Martin Moloney, Secretary General of the International Organisation of Securities Commissions, outlines his priorities for the year ahead Irishman Martin Moloney is Secretary General of the International Organisation of Securities Commissions (IOSCO). Headquartered in Madrid, Spain, the international body brings together the world’s securities regulators and is recognised as the standard setter for the securities sector worldwide. IOSCO develops, implements, and promotes adherence to internationally recognised standards for securities regulation, working closely with the G20 and the Financial Stability Board (FSB) on global regulatory reform. Accountancy Ireland sat down with Moloney to discuss his goals, priorities, and concerns for the year ahead. Q: What are the biggest risks facing investors around the world right now and how is IOSCO working with securities regulatory agencies to address these risks? The risks that investors face never really change. There are some fundamentals. You can hire the wrong advisers, you can pay them too much, you can choose the wrong times to get in or out of markets, and you can invest in the wrong things. These risks are the core risks for investors, and they have been for as long as financial markets have existed. The difficulty is that financial markets are constantly changing. New asset classes like crypto are emerging, and there are new ways in which intermediaries work on your behalf, but also earn fees for themselves. This creates new risks for investors. Also, as we saw from recent events in the UK, markets can go into sudden periods of stress and crash. We do our best, working with others, to try to make markets as resilient as they can be, to ensure that these episodes are few and far between insofar as we can. These are the big issues facing us currently. Really, it all comes down to integrity—being able to trust the price you see when you invest in the markets and ensuring that you are not being fooled by people who are trying to cheat you out of your money. Q: You have described the rise of cryptocurrency as an area fraught with risk, requiring “a lot of work” on the part of regulators. Can you tell us more? There is no doubt in my mind that we have reached a turning point in relation to crypto. This is not because of the so-called ‘Crypto Winter’. The value of crypto might go up or down, but that is not really the issue. The point that we all have to observe and recognise is that crypto has survived and has continued to survive over a number of years. It is reasonable to assume that it is not going away and, therefore, it has to be regulated. I am delighted to say that, since I have joined IOSCO, the organisation has moved forward with its policy in this area and is now very quickly developing a set of guidelines for the market on how different jurisdictions should regulate crypto and the common standards they should aim to achieve in doing so. We are seeing a number of regions, notably the United States and Europe, now moving towards developing legal frameworks. I have no doubt that this is far from the end of the matter, however—it is just the beginning. Crypto is going to evolve and change as people get on top of the technology and new opportunities emerge. The most important thing we must all keep an eye on here is the outcome for the investor. In the first years of crypto, a huge number of people lost money through fraud. Other people, who may not even have been aware of it, lost money through market manipulation, insider trading and various other dubious activities we know well. Very often, this has been driven by conflicts of interest. If you dig down into the principles articulated by IOSCO for financial markets many years ago, you will find us warning against many of the phenomena we are now seeing in crypto markets. Theft does not change. It might happen in a different location, but theft is still theft. Bad management is still bad management, no matter where it happens. It is up to us to re-articulate these very simple, but really important, ideas and explain how they can apply in the crypto space. It is also important for the crypto sector itself to come up with good solutions and technologically enabled solutions, so that its work can be supervised and that it can reach the same standard of regulation as the rest of the financial sector. There are a number of individuals, I think, within the crypto sector who have come to understand that they need to move positively towards a strong regulatory framework in order to bottom out their businesses and remain stable. If we do not start to see self-regulation within the crypto sector, then I think we will see more jurisdictions banning crypto. It is just not sustainable over the medium term to try to avoid the regulatory frameworks that apply to everyone else. It is one thing to see yourself as a different asset class. It’s quite another to see yourself as an entirely different industry when you are effectively doing the same thing. Q: So, you do believe that cryptocurrency has a long-term future provided that there is robust regulation in place across the board? I think there is some potential for this asset class, but it is going to become more challenging. I don’t have a crystal ball, so I try not to predict the future. I see some very interesting new products developing in the decentralised finance space, and I wonder if this is ultimately where crypto is going to go. We are all used to a simple model in which you get quite non-functional assets like Bitcoin being traded and people making money primarily out of the bubbles in Bitcoin. The use cases for crypto continue to be worked on extensively, however. So, every time you have one of those bubbles, what is actually happening is that money is being raised to allow people to invest in new potential use cases. There are now so many use cases that have come and gone, and failed ideas that have been touted and promoted, you could be forgiven for thinking that there are no use cases left for crypto—but that is probably wrong. I think people will continue trying to figure out good use cases for crypto. I don’t think it’s going away any time soon. Q: You have spoken recently about the greenwashing risk facing securities regulators—what can be done to address this? We put out a couple of reports in 2021 where we looked at the greenwashing issue in great detail, listing the different ways in which this phenomenon occurs. We had to acknowledge, however, that it is not just about ‘evil intent’. Activity that might be described as greenwashing often happens, because the market structures needed to adequately support sustainable finance are not yet in place. Sometimes, you do get people who are frankly trying to fool investors by issuing misleading information, but, equally, the markets as they stand are just not built for sustainable financing. Having identified the problem and having asked the industry to work as hard as possible to reduce the amount of greenwashing that now exists, we have had to acknowledge that the system itself needs to change. Regulators have to do it, governments have to do it, standard-setters have to do it—to create a better system to achieve true sustainable finance. If, for example, I am proposing an investment that has a strong impact in terms of reducing carbon emissions, I should get a better price on the market and a better investment price for that security than someone who comes to market with a security for a carbon-emitting project. We want the market to be sensitive to the environmental impact of different proposals, companies and products. They must have access to information that is reliable; that has been independently audited; and that brokers can bring together to compare stocks from different parts of the world and determine differential pricing based on their impact on the environment. Getting all of this right would be an incredibly hard job, so we have broken the job down into a number of elements. We will be progressively working on putting these building blocks in place over the next couple of years, in order to make sure that the process can be regulated and that people who don’t do the right thing can be held to account on the basis that they could have done the right thing and chose not to. Q: As the move to establish standards for environmental, social and governance (ESG) reporting gathers pace, what is your take on the current efforts underway? We have a very close relationship with the International Sustainability Standards Board (ISSB). We effectively oversee its work and, if we like what it is doing, we will endorse its standards, and recommend those standards to individual regulatory securities agencies around the world, so that these jurisdictions can adopt the standards as they see fit. The fundamental issue we are all facing is that a sustainable financial marketplace has to be a global marketplace. If you have fragmentation and you don’t have the same information sets available in different parts of the world, you cannot have a true comparison between different securities, and capital cannot flow to the best projects. It is no good for anyone if Europe is pristine, while the rest of the world is working in a different way. What happens in the Amazonian rainforest matters to all of us. Capital, therefore, has to flow from those places where it is abundant, such as Europe and North America, to locations in which the opportunities exist to do the right thing. What IOSCO has said to the countries we work with around the world is, “do this any way you want, but use the ISSB standards as a baseline and build your own approach on that foundation”. Put simply, you can do all you want in the ESG space, but unless we have a common core, we cannot create a global financial market that will bring about any real change. Q: Can you tell us about the work you are doing with the Financial Stability Board in relation to investment funds? This is a very big project for us. Investment funds are a crucial mechanism all around the world for people to get access to markets on a collective basis, but they can have a concerning impact on markets in periods of crisis. We have been doing work in this area since 2016. We have done a lot already, but there is more to do. A major focus for us next year will be trying to make sure that the kind of funds both ordinary individual investors and the more risk-averse institutional investors choose are safe in a crisis. We are trying to ensure that, if you are investing in a product that is riskier, it will be clear to you that it is more difficult to get your money out of it; that these kinds of investment funds are not the equivalent of a bank account. This is a typical example of what we do, but there are lots of others. We do a lot of work on cyber-resilience, and we are also very interested in the change in the behaviour of retail investors and their vulnerability to scams. One of the problems we face at the moment is that, while technology has made it easy or cheap for people to invest in the markets, it has also made it easy or cheap for fraudsters to get at many thousands of people. We need to figure out better and better ways to stop these fraudsters and prevent them in their designs. About Martin Moloney Prior to joining IOSCO as Secretary General in September 2021, Martin Moloney was Director General of the Jersey Financial Services Commission and, before that, he worked as a Special Adviser on Risk and Regulation to the Central Bank of Ireland, where he served for 16 years, previously heading up the Markets Policy, Markets Supervision, and Legal and Finance Divisions. Moloney began his early career working in industry with Barclays Bank and Bank of Ireland in London, before returning to Ireland to work with the Department of Justice, Department of Finance, the Irish Competition Authority. Born in Dublin, he has a master’s degrees in Business Law and Economic Policy, both from Trinity College Dublin.

Elaine Coughlan, one of Ireland’s most successful venture capital investors, tells us how her experience in accountancy and audit led to a high-flying career in technology Since qualifying as a Chartered Accountant and cutting her teeth in audit in the 1990s, just as the first wave of tech entrepreneurs in Ireland were beginning to access US capital markets, Elaine Coughlan has carved out an illustrious career in venture capital. Dublin-born Coughlan is the co-founder and joint Managing Partner of Atlantic Bridge, the global growth technology fund with more than €1 billion in assets under management across nine funds. For Coughlan, her career is a testament to both her training in finance and the power of human connection in business the world over. “Atlantic Bridge has over 35 companies we have successfully sold or ‘IPOed’ and I am immensely proud of that,” she says. “The wins drive you on because you can see what’s possible and those Irish entrepreneurs become role models for the next generation. I’m proud of the assets we have under management, and that Atlantic Bridge now has people in Dublin, London, Paris, Munich and Palo Alto in Silicon Valley. That is a truly global footprint, and it really helps us to scale our companies.” Early connections Coughlan credits the professional connections she made at an early stage in her career at Ernst & Young with setting her on the path to professional success. “Some of the people I met back in the nineties, our clients at the time, were hugely influential on me,” she says. Among those clients was Smurfit (now Smurfit Kappa), already a long-established industry leader in paper packaging production. “I was seconded from Ernst & Young to work with Smurfit when it was probably the number one Irish company in terms of market capitalisation and really blazing a trail in Irish business,” she says. “It is still a phenomenal company today, but for me at that time, Smurfit was just so ambitious and far-reaching in its approach to mergers and acquisitions, and the capital markets. I worked on fundraising and acquisitions with them and had early exposure to some of their senior executives—people like Gerry Fagan, their then-CFO.” Coughlan forged other crucial connections at the time with Bill McCabe, founder of CBT, the e-learning group, and Iona Technologies’ Chris Horn. “Bill and Chris were the first entrepreneurs in Ireland to float tech companies on the Nasdaq and, if you look at what they had in common with Smurfit, it was really that they were all entrepreneurial,” she says now. Coughlan would leave Ernst & Young to join Iona ahead of the company’s Initial Public Offering. “I knew then that practice probably wasn’t for me. That’s not to say that you can’t be entrepreneurial in practice, but the cut and thrust of the tech business pulled me in,” she says. “I remember traveling over to the US with CBT back in 1993 and that was it for me. There was such a sense of possibility.” Coughlan went on to join Parthus, the semiconductor IP company co-founded by Brian Long, and the pair formed an abiding partnership, co-founding both Atlantic Bridge and GloNav, the GPS company acquired in 2007 for $110 million. “All these years later, I am still in business with the same people, and they were the people that had an impact on me starting out. They were the people I learned from and the people who were generous with their time and their knowledge, and willing to give me experience and opportunities,” she says. For young Chartered Accountants starting out in their career, Coughlan has this advice: “Above all else, nurture your connections. These young professionals will already be well-qualified and proven in their ability and resilience, because training to become a Chartered Accountant is challenging in itself,” she says. “The question they have to ask themselves is ‘what differentiates me beyond that?’ It comes down to being able to combine your knowledge with strong relationships in ways that bring about better outcomes.” As Coughlan sees it, building solid sustainable relationships in business isn’t simply a case of networking and ‘transactional interactions’. “It’s about finding people who share your values and ethics, whose accomplishments and abilities you admire, and who have the ability to lead and inspire. You always have to be thinking long-term, not just about your next connection on LinkedIn,” she says. Supporting start-ups Coughlan’s commitment to supporting start-ups and advancing Ireland as a leading hub for technology development was recognised at this year’s Irish Accountancy Awards, at which she won the prize for outstanding contribution to the profession. “When we started Atlantic Bridge in 2004, we wanted to help tech companies in Ireland to scale successfully. Ireland is a small island and a small economy, so there are two things tech companies here need to scale—they need to move beyond the island to reach customers and they need access to capital,” she says. “We wanted to cross the Atlantic to the US, because it is the largest market in the world in terms of customers and capital markets. At the time, Ireland had a VC market of less than €100 million. It’s 10 times that size now, but back then, it was really small.” The primary focus for Atlantic Bridge today continues to be “deep tech” innovators in the business-to-business (B2B) space. “We’re not after instant gratification or overnight success. These are businesses with defensible research-intensive technologies that are primed to scale when the time is right,” says Coughlan. “Our investors are patient. They are looking for strong long-term returns, and we are very proud to have reached the stage where we have raised nine funds, because that is not an easy thing to do in this industry.” Coughlan warns, however, that we are entering a “new investment cycle”, in which surging inflation, rising interest rates, and the risk of recession, are all making investors more risk averse. “The outlook for Atlantic Bridge in the short-term will be cautious and tactical, but beyond that, we are optimistic and deeply committed to the technology trends we are seeing today that will make a difference in the future,” she says. “A lot of the technologies we’re investing in now are in climate change action—low-power, low-carbon enablers—and in medical technology and the digitisation of health, where we can meet unmet needs. We’re focusing on technologies like Artificial Intelligence and semiconductors—the fundamental building blocks that will be built into new products over the next three to five years.” Research and development As the economy enters uncertain terrain, Coughlan is urging the Government to continue investing in research and development (R&D). “Ireland has to continue to invest in R&D. We need to hold our nerve in continuing to invest in the best and brightest people and start-ups, because they will drive the next generation of growth,” she says. “Today, we are investing about 1.25 percent of GDP in R&D. We need to get that up to between 2.5 percent and three percent. The future economy will be knowledge-intensive and that requires knowledge-intensive people.” Coughlan is equally committed to the advancement of her profession, and proud of her own achievements as a Chartered Accountant. “The ‘bean counter’ perception is one too many people have of accountants, but I would probably be the last person you’d ask to do a P&L statement,” she says. “I can tell you if it is right or wrong though, because I understand the numbers and what they mean. I can interrogate and interpret any set of numbers and that is because I am a Chartered Accountant. All business now is run on data and our profession gives us a really strong grounding in using data to make decisions—and that is the future. “There are doors that are opened to you when you train as an accountant. You learn about process, structure, deadlines, and relationships. All of these skills are incredibly important. “You come out of it battle-hardened and resilient, and with all these options: to stay in practice; to focus on technical work; to go into consultancy; financial services; or business and entrepreneurship. The opportunities are phenomenal.” Growing up in Beaumont in north Dublin in the recession-hit 1980s, however, Coughlan had envisaged a different career for herself. It was a chance encounter that set her on the path to accountancy and a high-flying career in venture capital. Early career path “I was good at numbers at school and I studied accountancy for the Leaving Cert, but I wouldn’t say I was destined to be an accountant. I fully recognise now that it was my accountancy and audit experience that led me into the technology industry, but my real interest growing up was people,” she says. “I wanted to work in a people-focused environment, so I applied to study marketing and languages at DCU and went for a summer job at a small accountancy firm to keep me going in the meantime.” Coughlan didn’t get the summer job, but she was contacted by her interviewer and urged instead to consider accountancy as a full-time career. “It was 1989, unemployment in Ireland was something like 15 percent and so many people were emigrating to find work in the UK and the US,” she says. “I didn’t know anything about becoming a Chartered Accountant, but I wrote to the Institute and was offered a training contract with Ernst & Young. Here was this opportunity to have my fees paid and earn a wage with guaranteed work in a really tough economy. It was a great deal. That’s why I always say to this day, ‘what’s meant for you won’t pass you by’.”

As the recently appointed Vice-Chair of the International Sustainability Standards Board (ISSB), Sue Lloyd will play a key role in paving the way for a “global baseline” for reliable ESG investment criteria. Elaine O’Regan talks to the New Zealand-born former IASB Vice-Chair about what lies ahead in her new role.  Prior to taking up your role with the ISSB, you were Vice-Chair of the International Accounting Standards Board for six years. Looking back on it, what do you see as your most significant achievements in that role? Completing the international IFRS Standard for insurance contracts was definitely a high point, and also chairing the IFRS Interpretations Committee from 2017 to 2022, and making it more responsive. What does your appointment as Vice-Chair of the International Sustainability Standards Board mean to you professionally? How important do you think the work of the ISSB will be, and your role in it? I see this appointment as a really exciting opportunity for me professionally. Corporate reporting is at a real turning point where we are embracing the need for the broadest set of information about sustainability, risks and opportunities to help investors make informed decisions. I am really excited and honoured to be part of that process. The ISSB has a pivotal role to play in bringing more comparability and quality to reporting on sustainability risks around the world and building a more efficient system, both for the preparers, providing the information, and also for the investors consuming them. One of my key roles as Vice-Chair of the Board is to bring to bear the standard-setting approach of the IASB. My technical skills from that world, and my knowledge of financial reporting, will help me to bring that rigor to sustainability reporting for investors. How will the ISSB’s approach to standard-setting emulate or differ from that of the IASB? How will the two bodies coalesce and work together in the future? There will be a lot of similarity with the IASB, particularly in relation to due process and the thoroughness in which we approach our work. The ISSB wants to be really inclusive and build on the viewpoints of our stakeholders. We have that in common with the IASB. Obviously, the subject matter is different. Sustainability is a more nascent area of reporting, so we will have to work more closely with our ecosystem and really work with assurers and specialists in sustainability to build this new infrastructure for reporting. The ISSB is a sister board to the IASB, and that is great because it means we are part of the same foundation. It gives us the unique ability to sit together and work out the package of information we are asking for to meet investor needs, and to make sure that the reporting and the financial statements fit well together. When the IFRS talks about the ISSB establishing a “global baseline of sustainability standards” what does this mean, and why is it important for the ESG agenda globally? When we talk about a global baseline, what we really want to do is establish a set of disclosures that are sufficient to meet the needs of investors—to enable them to understand how sustainability, risks and opportunities affect the value of a company’s shares and its debt.  We want to provide a ‘set of information’ on companies around the world so that investors can make decisions based on consistent and comparable data. That is really what a global baseline means. It will happen in practice through a combination of two different mechanisms. One will be adoption or incorporation into the regulation in different countries, so that it becomes part of the mandatory reporting system for jurisdictions, in the same way that the IASB’s accounting standards have been mandated by jurisdictions around the world.  Complementing this, we expect there to be a lot of voluntary application of the standards, separate to the regulatory element, because this is a good way for preparers to understand what information is relevant to meet investor needs.   Tell us about the ISSB’s four core pillars – governance, strategy, risk management and metrics. How relevant is each one in the context of your overall mission? Our overall objective is to make sure that investors have the information they need to understand the effects of sustainability risks and opportunities on enterprise values, share price and the value of a company’s debt.  Our pillars are the prism we use to gather sustainability information from four different perspectives. One is how a company governs its risks, and how it is managing those risks and building them into its business strategy. We also look at the metrics they use to assess where they are now, to set their targets for the future and measure their progress in meeting their targets. This ‘package of information’ is designed to meet the investor’s needs, and, importantly, it is designed to encourage companies to think about how they govern and manage risks. How will the work of the ISSB support and help investors in respect of good environmental, social and governance (ESG) practice? What other ‘ESG stakeholders’ will benefit from your work? We know that there are different parties who are interested in information about sustainability, not just investors. We want to facilitate the provision of information to all of them. We want to make this an efficient reporting system for public policy purposes and for broader stakeholder groups beyond investors, for example. One of the aspects that we are focusing on here is what we call the “building block” approach.   This means that, when we are building our requirements, we have investors’ needs in mind, but we also want to make sure that others can add specific investor requirements onto our disclosures to meet broader needs. If we can avoid the need to have one set of disclosures for investors and a completely separate set for broader stakeholders, it is more efficient for those preparing the information. Tell us about the first draft ISSB standards, published in April. What do these draft standards provide for, how is the consultation process progressing and what will the next steps be? There are two documents. The first is the General Requirements Exposure Draft, which sets out the overarching requirements for what should be provided for in sustainability reporting.  It asks companies to provide information about all of their significant sustainability risks and opportunities relevant to enterprise value assessment.  It also sets out some other general ideas—for example, the fact that you should be able to understand how this information relates to the financial statements and the proposal that this information be provided at the same time as the financial statements. The second document is the Climate Exposure Draft, which sets out what specific disclosures should be provided by a company about climate risks and opportunity. This means that, if a company using the General Requirements Exposure Draft identifies climate risks and opportunities as a “significant” sustainability-related risk and opportunity, they can turn to the Climate Exposure Draft to find out what disclosures to provide.  That document is asking for information about the physical risks of climate change the company is exposed to—flood risk, for example—but also opportunities arising from climate change. If a company has developed a product, which may become more popular because of climate change, investors may want to hear about that as much as they would climate-related risk.  These drafts are out for comment until 29 July, 2022. Once we get the feedback, we will decide what we need to adjust, what we can keep as is, and then we will move on to the final requirements. How do you foresee the “roadmap” of additional draft standards rolling out beyond these first two? What standards are next on the agenda for consultation and what is the anticipated timeline for their introduction? Our next step will be to ask our stakeholders what they think we should prioritise after the General Requirements Exposure Draft and Climate Exposure Draft documents are approved.  We only have so much time, and the same is true for our stakeholders, so it is important to us to ascertain where the greatest needs lie. In other words, it is really up to the stakeholders to decide what we work on next. How will the International Sustainability Standards Board (ISSB) build on work already carried out by the Task Force on Climate-Related Financial Disclosures (TCFD) and the Sustainability Accounting Standards Board (SASB)? Our four core pillars (governance, strategy, risk management and metrics) are taken straight from TCFD recommendations, and they form the backbone of the proposals we have out for comment.  We have incorporated their structure and the climate disclosures included in the TCFD have been incorporated into our Climate Exposure Draft. We have built on SASB materials in two ways. Industry-based requirements in the appendix to the Climate Exposure Draft are taken from SASB’s industry-based standards.  We took the climate-related metrics and included those in the Climate Exposure Draft as part of the mandatory climate disclosures.  We are asking stakeholders to use SASB guidance to help them meet their disclosure requirements in the General Requirements Exposure Draft up until the time we draft more specific disclosure requirements of our own. How do you foresee the ISSB working alongside, and collaborating with, other standard-setting and regulatory bodies and initiatives like the Securities and Exchange Commission (SEC) the Global Reporting Initiative (GRI) and European Financial Reporting Advisory Group (EFRAG)? Having our proposals out for comment at the same time as the SEC and EFRAG proposals means that we have a unique opportunity to compare and contrast these different proposals and bring as much commonality as we can to our requirements. In an ideal world, we want to work together to build this global baseline and ensure as much consistency as possible with the SEC, EFRAG, the Global Reporting Initiative (GRI) and others.  We have a Working Group tasked with doing so with the US, Europe and also China, Japan and the UK. We are encouraging our stakeholders to write to the SEC and to let the commission know if they think that the global baseline is important.  The GRI is also very important and is a really good example of the ‘building block’ process that I described earlier.  We have a Memorandum of Understanding with GRI. One of our aims is to work together to form a global baseline we both agree on to meet investor needs and to encourage GRI to add the additional pieces of information to meet the broader information needs.

Mairead McGuinness, EU Commissioner for Financial Services, Financial Stability and Capital Markets Union, talks to Elaine O’Regan about her role in implementing sanctions to stop the “Kremlin war machine”, her ongoing contribution to the future of sustainable finance  and her role in laying the foundations for the Capital Markets Union. You’re 18 months into your role as EU Commissioner. What do you see as your most important achievements so far, and what are your priorities now? I am responsible for sanctions and their implementation by the Commission and this is top of my agenda right now, given the terrible war in Ukraine and the need to respond to Russian aggression. We want to cut off funding to the Kremlin war machine.  We’ve listed hundreds of individuals, including Vladimir Putin, his Foreign Minister Sergey Lavrov and dozens of oligarchs, which means their assets are frozen. They can’t be provided with funds, and they are also subject to travel bans.  We’ve cut Russian access to EU capital markets, including a full asset freeze on three Russian banks with strong links to the Russian state, excluding seven key Russian banks from Swift, and blocking Russia’s EU-held foreign exchange reserves.  We also have measures on energy, transport, dual-use technologies, trade, visas for diplomats and disinformation. And, we have sharpened sanctions against Belarus, so it cannot be used by Russia to evade our sanctions.  At the same time, we’ve been working closely with our partners, including the US, Britain, Canada, Australia, Japan and others, to impose comprehensive and complementary measures that ensure Russia’s illegal actions bear a high cost. The focus now is on making sure that the sanctions are properly implemented so they are as effective as possible – and we stand ready to put more sanctions in place as the situation evolves. Beyond this, over the past 18 months my work on sustainable finance and the contribution of finance to tackling climate change has been important, as well as work on building up the Capital Markets Union to give companies across the EU better access to finance.  I’m also passionate about using my role to highlight the importance of financial literacy. People should understand how the financial system works, how they can make the best use of their money, and be confident enough to ask the right questions about their personal finances. The Ukraine invasion has placed energy supply at the forefront of the EU agenda. How do you expect the situation in Ukraine, and its impact on the flow of energy supply globally, to influence the policy initiatives laid out in the EU Green Deal?  Russia’s aggression against Ukraine makes a rapid transition to clean energy more urgent than ever. We’re too dependent on Russian gas. We must have a reliable, secure, and affordable supply of energy for Europe.  We already have the Green Deal indicating where we need to go, but Russia’s aggression has brought into very sharp focus our vulnerabilities and why we need to accelerate the transition to a more sustainable economy.  The Commission adopted a plan in March – REPowerEU – with new ways to ramp up green energy production, diversify supplies, and reduce demand for Russian gas.  The financial system has a key role to play in the Green Deal. The goal is both “to green finance” and “to finance green” to help the financial sector become sustainable and to make sure that the financial sector provides the money for business to become sustainable.  We’ve put clear and consistent rules in place, namely the EU Taxonomy, a disclosure regime for non-financial and financial companies; and investment tools, including benchmarks and standards like the European Green Bond Standard.  We are now increasingly moving to the implementation phase to make sure these rules are effective.  How far along is the Taxonomy at this point, and what are the next steps in the pipeline for the year ahead? What do companies operating in the EU need to know? The Taxonomy helps signpost the way for private investment to contribute to our climate goals: it provides clear definitions for sustainable economic activities. Companies can use it to plan their transition and to show the market what they are doing.  Last year, we adopted the first rules on activities that make a substantial contribution to adapting to and mitigating climate change.  They cover 170 economic activities, representing about 40 per cent of listed companies in the EU, in sectors responsible for around 80 per cent of direct greenhouse gas emissions in Europe.  The rules are applicable from January 2022. We have also specified how market players should disclose the extent that their activities are taxonomy-aligned. We’ve put forward proposals for how gas and nuclear can make a contribution to the transition to sustainability. We have not designated gas and nuclear as “green”, but we have recognised the specific role certain nuclear and gas activities can play in the transition to full sustainability, subject to very strict conditions and phase-out periods. This proposal is now under scrutiny by the European Parliament and the Member States. We have work to do on including more sectors in the Taxonomy and we will be preparing details on the four remaining environmental objectives – water quality, circular economy, biodiversity, and pollution prevention. The International Sustainability Standards Board (ISSB) is expected to put its first set of standards to public consultation later this month. How do you foresee the EU Commission working with the ISSB to progress the wider ESG reporting agenda?  The EU has been the global leader on sustainable finance. We are ahead when it comes to the contribution of the financial system to tackling climate change. So, we’ve gone further than others, and we’ve done that faster – which is important given the urgency of the climate challenge. But, of course, the climate challenge is global, and markets are global too. So, we are fully engaged in efforts on global standards. EU sustainability reporting standards have shown the way, to a great extent, and informed the international context.  We see global standards as a common baseline that allow us to go further to meet the ambition set out in the EU Green Deal.  At a practical level, the body that drafts EU accountancy and sustainability standards – the European Financial Reporting Advisory Group (EFRAG) – has established close cooperation with the ISSB. The CSRD proposal – and the reporting standards that will be part of it – will ensure that corporates disclose sustainability information that underpin the rest of the sustainable finance agenda.  EU standards must be coherent with the EU’s political ambitions and with our existing framework for sustainable finance, including the Taxonomy and the Sustainable Finance Disclosure Regulation.  From the beginning, EU standards will cover all ESG topics under a double materiality perspective – companies will have to report about how sustainability issues affect them and about their own impact on society and the environment.  In contrast, the standards set by the ISSB only look at risks to companies, but not at the impact of companies, and in the first instance they are focusing on climate.  EU standards will build on and contribute to global standardisation initiatives. We should build on what exists, and seek as much compatibility as possible, while also meeting Europe’s specific needs. At the recent IIF Sustainable Finance Summit, UBS Chairman Axel Weber said “banks can be a facilitator of channelling money into the right uses for a carbon transformation of the economy, but it’s not a banking issue.” What’s your take on this stance? All financial institutions, including banks, but others too, need to play their part in the transition to climate neutrality and improve their environmental performance as part of their financing, lending, and underwriting activities.  Financial institutions should integrate EU sustainability goals into their long-term financing strategies and investment decision-making processes.  We will help them accelerate their contribution to the transition, by reinforcing science-based target setting, disclosure and effectiveness of decarbonisation action, but also monitoring the financial sector’s commitments. The Corporate Sustainability Reporting Directive (CSRD) is being viewed as a crucial step in bringing sustainable reporting on par with financial reporting. It will require assurance on non-financial statements, however. Who do you foresee this responsibility falling to? The CSRD proposal requires statutory auditors to give an opinion on sustainability reporting – the idea is to ensure that the sustainability information disclosed is credible.  This will require statutory auditors to have the necessary skills in the assurance of sustainability reporting, helping to ensure that financial and sustainability information is connected and consistent.  We are mindful of the potential risk that the audit market could become even more concentrated, however. That’s why the proposal allows Member States to accredit independent assurance service providers to verify sustainability reporting. The proposal for the EU Green Bond Standard was published by the European Commission in July 2021 as part of the Strategy for Financing the Transition to a Sustainable Economy. Tell us about this proposed regulation.  Green bonds offer a great opportunity for financial markets to directly support the transition to a climate-neutral economy. They bring issuers reputational benefits and sometimes also a lower cost of funding.  They give investors transparency about how companies allocate their money. So green bonds make business sense as well as climate sense — and the market is booming. Last year, after many years of on average 40 percent growth, issuance increased by another 65 percent compared to the previous year.  However, there are some challenges. As new issuers enter the market, there is less consensus on what is green. This means more effort for issuers to prove their green credentials, and more work for investors to check them.  Companies acting as external reviewers of green bonds help investors navigate this complex landscape, but the wide range of methodologies they use can also be a source of confusion.  That’s why in July 2021, the Commission adopted a legislative proposal for a European green bond standard, as part of its work to guide investors towards greener investments. The overall aim is to create a new gold standard available to all green bond issuers on a voluntary basis.  While building on market best practice on reporting and external review, this standard would add two important new elements. First, full alignment with the EU Taxonomy, to ensure that funds raised by these bonds are spent on economic activities that are sustainable. Second, supervision by ESMA of external reviewers that provide opinions on the alignment with the standard.  There is already a lot of interest from both issuers and investors. But, in the end, success depends on whether we keep the environmental ambition high, and the unnecessary burden on issuers low. Negotiations are ongoing in the European Parliament and the Council, and we are hoping that an agreement can be reached as soon as possible.   You recently indicated that a bill to introduce a digital euro may be tabled in the EU in early 2023, providing a legislative framework for the ongoing work of the European Central Bank on a digital version of the euro. What are the potential benefits of introducing this digital euro? A digital euro would be to complement cash – which remains vital – and other means of payment provided by the private sector.  A digital euro would provide a digitalised form of money backed by a central bank, which would be designed to allow everyone to use it, from the tech savvy to those excluded by the financial system. How exactly it should be designed to meet those goals is currently being examined.  Other countries are working on or are already issuing central bank digital currencies, and the use of stablecoins is increasing. A digital euro would strengthen the EU’s ability to determine its own course and maintain the autonomy of EU monetary policy.  The digital euro raises challenges, but also opportunities. This is why we are working hand in hand with the ECB and listening to all stakeholders on this key project.  The ECB would be responsible for issuing any digital euro, while the Commission would need to put forward the legislative framework to allow the ECB to do so.  Currently, we are looking at early 2023 to introduce the proposal to give time for the Parliament and EU Member States to work before the ECB would decide how and whether to issue a digital euro. The EU is responding to the need for improved online security for cryptocurrencies with the Markets in Crypto-Assets Regulation and Digital Operational Resilience Act. What do you see as the biggest risks in this area? Unfortunately, the level of operational resilience in the crypto-asset space is not good enough. There are also a lot of hacks and thefts.  The Markets in Crypto-Assets Regulation (MiCA) will bring crypto into the regulated space and will mean that crypto service providers are covered by financial services legislation.  MiCA will put in place consumer protection measures and limit the risk of fraudulent behaviour in the market.  The Digital Operational Resilience Act (DORA) is for the whole of the financial services sector, to ensure ICT risks are better managed by financial companies. When MiCA enters into force, crypto service providers will have to adhere to the highest levels of operational resilience, as they will also be covered by DORA. DORA and MiCA are currently part of negotiations between the EU institutions. 

The membership has voted to re-elect the Officer Group for a second term as the Institute and broader profession seeks to re-emerge from the COVID-19 crisis. President Paul Henry, Deputy President Pat O’Neill and Vice-President Sinead Donovan discuss the year that was and explain their priorities for the year ahead. The re-election of the Officer Group for a second term is an unprecedented step in the Institute’s recent history. Can you explain the thinking behind it and outline what it will mean for members as we enter a new phase in living with COVID-19 and its consequences? Paul Henry (PH): At the recent AGM, a proposal was put to – and passed by – the membership of Chartered Accountants Ireland to extend the term of the Officer Group by one further year. The coronavirus pandemic effectively halted important parts of the President’s role, not least outreach and member representation activities. As such, Council felt that an extension of our term would provide an opportunity for the Officer Group to achieve our objectives in a meaningful way for the benefit of members while providing much-needed stability and continuity as the pandemic on the island of Ireland enters a new phase. Over the past year, I have sought to provide leadership at a time of uncertainty as the island grappled with the challenges of COVID-19 and Brexit. During that time, I – along with my colleagues in the Officer Group – supported the advocacy activity of the Institute to alleviate pressure points for members so that they could continue to deliver for their businesses and clients. I also focused on attracting new talent to the profession, continuing a long tradition of positioning the Chartered Accountant qualification as the gold standard for the accounting profession. Looking ahead, the Officer Group will continue to lay the foundations for renewed growth in the aftermath of the pandemic. The future is uncertain and, for many, survival is the sole objective. My goal is to help Chartered Accountants, both in business and as advisors to business, prepare for the challenges that will come as economies re-open and a new ‘business as usual’ takes hold. Pat O’Neill (PON): The profession has worked through many unprecedented issues since the middle of last year, and now we are figuring out how to emerge from a period of significant restriction. We deliberated on the benefits that continuity would bring and concluded that as the economy opens up, the President and the Officer Group will have an opportunity to advance the member-focused initiatives identified at our election in 2020. So in terms of overseeing the evolution of our education model – and in the last year, that has entailed keeping the path to qualification clear and open for our students and member firms – this continuity is vital. We are also focused on supporting our future pathway to being a more digital organisation for the benefit of our members. And not least, we need to support our members in dealing with the challenges of emerging from the pandemic and the Brexit transition. Sinead Donovan (SD): As an Officer Group, we spent much of our time over the past year in fire-fighting mode. We now have an opportunity to make progress on issues of critical importance on a more proactive basis, and our re-election allows us to conclude some complex issues while putting the Institute and the profession on a solid footing as the vaccination programme and economic recovery gathers pace. The virtual environment has been a largely positive experience for the Institute and its members, but not without its challenges. How can members and students expect their Institute to evolve as the vaccination programme continues and restrictions are eased? PH: Since the pandemic took hold, members have benefited from a greater degree of accessibility to their Institute, and that will continue. There will also be a continued emphasis on upskilling and knowledge sharing, as the Institute’s suite of webinars, bulletins, and other digital communications have been invaluable in helping members adapt to remote working while staying on top of relevant technical developments in the profession. We will also continue to work on our digital education offering. Last year, the Institute moved from a traditional in-person examination model to a virtual examination environment, condensing a five-year project into a far shorter period. There have been challenges and setbacks on this journey, and I acknowledge the difficulties our FAE students faced in April. We knew at the outset that there were risks involved in moving all examinations online, and it has been our objective over the last year to mitigate these risks to the greatest possible extent. More than 20,000 virtual exams have now been completed, and we will continue to work closely with our partners to test and develop the platform as we improve the Institute’s digital capabilities into the future. PON: The experience of the virtual working environment has been different for everyone. Large organisations, for example, have central functions, which makes the transition to a virtual working world that bit easier. In contrast, some smaller businesses and practices struggled to adjust to new technology and remote working norms while achieving some degree of work-life balance. And whether you are in business or practice, the process of developing relationships with new customers or clients has been challenging. Indeed, certain ways of working have changed irrevocably, but the value of face-to-face interaction cannot be overstated for many members. We have seen this demand for connection through increased engagement from the membership with services provided by the Institute, such as webinars and digital networking events. Our district societies, both in Ireland and abroad, have played a vital role in this regard, and as Paul said, the Institute was at the vanguard of online education delivery at the very outset of this pandemic. Although the Institute embarked on its digital journey before the arrival of COVID-19, we will continue our measured approach on that journey as we seek to maximise the benefit to our members. SD: One challenge that will become crucial for the Institute is the absence of in-person, on-the-job training, which many trainee Chartered Accountants have now missed out on. The profession may not see the impact of this development for several years. Yet, we must be mindful of this and work to ensure that those trainee Chartered Accountants most affected by the pandemic from a training perspective are upskilled accordingly in the months and years ahead. PH: That is correct, and we must also bear in mind that the current crop of students is missing out on vital peer-to-peer networking opportunities. One of the most notable benefits of my training has been the number of people who studied alongside me that ultimately became lifelong friends and business acquaintances. Unfortunately, students are missing out on that engagement and vital on-the-job learning that helps them develop critical soft skills, which are increasingly crucial for the Chartered Accountant of the future. The business community continues to grapple with a host of issues from Brexit and sustainability to good governance and diversity and inclusion. How is the Institute maintaining its focus on these issues while supporting its members through the COVID-19 crisis? PH: The Institute has adopted a proactive stance on these key issues, notably Brexit. There has been much debate about the Northern Ireland protocol. Irrespective of your position on it, the profession must endeavour to make the best of the situation in the best interest of the island of Ireland while becoming more familiar with the associated operational issues. In terms of sustainability, there is a clear opportunity for members to lead the charge in tackling the climate crisis. As business advisors, we can help people understand and record their sustainability activity and begin to report on that activity in a meaningful and confident way. This work will evolve greatly in the coming months.  The Institute also continues its work in critical areas such as diversity and inclusion and ethics and governance. Many members volunteer their time and expertise on a range of expert working groups, and I would like to express my gratitude to them for their involvement in the Institute and selfless work in the interest of the broader profession. This individual commitment is reflective of the broader societal contribution that we can make.  PON: It has been remarkable to see the extent to which, in particular this year, organisations have pivoted their narrative reporting to highlight their focus on issues such as governance, climate, and diversity and inclusion. We continue to promote these agenda items for our members through member committees, including those devoted to ethics and governance and diversity and inclusion. Much good work has been done in the past year or more, but the journey is just beginning in many respects. The Council of Chartered Accountants Ireland is very gender diverse. However, we have been working to ensure that diversity and inclusion are more formally incorporated into the appointments process for the Institute’s many boards and committees. I am glad to say that the Institute is moving in the right direction and at pace on many fronts. SD: 2021 is the year in which we need to take a giant leap forward in some of these areas. I fully appreciate the need to move forward with care, but the pandemic has also presented a catalyst for change. The past year has forced people to think about what has happened and what could happen in the future. At a very practical level, I have seen a distinct change in the rhetoric used around diversity and inclusion. There is still a degree of nervousness when it comes to asking specific questions of our membership, but I sense that the membership is becoming increasingly receptive to speaking out about diversity and sharing the many stories that are there to be told by our 29,500 members. And it isn’t just about our current members. The Institute and the profession as a whole must endeavour to be dynamic, vibrant, and attractive to the next generation of Chartered Accountants. We have made very good advances on that front in recent years, and it is up to us to maintain that momentum. Your re-election seeks to bring a sense of continuity to the profession at a critical juncture. But looking to the future, what is in store for the profession and its members in the decade ahead? And how will the Institute help them prepare for the changes that will come? PH: The future for Chartered Accountants is, in my view, very positive. People need advice in an increasingly complex world, and the members of our profession are trained to handle, interpret, and communicate technical information and data in a clear, accurate and insightful way. As the level of complexity grows, so too will the importance of those communication skills. And while artificial intelligence will support us in providing advice to clients, I don’t see it as a threat in any way. Instead, it will improve the insights we provide to our clients. PON: The Institute is working through its implementation of Strategy24. If I’m honest, the pandemic has meant that we need to be agile in terms of planning ahead. So, looking out to the end of our strategic planning period is difficult to do with much accuracy at the moment, not to mention beyond that. That said, issues such as the increasing digitalisation of business and the profession will be a challenge. Cybersecurity, automation, and analytics are becoming increasingly real for businesses. Business leaders – and, by extension, Chartered Accountants – must continue to embrace these developments. Taking a longer-term view, the Institute is also engaged with the Department of Education regarding the accounting syllabus in secondary schools in Ireland. This is an excellent example of the Institute looking forward and playing a very positive role in ensuring that the accountancy profession continues to play its part in shaping the education of the next generation of Chartered Accountants. What have you learned about leadership over the past year? And what do you see as the main challenges for leaders as the profession develops a shared understanding of the new world of work? PH: For me, the number one lesson has been the importance of communication. We have achieved a high level of communication at the Officer Group level and within the Executive Team at Chartered Accountants Ireland. However, many of the challenges faced by businesses worldwide during the pandemic arguably arise partly due to an inability to read the room in an online setting or notice nuances or concerns during a virtual meeting. I don’t think you can overstate the importance of this.  Another big lesson has been the importance of understanding the human side of your colleagues, and not just the professional side. It is vital to make time to get to know your colleagues and support them as we work through the months ahead. It could be something as simple as a 10-minute call with a cup of coffee to chat about anything other than work. Gestures such as this don’t take much effort or time, but the impact on your colleagues could be huge. PON: Flexibility is the word that springs to mind for me, the importance of adapting your leadership style. During this pandemic, I have learnt the importance of understanding the challenges and pressures my colleagues face beyond the office. It is important to reassure people that it’s okay to feel under pressure, to prioritise family and to look after their own wellbeing. Flexibility affords us all the opportunity to prioritise different areas of our lives while still achieving our professional goals, and harnessing this opportunity will be of great importance into the future. SD: I agree wholeheartedly with the point about communication. I have found that people with different personality traits have responded differently to the pandemic and the resultant lockdowns. So for me, the big lesson has been taking time to check in on individuals on your team, particularly those who might be closer to the introversion end of the scale. The extroverts, I have found, have managed during the pandemic as they can get their feelings across in a virtual setting, but that is not the case for all colleagues. If you want to get the best out of people and ultimately avoid losing excellent talent, leaders need to communicate and engage with their people in a meaningful way and on an ongoing basis. In that context, wellness must be a priority for all leaders – including us. As an Officer Group, we will therefore continue to raise awareness about the benefits of wellness initiatives and promote the many valuable webinars and other wellness initiatives hosted by CA Support and the various District Societies. Finally, what is in focus for you as you enter your second term? PH: The focus will be on building supports for members as the vaccine roll-out continues, economies re-open, and the recovery takes hold. There is also an opportunity to support the government and the public sector. We have begun to increase our activity in this space – not least with the recent publication of a position paper on proposed reforms to Irish public sector accounting, launched by Minister Michael McGrath – and that will continue in the year ahead. I would also like to take this opportunity to thank Barry Dempsey and the leadership and staff of Chartered Accountants Ireland for their sterling work over the course of the last year. It was a year of many firsts – the first virtual annual general meeting, the first virtual conferences, the first virtual conferring ceremonies, the first virtual student recruitment campaign, and the first virtual regulatory inspections. The staff have ensured continuity of service for members in the most challenging circumstances while innovating beyond what we thought possible just two years ago. Their efforts are greatly appreciated by the Officer Group, Council, and the membership at large. PON: There will also be a strong sense of continuity in the second term. For example, the Institute has made great strides in advocacy and raising the voice of the profession – and that will continue. The Institute is undoubtedly the best spokesperson for members in terms of the challenges they will face and the supports they will need as we re-emerge from the COVID-19 crisis. We will also seek to play our part in building trust in the profession. This is an emerging area, particularly with regard to developments concerning regulation in the United Kingdom. These developments will directly impact our members in Northern Ireland and possibly have a trailing impact for members elsewhere. It will be important to support our members through that process and we will do so in the first instance by responding in July to the United Kingdom’s consultation on proposed reforms to restore trust in audit and corporate governance. SD: Re-emergence is probably a good word to describe the theme of our second term. There will, of course, be an initial knee-jerk reaction to bring people together and enjoy face-to-face interaction once more, but we must not lose sight of the benefits of the hybrid working model. We need to ensure that we re-emerge from this pandemic in a safe and protected manner, but also in a way that embraces change for the benefit of our colleagues and organisations.

Paul Henry shares his thoughts on the challenges ahead following his re-election as President of Chartered Accountants Ireland for a second successive term. It has been my privilege to serve as President of Chartered Accountants Ireland for the last year, and in a sign of these unusual times, I find myself at the mid-way point of a two-year term of office. I feel incredibly fortunate to represent our almost 30,000-strong membership once again as we move into what I hope will be a brighter time for us all. I want to express my appreciation to my colleagues on Council, and my fellow Officer Group members, for affording me the opportunity to continue to lead the work we started together this time last year. It is a pleasure to be joined by Pat O’Neill and Sinead Donovan in this issue of Accountancy Ireland for a round-table discussion on the issues of importance for our members and students. This will be a year of adaptation as we recover and grow again. It is more crucial than ever that I, as President, my Council colleagues, and our entire organisation channel our collective energies to empower our profession to fulfil its mandate, “for tomorrow, for good”. For society and the economy at large, the last year has been one of worry, isolation, and loss. The public health crisis has persisted for longer than most of us expected, and it has tested us. As human beings, we are not designed to operate at such removes from each other. We are now at an inflexion point, as a combination of prudent public health measures and successful vaccination delivery facilitate reopening and a greater sense of sustained optimism than there has been to date. This time of year is an inflexion point for Chartered Accountants Ireland too – a chance to reflect and plan for the coming months. While it may feel like we have been running to stand still during the pandemic, it is important to reflect on what has been achieved. It was a year of firsts: our first virtual AGM, our first entirely virtual conferences, the virtual completion of examinations, our first virtual conferring ceremonies, and our first virtual student recruitment campaign, to name a few. We have seen a surge in member engagement, which shows that what we are doing is resonating. I thank the Institute’s staff for their commitment to making this possible. I thank our members for their perseverance and resilience in delivering to the high standards that our profession demands in practices, businesses, and the public sector at home and abroad. Our profession has played an instrumental role in supporting businesses in keeping the show on the road in the face of immense challenge. And there is so much still to do. I said last year that recovery from the pandemic would be the challenge of a generation, and all of us will be called on to show even greater leadership and resilience. I look forward to leading the Institute in meeting this challenge. Chartered Accountants Ireland will continue to work on behalf of members this year as your strongest supporter and ceaseless advocate. We will work to promote the profession in which we hold such pride to a new generation. And above all, we will position our shared expertise to contribute to a meaningful and sustainable recovery. I was asked recently as President what career tips I would give to my younger self, and right up there was my advice to build a strong team and keep hold of them. The stronger the team, the better the outcome. None of us can meet the challenges of the future without a collaborative approach, and I look forward to working with you, and for you, this year. Paul Henry is the President of Chartered Accountants Ireland.