COP (Annual United Nations Climate Change Conference)
COP28
As well as progress towards the existing Paris goals, COP28 will concentrate on:
AIA has signed a climate declaration alongside IFAC in support of new ISSB climate standards, to help drive an enhanced global corporate reporting system.
Update: 13th December 2023
COP28 closed today with an agreement that signals the “beginning of the end” of the fossil fuel era by laying the ground for a swift, just and equitable transition, underpinned by deep emissions cuts and scaled-up finance.
In a demonstration of global solidarity, negotiators from nearly 200 Parties came together in Dubai with a decision on the world’s first ‘global stocktake’ to ratchet up climate action before the end of the decade – with the overarching aim to keep the global temperature limit of 1.5°C within reach.
“Whilst we didn’t turn the page on the fossil fuel era in Dubai, this outcome is the beginning of the end,” said UN Climate Change Executive Secretary Simon Stiell in his closing speech. “Now all governments and businesses need to turn these pledges into real-economy outcomes, without delay.”
Green Finance Education Charter
The government, the Green Finance Institute, and a number leading financial professional bodies, including AIA, are signatories of the green finance education charter, designed to embed green finance and sustainability into the core curricula, new qualifications, and the continued professional development of accountants.
Each of the signatories acknowledge the collective responsibility of the global community including the banking, finance and professional services sectors to deliver Article 2.1c of the Paris Agreement and the UN Sustainable Development Goals.
Budget Statement 2023
Chancellor Jeremy Hunt has unveiled the contents of his Autumn Statement in the House of Commons, with a focus on a rise in the National Living Wage and a cut to National Insurance.
The government is to cut National Insurance for both self-employed and employed taxpayers earning more than £12,570 and National Living Wage will rise from £10.42 to £11.44 per hour in April next year.
He also announced an extension of the 75% discount on business rates up to £110,000 discount for hospitality and leisure businesses for another year and all alcohol duty is to be frozen until 1 August 2024
Mention ESG and historically climate change would spring first to mind. Its negative impact on biodiversity, rising green house gases emissions, melting ice around polar regions and wild fires all hit the headlines on a regular basis. These are all important issues but as Sonia Shah, the Financial Regulation - ESG and Climate Risk Lead at Grant Thornton, points out, there are others, including environmental waste, depletion of resources and air and water pollution.
Speaking at the recent ACCA virtual Internal Audit Week, she alerted her audience to the wide range of issues falling under the ESG umbrella. “Alongside the environmental considerations, there are also a wide range of social matters, such as human rights, impact on local and indigenous communities, employee relations and up-skilling of employees,” she said. “All of these are of interest to a wide range of stakeholders in ESG.”
ESG structures are being created across every board and every industry but Sonia said that all organisations need to consider what is actually relevant to their business. Last year was “the year of ESG” and this was evidenced by a whole host of documentation coming out and discussions taking place around them. What was previously perceived as good for business is now a necessity for long-term sustainable growth.
In 2015, 193 member states of the UN General Assembly signed up to a 15-year plan to fight poverty and inequality, end injustice and protect the planet. Lying at the heart of the plan are 17 Sustainable Development Goals, including action on climate. The same year saw the Paris Agreement, which initially set a goal to limit temperature rises to two degrees celsius, although this has now been reduced to 1.5 degrees celsius.
Meanwhile, the UK task force of regulators and government departments are considering how the expectations in the Green Finance Strategy can be met, while the Task Force Climate-related Financial Decisions (TCFD) has been developing voluntary climate-related financial disclosures that will be useful to investors, lenders and underwriters in understanding material risks. The latter’s final report sets out overreaching recommendations in the areas of governance; strategy; risk management; and metrics and targets.
Making commitment a reality
Sonia emphasised that the time for simply making statements on ESG is over. “As auditors, we need to be aware that if our firm has made an ESG commitment, stakeholders will want to know what frameworks are being set up and what is actively being done in terms of identifying material risks and growth opportunities ,” she said. “Paying lip service to ESG is no longer acceptable.”
All organisations need to know what impact they are having on the environment. “I can’t emphasise disclosure enough because everyone is going to be looking at this,” Sonia pointed out. “What’s more, failure to disclose can have a hugely negative effect on the reputation of a business.”
Risk management is very important for the wider ESG framework and boards need to sign off on risk appetite and tolerance levels against the various risks identified. They need to be familiar with the risks modelled and how they effect the long-term horizon.
So how are risks being captured, monitored, managed and mitigated? These are all familiar terms to Internal Auditors. The tools needed to capture risk include data and there is a lot available. Meanwhile, in terms of governance, it is important to remember that there is no need to try to create a new framework but simply to extend it to include ESG risks. “You need to assess what kind of reporting is required and what challenges need to be made,” Sonia concluded. “All three lines of defence have an important role to play.
“This is a journey for organisations and internal auditors have a key role to play in it.”
At Forsyth Mackenzie we recognise that ESG and corporate performance are intrinsically linked. Recent studies have consistently highlighted that firms that perform strongly across all three factors of ESG outperform the market and generate longer-term value.
We will help to identify and quantify your ESG credentials. We believe in a new way of accounting - for the people and planet. We help clients who are working towards a more environmentally conscious and socially fair future.
Environmental performance
Social
Governance
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