G7 Executive Talk Series

Branded Story / CPA Canada

Trust through
Climate Action

Trust forms the bedrock of our society and economy. It is essential for rational discourse and evidence-based decision-making in the public interest. With the proliferation of fake news, media distrust and increased demands for transparency, public and private sector institutions need to focus on building and maintaining trust with their stakeholders.

During Canada’s 2018 G7 Presidency, Canada has an opportunity to build trust and lead on a number of themes through the lens of climate change. An inclusive and just transition to a resilient low-carbon economy requires investing in growth that works for everyone and preparing for jobs of the future. Combatting climate change can create new economic opportunities and jobs for Canadians if efforts are supported by thoughtful and well-informed policies that consider a broad range of stakeholders.

However, trust across the G7 countries is in decline. According to the 2018 Edelman rust Barometer, all G7 nations fell into the category of “Distrusters” on the Trust Index 2018, with less than 50% of the general population trusting their country’s institutions. The Edelman Trust Barometer is a 28-market index that tracks the level of trust in institutions annually for the past 18 years. This year, the United States experienced a record-breaking drop in public trust. Falling by nine points to the bottom quartile of the index, it was the steepest decline in US since the survey’s inception.

Society’s expectations of corporate leaders are evolving. Nearly 7 in 10 respondents say that building trust is the top priority for CEOs and nearly two-thirds say they want CEOs to take the lead on policy change instead of waiting for government. In order to encourage behavioural shifts in our society, climate change actions must focus on relevant facts and evidence.

Canadian Perspective
As a signatory to the Paris Agreement, Canada needs to work harder to achieve greenhouse gas emission reduction targets of 30% below 2005 levels by 2030. Further, there is an opportunity to build a nationwide strategy to adapt to the impacts of climate change.

In March 2018, Canada’s auditors general issued a collaborative report on Perspectives on Climate Change Action in Canada – an unprecedented effort to work together to examine government responses to a critically important issue.

According to the auditors general, “the impacts of a warming climate and extreme weather events are already being felt in Canada and are forecast to become more severe and more frequent… Beyond environmental and physical impacts, climate change is also expected to have significant economic and social impacts.”

Their findings noted more than half of governments did not have greenhouse gas emission reduction targets, and most governments had not fully assessed climate risk, nor developed adaptation plans.

This is concerning for a country like Canada. The rate of warming in Canada is about twice the global rate – a 2 degree Celsius increase (the goal of the Paris Agreement) translates into a 3 or 4 degree Celsius increase for Canada. Canada is already experiencing roughly 2 degrees Celsius of average temperature rise and an increase in extreme weather events causing record-breaking economic losses according to the Insurance Bureau of Canada. The time for climate action is now and trust will be the foundation for effective collaboration.

Public & Private Sector Collaboration
Climate change continues to be one of the top global risks identified by the World Economic Forum in its 2018 Global Risks Report. Climate-related risks will amplify over time due to their linkage with other global risks such as resource scarcity, increasing energy demand and large-scale involuntary migration. With a world population forecasted to reach almost 10 billion people by 2050, we must collaborate and be innovative in our response to climate change.

It is not the sole responsibility of government to address climate issues – it is a shared responsibility among government, business and consumers. According to Mission 2020, led by Christiana Figueres, former Executive Secretary of the United Nations Framework Convention on Climate Change (UNFCCC), $1 trillion in annual investment in climate action is needed to meet the goals of the Paris Agreement and about 80% will come from the private sector.

Transparency and the Role of Business
Global business leaders and investors recognize climate change as a business issue. The impacts of climate change are ubiquitous, extending across markets and borders. Climate-related risk is systemic and its impacts can be direct and indirect. The importance of mitigating and adapting to climate change cannot be understated due to the economic value at stake. According to the US-based Sustainability Accounting Standards Board (SASB), 93% of US equities are facing material risks due to climate change, representing 72 of 79 industries researched.

To enable the efficient allocation of capital by the investment community, businesses must enhance their disclosure of climate-related financial information. The Task Force on Climate-related Financial Disclosures (TCFD), established by Mark Carney and chaired by Michael Bloomberg, is a strong example of climate change as a financial issue. Recognizing that unpriced climate risks could impact global financial stability, companies with a combined market capitalization of $6.3 trillion USD are publicly committing to supporting the TCFD recommendations and improving their climate-related disclosures.

Disclosure is an important focus area for the private sector given its strong potential to influence behavioural change. After all, what gets measured gets managed. Investors are incorporating climate change considerations into their investment decisions. Companies are utilizing this information to set strategy, manage risks and make better decisions for their business’ long-term future.

Ultimately, senior executives and Boards of Directors are responsible for executing and overseeing the company’s strategic response to climate change issues. It is essential that business leaders set a strong tone at the top for taking meaningful action on climate change and that their boards are knowledgeable and actively engaged in creating a strategy that addresses climate risk. Private sector companies that incorporate climate change into strategy will be well-positioned to take advantage of new opportunities.

Bold action is needed in today’s business planning cycles to realize the opportunities in tomorrow’s economy. Companies must follow through with climate commitments with the full support of their executive team and Board of Directors.

As a signatory to the Paris Agreement, Canada needs to work harder to achieve greenhouse gas emission reduction targets of 30% below 2005 levels by 2030.

Role of Accountants
Transparency is essential in maintaining and building trust in our institutions as we work together in combatting climate change. Accountants add substance and evidence to the climate change conversation – an essential ingredient to building trust with stakeholders.

Accountants act as trusted advisors to public and private sectors. As governments and businesses move to set targets to achieve Canada’s climate change goals, reporting on progress over time is an essential part of the process. By establishing internal controls and processes, they can enable accountability by ensuring the reliable measurement and reporting of climate-related information.

Accountants in leadership positions excel at translating data and information into actionable insights for strategic decision-making. This information is useful to senior executives and Boards of Directors in setting targets and measuring performance over time. It is also useful to investors allocating capital in alignment with their climate change investment strategies.

However, they cannot do it alone. Accountants must work with other disciplines and across functions. Climate change requires an interdisciplinary and integrated response. We have an opportunity to establish global best practices here in Canada. In order to do this, we must build capacity to bridge the gap between plans to address climate change and the tangible actions required to achieve real progress on this burning issue.

Role of Consumers
Consumers also have a role to play. The largest single threat to the ecology and biodiversity of the planet in the decades to come will be global climate disruption due to the buildup of human-generated greenhouse gases in the atmosphere. Carbon is tied to consumption and we continue to consume more resources. As our population grows, so will consumption. We must educate, and encourage consumer awareness that will lead to individual actions.

Time to Act is Now
We are in this together. A just transition to a resilient low-carbon economy requires informed and holistic decision making that leaves no Canadian behind. It is our shared responsibility to build and maintain public trust in the economic shift toward a more sustainable world. In doing so, we must:
Recognize and act on the need for public and private sector collaboration
Enhance climate-related financial disclosures for improved decision-making and transparency
Demonstrate bold private sector climate change action and leadership
Leverage a broad range of subject matter expertise, including professional accountants
Build capacity through education and training opportunities

With trust, transparency and coordinated climate action, we can make a significant shift in our stewardship of the planet.

Gordon Beal, CPA, CA, M.Ed.
Vice President – Research Guidance and Support,
Chartered Professional Accountants Canada (CPA Canada)

Gord oversees a team of senior professionals who conduct technical research and produce guidance and thought leadership resources to help shape the future of the CPA profession. Areas of focus include strategy, risk and performance management; external reporting and audit; and corporate oversight and governance. Climate change and other sustainability issues, along with the impact of emerging technologies, are core elements of this work.

Gord leads CPA Canada’s strategy on climate change and the role of CPAs in creating sustainable enterprises. Since 2013, he has been a member of Canada’s National Climate Change Adaptation Platform Plenary and is a member of the National Assessment Advisory Committee on Canada in a Changing Climate. Gord is also on the Board of Directors for the Clean Air Partnership, a Toronto based not for profit organization focused on advancing the implementation of actions to foster low-carbon, resilient communities.

Prior to CPA Canada Gord has over 15 years of experience in senior roles in Canada’s manufacturing and construction sectors, professional audit and advisory services, in addition to a senior training and development role in the Ontario Ministry of Finance. Gord is a CPA, CA and has a Masters in Education that focused on the role of leadership in organizational learning and adaptation.

Gigi Dawe LL.M
Director – Corporate Oversight and Governance,
Research Guidance and Support – CPA Canada

Gigi Dawe leads the Corporate Oversight and Governance department at the Chartered Professional Accountants of Canada (CPA Canada). As such, she oversees CPA Canada’s development of influential, thought leading resources and events that improve board performance. Gigi launched the governance discipline at CPA Canada to facilitate enhanced board and executive response to market demands. Her history includes consulting in organizational development in a variety of industries.

Gigi is a board member of Youthdale Treatment Centres. She is also on the International Corporate Governance Network’s Corporate Board Governance Committee, sits on the advisory board of Women Get on Board and of Simon Fraser University’s Next Generation Governance Project. She is a past board member of Active Healthy Kids Canada and Family Daycare Services Toronto. Gigi is a member of the National Association of Corporate Directors, the Institute of Corporate Directors, and the International Corporate Governance Network.

Gigi obtained a Master of Laws at Osgoode Hall Law School. She teaches Corporate Responsibility and Ethics in the Masters of Financial Accountability program at York University.

Sarah Keyes, CPA, CA
Principal – Strategy, Risk and Performance,
Research Guidance and Support – CPA Canada

Sarah Keyes is a Principal at Chartered Professional Accountants of Canada (CPA Canada). She develops research and thought leadership on climate change issues and the implications for business decision-making, reporting and corporate governance. Prior to CPA Canada, Sarah worked as a Senior Auditor in the mining and extractives sector at PricewaterhouseCoopers and as a Senior Energy Consultant at MNP.

She is a member of the Energy and Economics Working Groups as part of Canada’s Climate Change Adaptation Platform convened by Natural Resources Canada. Sarah is certified in ISO 14064-3: Greenhouse Gas Verification and Validation. She is a Chartered Professional Accountant, Chartered Accountant (CPA, CA) registered in Ontario. Sarah also holds a Bachelor of Commerce in Accounting with distinction from McGill University.