Business valuation, climate change guide published by CPA Canada, A4S partners

Charles-Antoine St-Jean is president and CEO of Chartered Professional Accountants of Canada (CPA Canada).

TORONTO, March 3, 2021 – The Canadian accounting profession continues to play a leading role in supporting sustainability business initiatives. As part of The Prince of Wales’s Accounting for Sustainability Project (A4S), CPA Canada and its partners have launched a new publication — The A4S Essential Guide to Valuations and Climate Change — to help business valuators price climate change risks and opportunities for organizations. 

This first-of-its-kind guide offers a five-step framework that enables investment and valuation communities to apply climate change risks and opportunities consistently to their valuations and decision-making. The goal of the guide is for the integration of climate change into valuations to become accepted practice, resulting in better decision making, shifting investment towards sustainable outcomes, and more consistent and transparent disclosures in corporate reporting.  

“Until now, the general approach to considering climate change in valuations has been primarily qualitative in nature. The Essential Guide to Valuations and Climate Change, on the other hand, enables valuators to quantify the impact of climate change on business valuations, providing a more robust, accurate and holistic indication of the true impact of climate change risks and opportunities.” says Charles-Antoine St-Jean, president and CEO of Chartered Professional Accountants of Canada. 

Making sustainable business, business as usual

Globally, investors and businesses are implementing changes to their strategies and investment practices in order to mitigate and adapt to climate change. Organizations that exhibit strong environmental, social and governance (ESG) traits can experience significant benefits, from outperforming their peers and experiencing a lower cost of capital, to minimizing share price volatility as well as attracting and retaining talent more easily. For these organizations, having the ability to price climate change impacts explicitly into their valuations could further benefit their long-term performance and reputation. 

The guide was developed as part of The Prince of Wales’s Accounting for Sustainability Project (A4S), in partnership with CPA Canada, finance teams from its CFO Leadership Network, global institutional investors and industry experts. Contributing members to the guide include Ontario Teachers’ Pension Plan (OTPP), New Zealand Superannuation Fund, OMERS, Brookfield Asset Management, Caisse de dépôt et placement du Québec (CDPQ), Chartered Business Valuators Institute (CBV Institute) and CPA Canada. A4S partnered with CPA Canada to run the Canadian Chapter of the CFO Leadership Network, which is developing a number of projects to address key challenges for organizations in Canada. 

“We are delighted to launch the A4S Essential Guide to Valuations and Climate Change today, which presents an exciting step towards the systematic integration of climate change into the heart of business valuations” said Jessica Fries, executive chairman of A4S. “At A4S, our ultimate goal is to make sustainable business, business as usual. Calculating the value of businesses and assets is one of the most important factors determining where investors put their money. By embedding these considerations into the valuation process — using guidance developed by industry professionals and the valuation community — there is potential to make the integration of climate risk become the norm rapidly. 

“We hope that the launch of this guide will spur action from finance and investment teams globally and help accelerate the transition to a net zero, sustainable economy.” 

David McGraw, chief financial officer at Ontario Teachers’ Pension Plan, a member of the Canadian Chapter of the A4S CFO Leadership Network and a key contributor to the guide and framework, stated: “Factoring climate change into valuations is in its infancy. Through this guide we hope to inform the discussion among the valuation, accounting and regulatory communities to encourage moving this forward into accepted practice. By doing so, we would expect more disclosures on the impact of climate change in corporate reporting and a greater oversight by boards on this topic.” 

The full guide and framework, which includes a practical guide and workbook demonstrating the five-step framework in practice, can be viewed at this link.  

Published by Canadian Accountant with files from CPA Canada.