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A renewed commitment must be made by government to the long-awaited reform of Ireland’s pension system in 2021, according to Chartered Accountants Ireland. The Institute’s comments come as legislation was debated in the Dáil last night, halting the increase in the State pension age to 67.   This legislation ensures that the State pension age remains at 66 until the work of the Pensions Commission concludes, which is expected by the end of June 2021. This comes a week after the Irish Fiscal Advisory Council (IFAC) estimated that the additional cost of providing for new pensioners (public sector and social welfare recipients), will be €370m a year between 2021 and 2025.   Commenting, Cróna Clohisey, Public Policy Lead, Chartered Accountants Ireland said  “Understandably, pension reform slipped off the agenda in 2020. A global pandemic and the conclusion of the Brexit transition period have dominated the minds of policymakers and preoccupied businesses simply trying to stay afloat.  “The need for pension reform has not dissipated though, and as we move into 2021, and economic forecasts start to look slightly brighter, attention must return to it. Political minds today are focused on the state pension age, but the reality is that the state pension in its current form may not even be sustainable in the decades to come.   “A long-term, consistent approach is needed from government, one that will be adhered to and from which we will start to see a sustainable system of retirement planning emerge in Ireland.  The work of the Pensions Commission must result in a clear policy on the State pension age. Workers planning or approaching their retirement need reassurance and greater certainty on this issue so that they can plan adequately and responsibly.  “The figures are already failing to add up, in that the numbers of workers to support those retired is on a downward trajectory, and this needs to be addressed in a sustainable way in 2021.”  Chartered Accountants Ireland made this call to action today as it launched a new publication on retirement planning, A Practical Guide to Pensions and Life Insurance. The publication provides accountants, tax advisors and other financial advisors who provide financial planning advice with a practical resource to help individuals and businesses plan for retirement.   Commenting, the publication’s author, chartered accountant Simon Shirley said  “Pensions exist so we can afford to stop working one day and should be one of our most important financial assets at retirement. They are also without doubt the most tax-efficient and effective way of saving in a sustained low-interest rate environment.  “Although the basic concept of pension planning makes sense, terms like ‘investment risk’, ‘volatility profile’ and ‘cash and cash equivalents’ often induce the ‘glaze’ that all pension advisors recognise.   “We have to tackle a deep-rooted lack of understanding and demonstrate the importance of prioritising long-term provision over often important short and medium-term needs. Over 50% of the Irish workforce do not have a personal or employer offered pension plan, so the task is considerable. The more you know, however, the better positioned you will be to take advantage of pensions for your personal benefit and, in the case of advisors, for the benefit of your clients.”   ENDS     Publication details:  A Practical Guide to Pensions and Life Insurance  Publisher: Chartered Accountants Ireland  Publication date: 10 December 2010  ISBN: 978-1-912350-95-7  184 pages   Price: €25.00 / £22.50     The Author  Simon Shirley is a Fellow of Chartered Accountants Ireland, a Revenue-approved pensioneer trustee and the founder of the financial advisory firm Simon Shirley Advisors. 

In this week’s Public Policy news, read about Ireland’s latest Exchequer figures; a new report on human rights and Irish businesses; the “greener, stronger future” promised in the UK Government’s Spending Review 2020; and new rules on Data Governance proposed by the EU. Department of Finance figures show Exchequer deficit and expenditure increase Figures released this week by Ireland’s Department of Finance have shown that the Government recorded an Exchequer deficit of €8.9 billion to the end of November 2020, compared to a surplus of more than €3.3 billion in the same period last year. Given COVID-19 support measures, Government expenditure increased considerably this year compared to 2019, with net expenditure reaching €59.3 billion. This represents a 23.7 percent (€11.3 billion) increase on last year’s expenditure. Receipts from both income tax and VAT were down on last year; however several factors make comparisons limited. The income tax figures were skewed by the deferral of the “pay and file” income tax deadline to 10 December; and the VAT figures reflect the partial impact of Level 5 COVID-19 restrictions. However corporation tax receipts were up 7 percent, cumulatively amounting to €10.7 billion. The Central Statistics Office have also released unemployment figures which show that unemployment – when adjusted to include those in receipt of the Pandemic Unemployment Payment – has increased to 21 percent in November. While that number is still less than the 30.4 percent experienced during April of this year, it still represents a marked increase on the unemployment rate in November 2019; more than 71,800 people are unemployed now than were out of work this time last year. Ireland benchmarks low in a new Report on Irish Business and Human Rights A report published by the Trinity Business School Centre for Innovation found that there is still uncertainty over how much progress that has been made in Ireland by businesses and state-owned enterprises since the first publication of the UN Guiding Principles on Business and Human Rights (UNGPs) almost 10 years ago. The UNGPs aim to ensure that respect for people is at the heart of business operations.  The report analyses published information from the top 50 publicly-listed firms operating in Ireland (20 domiciled in Ireland, 30 multinational employers), with the goal of “providing a comprehensive snapshot of what corporate adherence to the UNGPs looks like in practice”. The report also includes a standalone analysis of the ten largest state-owned enterprises and whether they actually take additional steps to protect against human rights abuses in such businesses, as the UNGP suggests they should do given their closer proximity to government. The report found that: 88 percent of the Top 50 companies benchmarked score below 50 percent of the maximum points available. 50 percent of companies score 20 percent or below. State-owned enterprises included within the research also scored low. The key area where alignment with the UNGPs was found to be severely lacking is human rights due diligence. There are policy and legislative options which the Irish government should consider, in the absence of an international legally binding treaty. The report’s recommendations include stepping up awareness-raising among business, taking ownership of the implementation of the UNGPs in state-owned enterprises, and delivering mandatory human rights due diligence legislation at the national and European levels. UK Government’s Spending Review 2020 promises a “greener, stronger future” The UK government announced last week that it will provide billions of pounds in the fight against COVID-19, increasing funding to deliver stronger public services, and investing £100 billion to drive UK’s recovery. Presenting the Spending Review 2020, Chancellor Rishi Sunak warned that the pandemic still represents an emergency, and that the country was now facing an ‘economic emergency’; however, he pointed to the stronger public services that will be delivered, including new hospitals, better schools and safer streets, “a once-in-a-generation investment in infrastructure”, jobs and economic growth. Increases in departmental spending, capital spending and a £4 billion Levelling Up Fund would, the Chancellor continued, make for a “greener, stronger future”. Further information can be found here. European Commission proposes new rules on Data Governance The EU Commission has proposed new rules on data governance. The goal of the new rules – the first of a set of measures announced in the 2020 European strategy for data – is to “facilitate data sharing across the EU and between sectors to create wealth for society, increase control and trust of both citizens and companies regarding their data, and offer an alternative European model to data handling practice of major tech platforms.” More details, and information about the 2020 European Digital Strategy, can be found here.   Read all our updates on our Public Policy web centre.  

Louise O’Mara considers how environmental, social and governance issues will impact on corporate decision-making in a post-COVID-19 era. As focus on climate change continues to grow, there is a greater interest in what part corporates are playing in the fight against climate change. Mindful of this, companies are transitioning their business models towards lower or net zero emission models as an expression of their desire to combat climate change. Stakeholders accelerating the sustainability agenda Mindful of the attention given to sustainability, companies are transitioning their business models towards lower or net-zero emission models as an expression of a desire to combat climate change. Asset managers and financial institutions are increasingly supportive of the sustainability transition. Funds invested in environmental, social and governance (ESG) assets are ballooning – sustainable assets under management have surpassed $30 trillion and could grow to $50 trillion by 2025. Companies are developing robust sustainability strategies so they can access this growing source of capital. In September 2020, AIB tapped this market with a €1 billion green bond. The transaction attracted significant investor interest, with the green format maximising depth of demand. Net-zero and the supply chain An increasing number of corporates are setting targets to be net-zero by a specific date. However, not all net-zero targets are created equal. The most challenging and most comprehensive target – Scope 3 – requires a company to achieve net-zero across all elements of its supply chain. In practice, this means that a company will require its suppliers to be net-zero, or it may have to purchase offsets to bridge that gap – at a cost. Consequently, the supply chain contract might be renegotiated to reflect that cost or the company may move to a different net-zero supplier, avoiding the incremental cost. This is a tangible example of sustainability impacting on cost and pricing strategies. Accordingly, what we are beginning to see (in its early stages, but with rapidly building momentum) is the creation of a ‘net-zero club’ populated by companies that are part of the solution. Green and sustainability-linked financing Companies are increasingly linking sustainability key performance indicators (KPIs) to financing, and there is an array of finance options available. The simplest form is a green bond, where the proceeds are directed solely towards eligible green projects. For example, Citi led Ireland’s inaugural green bond in October 2018. The proceeds were allocated to projects that address climate change, clean water, and wastewater treatment. Sustainability-linked bonds (SLBs) are linked to the sustainability objectives of the issuer. The cost of SLBs can vary depending on whether the company achieves its defined ESG objectives. As such, companies are committing explicitly to future sustainability outcomes and creating a financial incentive to achieve them. Finally, the ‘greenium’ or green premium refers to the pricing advantage offered to companies using green bonds/SLBs due to a higher degree of demand from investors. Co-dependency of finance and sustainability Although we have historically seen sustainability and finance as separate entities, they have often existed in parallel. What is exciting about the ‘net-zero club’ and the ‘greenium’ is that they represent tangible examples of sustainability directly improving margins – sustainability meeting finance in its most fundamental sense. As consumer sentiment continues to shift, we should expect finance and sustainability to walk hand-in-hand in the same direction. Louise O’Mara is Head of Corporate Bank Ireland at Citi.

In this week’s Public Policy news, read about the launch of the Ireland for Finance 2020 Action plan; the stark warnings from the Environmental Protection Agency on Ireland’s progress towards its climate targets; and the forecast for the biggest decline in the UK economy in 300 years.  Launch of ‘Ireland for Finance 2020’ Action Plan The Ireland for Finance 2020 Action Plan was launched this week, the first to be published since the formation of the new Government in June of this year. The new Programme for Government, committed to complete the ‘Ireland for Finance Strategy’ for the development of Ireland’s international financial services sector to 2025. The plan has been updated since its initial development in December 2019 to take account of the passage of time and the unprecedented challenge of COVID-19 and the continued requirement for Brexit-readiness. The vision of the plan is to ensure that Ireland continues to be a top-tier location of choice for financial services companies, to enhance our competitiveness, and for Ireland to  be at the forefront of positive industry developments in products, services and operational models. Launching the plan, Minister of State with responsibility for Financial Services, Credit Unions and Insurance, Sean Fleming TD said that the progress made on important measures for International Financial Services during the year is reflected in “the resilience the sector has shown in the face of the pandemic,” and that attention must now be focused on the future and how the potential of the industry can be maximised as the economic recovers. Stark warnings from the Environmental Protection Agency The publication this week of the Environmental Protection Agency (EPA) Ireland's Environment 2020 - An Assessment provides an update on the environmental challenges that Ireland faces both nationally and globally. The report, which publishes every four years, found that Ireland is still heavily reliant on fossil fuels and is falling seriously behind in protection of natural habitats. It also found that raw sewage is being dumped into water from 35 towns and villages, leaving only 20 of Ireland’s more than 3,000 rivers, streams and tributaries unpolluted. The report noted that Ireland cut only  4.5 percent of its greenhouse gas emissions in 2019. This signals a significant challenge to the Government as it seeks to make Ireland carbon neutral by 2050, which it plans to do by, among other measures, cutting overall greenhouse gas emissions by 7 per cent annually for the next decade. The report called for the implementation of solutions across all sectors of society through an overarching environmental policy position, and predicted that a decade of action is needed to put things right. UK economy forecasted for biggest decline in 300 years Describing the impact of COVID-19 as an “economic emergency” UK chancellor Rishi Sunak reportedly warned that the pandemic will damage both growth and jobs, with official forecasts  predicting the biggest economic decline in 300 years. The outlook is for a contraction of the UK economy by 11.3 percent this year, with no return to pre-crisis levels until the end of 2022. It also expects a rise in Government borrowing to reach levels that are record for peacetime, to deal with the economic impact. According to the Office for Budget Responsibility (OBR), the UK government’s independent forecaster, the number of unemployed people will rise to 2.6 million by mid-2021, with the unemployment rate reaching 7.5 percent, its highest level since the 2009 financial crisis. Read all our updates on our Public Policy web centre.  

This week, Chartered Accountants Ireland held a webinar on the important topic of sustainability and the public sector. The event was moderated by Institute President Paul Henry and also hosting was Susan Rossney, Public Policy Officer and member of the Sustainability Expert Working Group of the Global Accounting Alliance. An expert panel drawn from across the public sector discussed a wide range of topics including public/private sector collaboration; Environmental, Social and Governance (ESG) reporting and green finance.  The webinar was particularly timely, with the publication earlier in the week of the EPA report on the environmental challenges that we face both nationally and globally, “Ireland's Environment 2020 - An Assessment”. The report called for the implementation of solutions across all sectors of society through an overarching environmental policy position providing a national vision. It predicted that a decade of action is needed to put things right.   The panel for the webinar was made up of:  JP Corkery FCA, Senior Manager – Sustainable Finance, NewERA, National Treasury Management Agency  Joan Curry FCA, Head of Finance in the Department of Transport, Chair of the Institute Public Sector Members’ Committee and board member of the International Federation of Accountants (IFAC) Pat Fenlon FCA, Group Finance Director, ESB Ciarán Hayes, CEO Sligo County Council and member of the Adaptation Committee of the Climate Change Advisory Council Dr John O’Neill, Head of the Transport Energy & Climate Action Fund for the Department of Environment, Climate and Communications, and Steering Committee member of the Irish Forum for Natural Capital William Walsh FCA, CEO of the Sustainable Energy Authority Ireland and member of the Climate Change Advisory Council. Collaboration in moving towards the sustainability goal was a strong thread throughout the discussion. Neither the public nor private sector can do it alone; without working together, neither can achieve critical scale. There was also broad acceptance that climate change does not recognise boundaries, so moving out of our silos, whether within our own organisations, or the wider public sector silo is a central step forward. Environmental, Social and Governance (ESG) considerations also occupied the minds of panellists and attendees. A critical consideration for investors worldwide, the question arose of how we account for ESG in a consistent and sustainable way in our reporting. There was also a recognition that greater focus needs to be given to reporting in the public sector, with much focus at present on large business and the private sector. There was a strong sense in the discussion that progress along the path towards accruals accounting will assist in the gathering of richer, more reliable financial information.  The Institute’s next webinar on the topic of sustainability on 9 December addresses this issue of ESG reporting: A guide to Environmental, Social and Governance (ESG) Best Practice: What do investors looks for? A free webinar in association with Goodbody, it will bring together the institutional investor perspective and speakers from two world-class companies, Kingspan and Hibernia REIT, to showcase their best-practice ESG reporting. 

A new report by the OECD outlines how greater global co-operation and a strong, targeted policy action is needed for a sustainable recovery from the COVID-19 crisis. The report outlines how governments need to plan now for the recovery while continuing to live with the virus. The OECD also identifies the need for stronger co-operation between governments in a number of areas including in the taxation of multinationals as the economy becomes increasingly digitalised. For more information you can read the report here.