In the first of a four-part series, Kate van der Merwe considers the interplay between Finance and sustainability against a backdrop of increasingly extreme weather events.
I love the sound of rain and the fresh release as it makes way for breaking sunshine (on those days that it does make way!) So it is hard to imagine the ferocious cruelty people experienced when Cyclone Idai hit Mozambique, Zimbabwe and Malawi in March, killing over 750 people, displacing far more and destroying infrastructure, livelihoods and businesses. Climate change equates to increasing frequency of such extreme weather globally and Ireland is also vulnerable to heavy rainfall frequency and sea level rises (Dublin Bay has risen at twice the global average over the last 20 years).
Growing up in South Africa with an environmentally aware scientist as a father, sustainability is a familiar concept to me and one that has been brought into ever sharper focus in recent years. When I moved from Social Science to qualify as a Chartered Accountant in 2009, there seemed to be little awareness of sustainability within finance. I will investigate this intersection between finance and sustainability in a series of articles, while incorporating economic viability and social well-being.
So first, should you care about climate change? As an inhabitant of this planet, whether you appreciate nature (where you holiday, how you exercise, how you unwind), believe in human rights (how climate change will impact society, particularly the young or marginalised), or are merely concerned with your own net worth (how risks, opportunities and frameworks will fundamentally shift in the future), climate change will affect you.
Most will have a vague awareness of climate change at this point. It is hard not to notice Greta Thunberg’s FridaysForFuture movement (which saw over 10,000 protesters gather in Dublin on 15 March 2019), the frequent research warnings released or senior leaders speaking up on the topic. But let’s pause to ask what climate change is. Since industrialisation, population, manufacturing and consumption have significantly increased – all of which uses energy and resources, contributing to climate change. This form of growth mentality has excluded circular or design thinking, driving up greenhouse gas emissions (for example, CO2 emissions in 2011 were 150 times higher than in 1850). These greenhouse gases, when present in the upper layers of the earth’s atmosphere, exacerbate a “greenhouse effect”, whereby a barrier is created, trapping heat, causing climate change and resulting in more extreme weather patterns that are increasingly wet or dry, hot or cold.
More than 95% of climate scientists agree that climate change is human-induced. While the first voices to warn of climate change back in the 1980s were dismissed as “tree-huggers”, the eccentric is now the denialist. Maybe the enormity of the challenge – its complexity and the global collaborative efforts required – paralysed leaders. Or perhaps the upfront costs of making fundamental systemic changes made career politicians overly cautious. However, if changes are postponed, consequences will continue to escalate with compounded costs and less successful remediation. It is commonly accepted that for businesses to thrive, they must continually innovate for the future and the future is climate change. There is an opportunity cost associated with denial or a failure to act.
The UN’s 2018 IPCC report highlights the danger we face in starker terms than ever before. Impacts are stronger and unfurling quicker than previously predicted, bringing our current growth-based consumptive economy into sharp focus. Following the IPCC report, the World Wildlife Fund (WWF) released a report which found that 60% of the planet’s biodiversity has been destroyed since 1970. Considering the impact on the food sector alone, these two key facts need no narrative:
- The critical loss of pollinators; and
- More than 70% of the world’s most produced crops are reliant on pollination.
This illustrates the significant ripple-effect consequences of climate change. It is not cost-beneficial. There is no opt-out option. Action is urgently needed from every pocket of society, and businesses have significant potential to be positive agents. The growing trend of both awareness and intersection with finance plays out alongside an increasing global sense of urgency.
An existential threat
Climate change is the single biggest challenge facing humanity. It is an existential threat, but shifting towards more sustainable alternatives will help stem the severity of climate change.
Climate change is already on the agenda of major global accountancy bodies and is increasingly referenced by prominent business leaders. In February, the then-Central Bank Governor, Philip Lane, issued a warning on the dangers of delaying climate action, one of which included financial instability. Readers who have been following these developments will have noticed how the intersection between finance and sustainability has been growing rapidly. I firmly believe that this trend will increase to become a critical part of the professional role of Chartered Accountants. If my prediction is wrong, it will be the least of my concerns, as without meaningful engagement from the finance community, the challenges of climate change will not be met. Finance professionals have key roles to play in reporting critical information, directing funds, and making decisions.
Over the next three issues of Accountancy Ireland, I will explore the intersection between the finance world and sustainability, beginning with an examination of our retrospective roles of reporting, including familiar areas such as Environmental, Social, and Governance (ESGs) and sustainability reporting. Thereafter I will look at emerging trends that pose a blend of risks and opportunities.
In closing, to quote Charles Tilley, Chair of IFAC Professional Accountants in Business: “‘Business as usual’ is no longer sustainable”.
Kate van der Merwe ACA is responsible for Global gFA Reporting Optimisation at Google.
You can also listen to Kate on the Accountancy Ireland Podcast, talking about climate change and sustainability.
This article was originally published in the August 2019 issue of Accountancy Ireland.