Most organizations ‘want’ to go green, but the hard reality is that the initial hit to the company coffers can still stand in the way of a corporation taking that leafy leap. For many, it simply comes down to dollars and cents.
And until now, assessing the effects of climate change has remained largely qualitative.
Well, the Chartered Professional Accountants of Canada in conjunction with the Ontario Teachers’ Pension Plan have just announced a new framework that will make it easier to create real numbers around climate change risks to company valuations and decision-making.
When it’s all down on paper, it means it’s one important step closer to companies being able to ‘show their work’ and get buy-in from across the board that not only makes sense for the planet, but for the company’s pocketbook too.
Read more right here, direct from the CPA release:
TORONTO, Feb. 25, 2021 /CNW/ – The impact of climate change and business valuations are inextricably linked but quantifying the actual effects remains a challenge. A new publication by CPA Canada, The Ontario Teachers’ Pension Plan and others has been developed to help business valuators price climate change risks and opportunities for organizations.
The A4S Essential Guide to Valuations and Climate Change – offers 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 Guide, 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.”
Charles-Antoine St-Jean, President and CEO of Chartered Professional Accountants of Canada (CPA Canada).
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.
Contributing members to this guide include Ontario Teachers’ Pension Plan (OTPP) and and CPA Canada.
“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.”
Jessica Fries, Executive Chairman of A4S.
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.
And keep your eyes peeled for more sustainability news right here on TechBomb!
