership Framework for capacity building, CPA Canada is committed to providing resources to support high quality implementation of IFRS Sustainability Disclosure Standards in Canada and globally.”

At COP 27, voluntary carbon markets were identified as vital to climate financing but are coming under increased scrutiny. McGuire anticipates a key focus at COP 28 on scaling these markets and restoring confidence and credibility.

“Voluntary carbon markets lack transparency and there are no generally accepted standards for carbon credits,” says McGuire. “But the potential for voluntary carbon markets to drive capital to emission reduction projects is compelling. There is a need to re-examine the infrastructure surrounding carbon markets and institute changes that will enhance integrity of the market.”

PRIORITIZING BIODIVERISTY AND NATURE-BASED SOLUTIONS

Commitments made at last year’s COP 15 Biodiversity Conference in Montreal to safeguard 30 per cent of natural habitats by 2030 has intensified the global focus on biodiversity loss. COP 28 emphasizes safeguarding biodiversity, promoting nature-based solutions and supporting frontline conservation and adaptation efforts.

“Nature-based solutions, such as using natural ecosystems to remove carbon from the atmosphere, play a critical role in achieving net-zero goals and we are pleased to see this topic figuring prominently on the agenda at COP,” said McGuire. “Nature and climate change are interdependent, and we cannot afford to look at them in silos.”

However, Brassard points out that natural capital is currently “hard to estimate” and tools are “not yet up to the task,” which creates challenges.

“Wetlands, for instance, are very important to biodiversity,” he said. “But from a financial standpoint, the value of services directly provided is relatively small from dollar sign perspective. So, our tools are not aligned with estimating its value.”

CPAs will play a pivotal role in guiding organizations to account for nature. A recent CPA Canada publication provides insights into conceptual considerations, methods, tools and resources for valuing natural capital. McGuire says it’s a timely topic, given that investors are demanding more transparency around nature-related dependencies, impacts, risks and opportunities of organizations.

“The Task Force on Nature-related Financial Disclosures (TNFD) recently launched their nature-related disclosure standards,” says McGuire. “CPA Canada is proud to be a co-convenor of the TNFD consultation group in Canada to build awareness and capacity in this area.”

MORE ON ACCOUNTING AND CLIMATE CHANGE

CPA Canada has been at the forefront of championing sustainability as a good business practice. Discover these emissions management resources or learn more about the Sustainability and ESG certification program. Check out the 2023 ESG Symposium, which is available on demand and counts towards CPD hours.

Plus, learn about Canada’s commitment to achieve net-zero emissions by 2050, and how CPAs can play a leading role in the transition.

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