Key Takeaways from COP28 – What CPAs Need to Know

The United Nations’ annual Conference of the Parties (COP) 28 in Dubai has wrapped up, leading to many headlines as well as discussions about how best to combat anthropogenic climate change. And though the biggest headline from the event was the historic decision by nations to transition away from fossil fuels, COP28 also highlighted many elements that will impact the work of CPAs, including sustainability disclosures and the evolving sustainability standards. 

Here’s what Ontario CPAs need to know about COP28:

Three Key Takeaways for CPAs

COP28 highlighted the broad-based global support and need for companies to begin preparing for mandatory sustainability disclosures. Some of the major announcements made at COP28 relevant to the profession include:

1. The International Sustainability Standards Board (ISSB) and International Organization for Standardization announced their commitment to future cooperation towards effective communication about sustainability-related risks and opportunities. This announcement further cements the International Financial Regulatory Standards (IFRS) Sustainability Disclosure Standards as a global baseline for sustainability reporting.
2. The ISSB formally launched the IFRS Sustainability Knowledge Hub, a key resource for all sustainability reporting and assurance professionals in the uptake of the ISSB’s IFRS Sustainability Disclosure Standards.
3. Signaling the importance of global, high-quality consistent sustainability disclosures, close to 400 organizations signed a Declaration of Support for the IFRS Sustainability Disclosure Standards, including:
   • Corporate membership groups representing thousands of companies globally, who were joined by more than 140 individual organizations expressing their support.
   • Investor groups representing investors with more than $120 trillion Assets Under Management (AUM) from around the world, who were joined by more than 70 institutional investors individually who expressed their support, including many Canadian asset managers.
   • More than 25 individual stock exchanges, and stock exchange associations representing over 40 exchanges expressed their support.

What is The Conference of the Parties (COP)?

The annual Conference of the Parties (COP) is the main climate decision-making body which assesses progress on the goals set forth by the 2015 Paris Agreement – a legally binding international treaty on climate change under the United Nations Framework Convention on Climate Change (Convention).

What is the objective of the Convention?

The Convention aims to stabilize greenhouse gas concentrations at a level that would prevent harmful human-made disruption of the climate system. This objective gave rise to the 2015 Paris Agreement, which aims to limit global warming from greenhouse gas emissions to well below 2 degrees Celsius (2°C) – preferably below 1.5 degrees Celsius (1.5°C) – above pre-industrial levels by the end of the 21st century.

How close are we to hitting the target set out in the Paris Agreement?

While the preferred target of the Paris Agreement is 1.5°C, the most recent Emissions Gap report, issued by the United Nations just before COP28, reached a sobering conclusion: that the world faces between 2.5°C (based on countries’ conditional pledges) and 2.9°C (based on countries’ promises of action) of warming above pre-industrial levels by the end of this century.

What sort of impact can we expect if we miss the target?

As a consequence of increased temperature levels, economic growth may be weakened through damage to capital stock, labour supply and labour productivity. Additionally, they can increase the cost of food and energy.

A recent report from S&P Global found that by 2050 if global warming does not stay well below 2°C, up to 4.4% of the world’s GDP (approximately $4 trillion) could be lost annually (assuming no adaptation), due to adverse physical effects of climate change.  

This highlights the economic importance of limiting global warming.

How ready are companies to report on IFRS Sustainability Standards?

While there is global support for the ISSB’s IFRS Sustainability Disclosure Standards (Standards), a recent report from E&Y released just before COP28 found that companies are unprepared for reporting under the Standards, with the quality of climate disclosures remaining low at 50%. This highlights the need for capacity-building resources to advance reporting.

Against this backdrop, at a panel event for Sustainability Disclosures Driving Climate Action, the Association of Chartered Certified Accountants (ACCA), the International Organization of Securities Commissions (IOSCO), The International Federation of Accountants (IFAC) and ISSB highlighted the critical role that the accountancy profession has to play in climate action, both to lead long-term valuation creation through transparent reporting and to champion responsible practices that serve the public interest.

These organizations also emphasized the importance of maximizing harmony between international and national sustainability disclosure standards, ensuring corporate sustainability reporting avoids greenwashing and building capacity so preparers and users of corporate sustainability disclosures have the skills and knowledge they need.  

To learn more about sustainability reporting standards and regulations impacting Canada, please visit CPA Ontario’s Sustainability Simplified.