As a professor in non-financial information, integrated reporting and assurance, Nancy Kamp-Roelands presented during the 38^th annual meeting some key findings from the agenda paper. She assisted the UNCTAD secretariat in writing the paper. It is based on an intensive literature research and therefore two student assistants helped her in collecting references. The paper is about climate-related financial disclosures in mainstream entity reporting, the good practices and key challenges. It was one of the two main papers discussed.

The Intergovernmental Working Group of Experts on International Standards of Accounting and Reporting of the United Nations Conference on Trade and Development  (UNCTAD-ISAR) holds annually a meeting where governmental policy-makers, regulators, standard-setters and lead experts in the area enterprise accounting and reporting meet. The mandate of UNCTAD-ISAR is to assist governments all over the world in improving enterprise accounting and reporting to facilitate investment and sustainable development. It focusses on regulatory, institutional and technical capacity building for high quality and internationally comparable enterprise reporting. It is a UN global forum of policy-makers, regulators, standard-setters and lead experts in the area enterprise accounting and reporting.

Low carbon economy

The topic is on the agenda of UNCTAD-ISAR to promote high quality disclosures. There is a growing recognition of the importance of climate-related financial disclosures. Reporting is seen as a driver to accelerate progress towards a low carbon economy. The financial impact of climate change becomes more visible, for example, in situations where extreme weather conditions impact supply chains or the accelerated change towards a low-carbon economy requires different products and services, resulting in an impairment of assets. At the same time, investments in innovation are being seen as raising new business opportunities. Investors are becoming more aware of the financial impact climate change risk may have on their portfolios. In 2017, The Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD) published recommendations that cover four different thematic areas which represent the core elements of how organizations operate: governance, strategy, risk management, and metrics and targets.

The purpose of this paper is to stimulate discussion during the 38^th UNCTAD-ISAR session, but also to provide many references about recent developments that can be considered by the participants at a later stage to improve high quality corporate disclosures in their member states. It is available in English, French, Spanish, Arabic, Russian and Chinese at https://unctad.org/system/files/official-document/ciiisard98_en.pdf

High quality disclosure

The paper describes the major recent developments in international standard development, with the International Financial Reporting Foundation establishing an international sustainability standards board, and the convergence of various initiatives on sustainability reporting currently taking place. It also shows recent publications on relevant indicators with respect to sustainability such as from the World Economic Forum and the Global Reporting Initiative. It identifies thinking on new concepts like the Capitals Coalition disclosing impacts on natural, social and human capital in financial statements. It provides a deep dive on how the recommendations by the TCFD are implemented internationally, regionally and by various national government and regulators in laws, regulations, supervision and other instruments.

Furthermore, the paper describes the progress made by preparers, but also the key challenges of practical implementation of climate-related financial disclosures that still exist. These include for example that the information is still too much generic, it is missing how climate change considerations are included in core business processes. The information in current reporting also lacks how climate change risks are embedded in existing risk processes, such as transition risks and the vulnerability of companies in the supply chain, physical risks and the potential impact on the continuity of the company. With respect to measurement, transparency on the financial impact of climate change can be improved. Further metrics are not always linked to quantitative targets on the medium and long term. The information provided is quite fragmented, rather than truly connected. This makes it difficult for investors to see the full efforts made by organizations. The paper provides an overview of some good practices, tools and guidance developed by various organizations that are helpful to both enterprises and governments to promote high quality disclosures on climate.

Need for expertise

The paper also discusses how support from the full corporate reporting supply chain can accelerate the uptake and quality of climate-related financial disclosures. The corporate supply chain consists of regulators, supervisors, preparers, those charged with governance and auditors. It shows the initiatives of these groups to promote high-quality climate-related financial disclosures.

UNCTAD-ISAR earlier developed an accounting development tool that provides insight in how to build a legal and regulatory pillar, an institutional pillar and a human capacity pillar. A key outcome of both the discussions at UNCTAD-ISAR at its 38^th session, as well as presented in the paper is the need for expertise. There is an urgent need to build expertise on sustainability, including climate change aspects, amongst preparers of annual reports, management, those charged with governance, auditors and investors, as well as amongst regulators and supervisors. As such there is an urgent need for more education on sustainability and how this impacts corporate strategy, risk management and performance, including financial performance.

Important platform

Kamp-Roelands has been attending UNCTAD-ISAR sessions since 1995 and was earlier the chair of UNCTAD-ISAR’s 27^th session in 2010 and chair of the Corporate Responsibility Indicators project. ”In my view, this is an important platform where especially developing economies and economies in transition have a voice. They can share their efforts and challenges with respect to high quality reporting, while leveraging on developments and experiences presented by developed economies. During the meeting various member states share knowledge and learn from each other. It results in the development of tools and guidance to improve the quality of financial and non-financial reporting.

The UNCTAD-ISAR paper and discussions at the 38^th session show how relevant it is that the University of Groningen provides education on sustainability in various ways. For example, the accountancy department offers an ESG (environmental, social and governance)  Reporting & Assurance executive course and jointly with the Dutch accountancy association NBA the University of Groningen Business School offers an online course sustainable entrepreneurship. I am glad to be involved in these initiatives.”

For more information, please contact Nancy Kamp-Roelands (https://www.rug.nl/staff/a.e.m.kamp-roelands/)