News

  The CDSB has issued new guidance on the disclosure of the financial effects of climate-related issues on a company’s financial statements. This guidance will seek to address three main questions: Are climate-related matters relevant to financial reporting? How should climate-related matters be factored into a company’s financial reporting and what this might look like? What steps can companies take to integrate material climate-related matters into financial reporting? This guidance is not intended to create new accounting standards; rather it will help finance and accounting professionals to ensure that companies account for material climate factors based on current International Financial Reporting Standards (IFRS) Standards. In this way the companies will provide the financial-related information investors are demanding about profits and valuations that reflect climate-related risks and events. The Climate Disclosure Standards Board (CDSB) is an international consortium of business and environmental NGOs. Disclosures like those on which the CDSB has just issued guidance will continue to be driven by a combination of investor-demand and mandatory climate reporting which is on the agenda of governments and regulators in various countries.

  The UK's financial regulatory body, the Financial Conduct Authority (FCA) has confirmed that it would enforce a rule for premium-listed companies, including advice firms, that mandates better disclosure around climate-related risks and opportunities. In a policy statement published on 21 December, the FCA announced that the new rule will require firms to include a statement in their annual financial report setting out whether they have made disclosures consistent with the recommendations made by the Taskforce on Climate-related Financial Disclosures. If the company does not provide the information consistent with the TCFD's recommendations, it must explain why it has not done so, and provide a plan for providing such disclosure in the future. The rule will apply for accounting periods beginning on or after 1 January 2021. 

  The FRC has responded to the IFRS Foundation’s Consultation Paper on Sustainability Reporting.   The FRC welcomes the consultation and supports the development of global standards for sustainability reporting, saying that they "will improve the quality and quantity of sustainability information in a consistent way that meets the needs of users". The FRC's main comments include: Support for establishing a Sustainability Standards Board within the IFRS Foundation architecture. Recommendation to build on the work done by existing framework providers. Encouraging the IFRS Foundation to move at pace to develop sustainability reporting standards. You can find the IFRS Foundation's published Consultation Paper to assess demand for global sustainability standards here. 

Susan Rossney, Public Policy Officer with Chartered Accountants Ireland, writes about Environmental, Social and Governance (ESG) Disclosures and the impact of investor demands.  "A wave of capital and focus" is how Joe Gill, Director of Corporate Broking with Goodbody, described ESG in capital markets, particularly over the past 18 months to 2 years. Speaking at a free webinar this week run by Chartered Accountants Ireland and Goodbodys, Joe described the focus on the environment and social governance as creating opportunities and challenges for both investors and companies. What is ESG? ESG stands for 'Environmental, Social and Governance'. It is not new, but it has grown in importance, particuarly in 2020. For many, ESG means climate change or corporate charitable donations. These are important parts of ESG, but the term also extends to issues like a company’s employment practices, talent development, the diversity of its board, and its business ethics. Because of this breadth, ESG disclosure is not always straightforward. What is clear, though, is that climate change and other environmental, social and governance issues have never been more important to investors. ESG criteria are increasingly used by investors as a set of standards for a company’s operations to evaluate potential investments. The Investor Influence Investors are actively recognising climate risks and sustainability issues as key determinants of a company’s future value-creation potential, and see successful delivery of a business strategy as inextricably linked to that business’s non-financial performance.   Therefore, companies looking to avail of capital must change how they embrace and disclose ESG issues. This often means re-evaluating their corporate strategies to include carbon-emissions reductions, enhance their corporate governance, and improve their sustainability disclosures. They must also be able to satisfy investors’ demands for analysis of the risks and opportunities presented by climate change and sustainability and deliver finance performance while making a positive contribution to society and the environment. Disclosing ESG - the drive towards comparability Accountants already play a key role in assessing and disclosing risk as part of corporate reporting, and will be equally important in disclosing sustainability-related risk and opportunities.  However, it is not always clear how to do so. There are various voluntary frameworks and standards in use for sustainability reporting – a veritable ‘alphabet soup’ of frameworks - but little standardisation, consistency or comparability, which are badly needed by investors. Preparers of ESG reports, such as accountants, can struggle to identify which reporting framework to use. Investors have in part driven the agenda of creating a set of consistent and comparable standards for sustainability reporting and Chartered Accountants Ireland has lent its voice to this agenda.  In June of this year we responded to the consultation on the EU Non-Financial Reporting Directive, which lays down the rules on disclosure of non-financial and diversity information by large companies. We are currently in the process of responding to a consultation by the IFRS Foundation on a global approach to sustainability reporting. We are also participating with other entities, including the Global Accountants Alliance in making submissions to this consultation. At the webinar ‘Environmental, social and governance disclosures: what do investors want’ we discussed the impact of investor requirements on sustainability reporting. Partnering with Goodbody stockbrokers we heard from Ian Huggard, Senior Equity Sales specialist in Goodbody, who provided the institutional investors’ perspective. Two companies  – Kingspan Global Plc and Hibernia REIT – showcased their ESG reporting,  describing the financial benefits of effective ESG disclosure, where to start and how the approach of large corporates can be applied to companies all sizes. Joe Gill, Corporate Broking, Goodbody, moderated the event, following an Introduction by Barry Demspey, CEO of Chartered Accountants Ireland.  This event is one of a series held by Chartered Accountants Ireland in 2020 on the topic of sustainability.  We recently launched a Sustainability Hub, available in our online Knowledge Centre, which provides information, guidance and supports to help members understand sustainability and give them the tools to take the steps they need to take. In 2021 we will be bringing members a series of events on sustainability, and will keep members updated on progress in the consolidation of global reporting frameworks.

EU leaders have agreed to raise the bloc’s 2030 emissions-cutting goal to from 40 to 55 percent.  The final deal still needs to be argreed with the European Parliament, which wants a 60 percent cut.  However, hitting even the 55 percent reduction goal for 2030 means a huge new regulatory rollout by the Commission next year. this is likely to target every sector of the economy. The deal also calls for reforming the Emissions Trading System. Speaking about the negotiations, European Council President Charles Michel tweeted  that “Europe is the leader in the fight against climate change,” and the agreement is seen is an important step for the European Green Deal’s aim to reach climate neutrality by 2050. Changes, including aassrances of financial and regulatory support, had to be made to the final text of the agreement to reassure poorer, coal-reliant countries in Central and Eastern Europe. These countries were concerned that they would have to bear the brunt of the costs of raising the target from its current 40 percent. The agreement also gives assurances they can use nuclear power and natural gas to replace dirtier fossil fuels like coal. The 2030 goal will be delivered by the bloc collectively, rather than at national level.  

In this week’s Public Policy news, read about IFAC’s latest ‘Point of View’ (POV), ‘Embracing a People-Centered Profession’; the Irish Government’s first Action Plan for Insurance Reform, and its Climate and Air Roadmap for the Agriculture Sector; the report showing Northern Ireland’s workforce as having high levels of job satisfaction; and the EU’s new Sustainability and Smart Mobility Strategy. IFAC publishes its People-Centred profession Point of View The International Federation of Accountants has this week released its latest ‘Point of View’ (POV), titled Embracing a People-Centered Profession. Focusing on ‘the human aspect’ of the profession, it allows IFAC to address issues such as gender equality, diversity, work-life balance, mental health, and lifelong learning, and to examine the relationship between focusing on ‘human capital’ and attracting and retaining talented people. Speaking about the POV, Kevin Dancey, IFAC CEO stated “Events like the COVID-19 pandemic remind us that ours is a profession powered by individuals”. This POV is the latest in a series of POVs which are issued by IFAC on key policy issues impacting the profession and society, and which represent IFAC’s official position on topics. Other POVs include the profession's perspective on issues from audit quality and anti-corruption efforts to climate change and corporate governance. First Action Plan for Insurance Reform in Ireland published The Government has published its first Action Plan for Insurance Reform this week. The Plan aims to make Ireland’s insurance sector more competitive and consumer-friendly, and to support enterprise and job-creation. It sets out 66 actions for the short- and medium-term, aimed at, among others, reducing the costs for businesses and consumers, preventing fraud and introducing more competition. The Plan reflects the commitments make in the Programme for Government for insurance reform, as well as outstanding recommendations from the Cost of Insurance Working Group and Personal Injuries Commission. It will, among other measures: replace the Book of Quantum with new guidelines on the appropriate level of personal injury awards enhance the role of the Personal Injuries Assessment Board (PIAB) reduce insurance fraud, including placing perjury on a statutory footing, making the offence easier to prosecute strengthen the enforcement powers of the Competition and Consumer Protection Commission (CCPC) establish a Government office to encourage greater insurance market competition. Actions under the Plan will be undertaken and delivered by Ministers in the Departments of Enterprise, Trade and Employment, Finance and Justice over the next 18 months. These Minister are part of the  Government’s Sub-Group on Insurance Reform, formed under the Cabinet Committee on Economic Recovery and Investment to drive implementation of these commitments. Other members of the subgroup are the Ministers for Public Expenditure and Reform; Minister for Children, Disability, Equality, Integration and Youth; and the Ministers of State with responsibility for Financial Services, Credit Unions and Insurance; and for Trade Promotion, Digital and Company Regulation.  The Sub-Group will  meet regularly, engage with stakeholders and publish progress of the actions every six months. Government publish its Agri Roadmap towards Climate Neutrality The Department of Agriculture, Food and the Marine has published its roadmap to tackle climate change and air pollution. Designed to help all stakeholders to work together so that Ireland will achieve its aim to have a carbon-neutral economy by 2050, the publication comes after extensive engagement with representatives from industry, research, policy, farming and environment. Including 29 actions with specific and challenging targets, it sets out how the agriculture sector will reduce emissions over the coming decades, for example, by reducing fertiliser use, encouraging lower-emitting cattle breeds and promoting an increase in organic farming and tillage. Two of the measures are to genotype the entire national herd by 2030 to underpin the development of enhanced dairy and beef breeding programmes, which it says will help achieve a reduction in “overall green house gas output at national level”, and to increase the area of land used for organic farming to 350,000 hectares in the next ten years. Speaking at the launch of the plan, Minister for Agriculture Charlie McConalogue said that  said that every sector “is going to have to make a contribution in the years to come in order to meet our climate change objectives and agriculture has a very important role to play.” Northern Ireland report shows high levels of job satisfaction Almost 90 percent of Northern Ireland workforce enjoys job satisfaction and regards their employment as ‘meaningful’ according to a recent report by NI Statistics and Research Agency (Nisra). Published this week, the study used a range of work-quality indicators for Northern Ireland for July 2019 – June 2020 and provided an overview of six work quality indicators sourced from the Northern Ireland Labour Force Survey (LFS). It used three new work-quality indicators for the first time: meaningful work, career progression and involvement in decision-making. It found that: 96 percent of employees were in ‘secure’ work, i.e. in permanent roles or in temporary jobs but with no desire to find more permanent work ·over 50 percent were happy with the opportunities for career progression in their work compared to 26 percent did not think their jobs offered good opportunities for advancement approximately 50 percent said that their managers were either good or very good at involving them in decision-making in the workplace, against nearly one in four who described their management as poor, or very poor, at involving them ·nearly 80 percent reported a job satisfaction rating of ‘satisfied’ or better 86 percent said that they performed meaningful work. EU launches its Sustainability and Smart Mobility Strategy The European Commission has launched its Sustainable and Smart Mobility Strategy this week. The strategy is part of the European Green Deal, and its key goal is to dramatically reduce emissions from transport. These currently account for more than a quarter of the EU’s CO2 emission. Without this reduction, the EU will not reach its goal of becoming climate neutral by 2050. Measures included in the strategy are: 30 million zero-emission vehicles on European roads 100 climate-neutral cities Carbon-neutral inter-city trips of less than 500 km zero-emissions airplanes and ships road and rail transport using a mix of electricity and hydrogen emissions-standards increases for cars in 2021 and trucks by 2022 a doubling of rail-freight traffic, a tripling high-speed rail traffic, and completion of the trans-European transport network with state-of-the-art traffic management systems. Speaking about the implementation of the strategy, Commissioner for Transport Adina Vălean described it as creating: “a more efficient and resilient transport system, which is on a firm pathway to reduce emissions in line with our European Green Deal goals.” Read all our updates on our Public Policy web centre.