IFAC's Points of View
Climate change is an urgent, global, and systemic issue that can threaten the sustainability of organizations, markets, and economies. It presents both physical risks (e.g., increasingly severe weather events) and transition risks (e.g., those associated with moving towards a low-carbon economy that may affect asset values or lead to higher costs of doing business). A low-carbon transition will change how economies operate creating both uncertainty and significant opportunities.
A transition to a low-carbon society cannot be achieved by business as usual. Climate action will require relevant policy initiatives and incentives, consistent and well-considered regulation, robust climate risk assessment, responsive business practices, and high-quality disclosures that advance climate action and adaptation. As instrumental members or advisers of every government, business, and not-for-profit organization, professional accountants can influence and enable the transition to low-carbon economies.
IFAC commits to work with the global accountancy profession to:
- Build the knowledge and capacity of accountants to advance the Sustainable Development Goals (SDGs), which provide an interconnected roadmap to a prosperous, equitable and sustainable future. The SDGs include SDG 13, which is a commitment by all 193 United Nations member states to take urgent action to combat climate change and its impacts. Climate risk affects the overall sustainable development agenda through the environmental and social challenges arising from climate inaction; and
- Be the global voice on climate action on behalf of the profession working through the B20, G20 and OECD.
We call on our member organizations, individual accountants, and accountancy groupings to embrace climate action and be part of the solution.
1. Role of Government, Business, and Others
Government, business, and civil society will need to act together to bring about decisive climate action. International agreements and commitments are important, as are national policies to reduce greenhouse gas emissions. Businesses and the economies in which they operate need the right incentives for both production and consumption to transition to a low-carbon economy.
- IFAC supports the Paris Agreement as the means to transition to a low-carbon future. Although the Paris Agreement and SDG 13 strengthen the global response to climate change through international dialogue, greenhouse gas emissions continue to increase. Current national emissions reduction pledges and efforts are insufficient to achieve the goals of the Paris Agreement.
- IFAC urges governments to take decisive action to put the world on a path to a sustainable future. Governments should take advantage of opportunities like The UN Climate Change Conference (COP) meetings in December 2019 and November 2020 to provide greater certainty for business and to encourage investment in low-emissions technology and innovation.
- IFAC believes that a transition to a low-carbon economy will require relevant market-based policy and regulatory initiatives and incentives across jurisdictions, as well as enhanced climate risk assessment and reporting. Long-term emissions strategies, targets, and budgets provide the necessary certainty for organizations to undertake significant investments in decarbonizing and in innovative low-carbon technologies to reduce emissions.
- By treating climate risk like any other significant risk, boards of directors should be able to evaluate the impact of climate change on the organization’s long-term business strategy and assets. Boards can then ensure that capital allocation and investment decisions respond to climate risk and provide the basis for seizing opportunities that can lead to competitive advantage.
1. Climate change and extreme weather risk are in the top 5 of the World Economic Forum’s 2019 Global Risks Perception Survey of business leaders. The 2019 KPMG Global CEO survey (1,300 CEOs, 11 countries) puts environmental/climate change risk as the number one risk with “over three-quarters of CEOs (76 percent) saying that their organization’s growth will depend on their ability to navigate the shift to a low-carbon, clean-technology economy.”
2. Unlocking the Inclusive Growth Story of the 21st Century: Accelerating Climate Action in Urgent Times, The New Climate Economy
3. The Prince of Wales’s Accounting for Sustainability Accounting Bodies Network is also responding to this challenge and will be announcing their commitment to climate action in 2020.
4. The Paris Agreement is the global climate agreement at the 21st Session of the Conference of the Parties (COP) to the United Nations Framework Convention on Climate Change (UNFCCC) in Paris in December 2015. It delivers a clear framework for international action and shaped a policy environment to facilitate investment and innovation in climate mitigation and adaption.