Sustainable debt key to financing economic transition: IFAC and CPA Canada study

[News]

Countries around the world are searching for ways to shift capital investments into activities that support the transition to a more sustainable, low-carbon economy. To finance that massive change, investors and regulators are looking to the sustainable debt market as an important vehicle in raising funds to finance projects that advance environmental, social and governance (ESG) objectives.

“Trust and confidence in this relatively new, still evolving, and rapidly expanding market is critical,” said Kevin Dancey, CEO of the International Federation of Accountants (IFAC). “Like any financial innovation, there are challenges. Smart regulation, standardization and external verification or assurance are needed to protect investor interests, mitigate the risk of greenwashing and enhance transparency. Verifying the details of these bond programs—both pre-issuance and in the form of annual updates for investors—is an essential part of maintaining integrity. The accountancy profession can help drive progress.”

A new, comprehensive study delves into the challenges and opportunities that exist in the sustainable debt market – Navigating the sustainable debt market: Enhancing credibility in an evolving market – is the result of a collaborative effort by IFAC and Chartered Professional Accountants of Canada (CPA Canada), who recruited PwC Canada to conduct the underlying research.

While the sustainable debt market has evolved significantly over the last few years, the study identified a number of issues that need to be addressed for the benefit of all capital market participants. These challenges include: the proliferation of voluntary, market-driven guidance; lack of a common understanding of what projects and activities qualify as “green” or “sustainable”; and inconsistent reporting, impact measurement, external review and assurance practices.

“Sustainability is increasingly being integrated into business, investment and financing decisions,” said Pamela Steer, president and CEO, CPA Canada. “Serving the public interest is core to the global accounting profession. It has a critical role to play in advancing sustainable finance. Collectively, the profession will continue to advocate for better policy, regulation and standards in this area and the study will help inform the dialogue.”

As part of the overall push to make sustainability front and centre for business, IFAC and CPA Canada welcome the establishment of the International Sustainability Standards Board (ISSB) by the IFRS Foundation. Globally accepted sustainability standards will enhance the credibility of ESG disclosures by improving their consistency and comparability and this will help mitigate some of the challenges identified in the report.

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