CPA Canada supports globally consistent climate-related financial reporting
Even as the Trump administration dismisses global warming, an international task force has laid the groundwork for consistent global reporting standards
TORONTO – Canada's national accounting body for Chartered Professional Accountants is drawing a clear line in the “sands” in support of climate change mitigation strategies.
CPA Canada has declared its support of the recommendations made in the recently released international Task Force on Climate-related Financial Disclosures (TCFD), which seek to provide clarity and consistency in reporting climate-related risk, even as the Trump administration has dismissed the threat of global warming.
“Establishing a commonly shared understanding of the business language used to describe climate change issues, enables a clearer discussion of the implications for businesses, investors and global financial stability,” says Joy Thomas, president and CEO, CPA Canada. The national body recently published a study that highlighted inconsistencies in climate-related disclosure among Canadian companies.
According to Rosemary McGuire, director of external reporting research, guidance and support at CPA Canada, “the efforts of the TCFD have put climate-related disclosures in the global spotlight and elevated the dialogue on this subject among governments and the business and investment communities.”
International initiative with Canadian roots
The TCFD was established in 2015 by former Bank of Canada governor Mark Carney, now governor of the Bank of England and chair of the international Financial Stability Board, and chaired by former New York mayor Michael Bloomberg.
The focus of the industry-led task force was to develop voluntary, consistent climate-related financial risk disclosures to be used by companies. Its membership was balanced between those who prepare and those who use financial disclosures, including representatives from audit, banking, insurance and industry sectors.
CPA Canada’s McGuire sees the recommendations as an “important message to capital markets and [an] important driver for improving the level and quality of climate-related disclosures.” In extending beyond businesses to asset managers and institutional investors, those parties “will need to obtain relevant information from the companies they have invested in, thereby encouraging improved transparency throughout capital markets.”
The TCFD emphasis on the mandatory disclosure of material climate-related information has already drawn a sharp rebuke in a report funded by global energy companies. But CPA Canada says mandatory filing “encourages companies to invest in appropriate systems, controls and processes to capture and disclose material climate-related information.”
CPA Canada points out that, under CSA Staff Notice 51-333, public companies must already disclose information on material environmental matters, which includes consideration of climate-related issues. “We hope that the work of the Task Force might lead to improved consistency and comparability of information, at minimum among companies within the same industry,” says McGuire.
Impact of the recommendations
With Donald Trump’s decision to pull the U.S. out of the Paris Accord, the impact of the TCFD report is unknown, though investors have urged widespread adoption of the recommendations, and the Canadian government is supportive of the task force’s work.
According to McGuire, “Greater consistency around climate-related reporting would assist CPAs in providing relevant information for capital and operational decision-making — both internally for senior management and externally for users of financial reports.
“For CPA Canada, our focus is clear — climate change is happening and the time for action is now.” The national body believes that CPAs can and will play a central role in governance, disclosure and successful decision-making related to climate change and its risk mitigation, especially as Canada transitions to a low-carbon economy.
It intends to engage in further discussions with key stakeholders “as we seek to understand the opportunities, challenges and potential benefits of adopting the TCFD recommendations.”
Colin Ellis is the editor-in-chief of Canadian Accountant.