With the transition to a low-carbon economy estimated to hold tens of trillions of dollars in opportunities, sustainable finance is becoming a front-burner issue across the global finance community. It was also a key discussion topic during Canada’s 2018 G7 presidency.
Since its appointment in April, Canada’s Expert Panel on Sustainable Finance has worked to engage a cross-section of stakeholders, from financial services and business leaders to academic communities, to weigh in on where sustainable finance stands in Canada.
On October 24, 2018, the Expert Panel released its interim report, which identifies opportunities and challenges that will help support investment in climate resilience and low-carbon growth. “This interim report is a critical first step toward finding practical solutions for a more sustainable and prosperous economic future,” said Catherine McKenna, Minister of Environment and Climate Change.
As there is no universally accepted definition of sustainable finance, the Expert Panel report describes it “as capital flows, risk management and financial processes that assimilate environmental and social factors as a means of promoting sustainable economic growth and the long-term stability of the financial system.”
CPA Canada has long been committed to creating a sustainable economy by helping Canadian organizations develop viable business models that include social, environment and economic issues. In anticipation of the report being delivered, CPA Canada and the Canadian Chapter of the Accounting for Sustainability (A4S) CFO Leadership Network held a roundtable on October 18, which put the spotlight on sustainable finance.
In attendance was Barbara Zvan, one of the Expert Panel members and chief risk and strategy officer for the Ontario Teachers’ Pension Plan. Zvan highlighted the key foundational elements of the interim report, which ranged from clarity on climate and carbon policy to clear interpretation of fiduciary and legal duties and consistent financial regulation.
“Part II [of the interim report] focuses on opportunities,” added Zvan. “There is a lot of success already in the sustainable finance space, however these are not mainstream and accountants have a crucial role to play to make it happen in Canada”
Another topic of discussion was climate-related financial disclosures—also identified as an important foundational element in the report. Back in June 2017, the Task Force on Climate-related Financial Disclosures (TCFD) released recommendations on improving the process. [See New funding agreement will create programs to help companies address financial impacts of climate change for more]
The TCFD report was well-timed as a CPA Canada study—State of Play: Study of climate-related disclosures by Canadian public companies—revealed that many TSX-listed companies have immediate issues to address with their climate-related disclosures. Major information gaps and inconsistent terminology were two main issues highlighted in the report. The absence of metrics also contributed to the lack of comparability. This is an important space where CPAs can help companies more clearly define areas of risk and opportunity for investors.
“Sustainability is a priority area for CPA Canada and CPAs in all sectors play a crucial role in integrating environmental and social factors into financial decision-making to promote sustainable long-term economic growth,” says Davinder Valeri, director of strategy, risk and performance at CPA Canada.
With several global organizations investing major resources on improving sustainable finance, this is no longer an issue of the future. This is current, immediate, and offers great opportunity for CPAs to help shape our collective future. The final report of the Expert Panel is set for publication in spring, 2019.