“As a firm, KPMG is clear that climate change is happening and that urgent action is needed to tackle it now. The evidence is not in doubt.”
Every year, the UN convenes the world’s governments at a Conference of the Parties (COP) to discuss how they should tackle climate change.
I have just arrived in Paris to attend this year’s Conference at which the chances of success are higher because all signatories to the United Nations Framework Convention on Climate Change (UNFCCC) have already agreed to sign up to a binding deal by 2015 to reduce their emissions.
Whilst recent meetings have seen limited progress, partly because this is a cyclical issue and the talks are influenced by political cycles, the lack of progress also reflects sharp divisions between industrialised nations that historically have produced most of the greenhouse gases that cause climate change, and developing nations that are hardest hit by climate change, but less able to tackle it.
Now the political landscape has changed. Previous talks have also failed because the US and China – the world’s two biggest emitters of greenhouse gases – have resisted making commitments. However, last year the US announced it would cut emissions by up to 28 per cent below 2005 levels by 2025, and China has said its emissions would peak by 2030.
These are encouraging developments.
At the same time, the cost of emission-reducing technologies has fallen dramatically, and as the number of renewable energy projects has grown, investors have become more comfortable with financing them. New forms of financing have emerged, such as green bonds, yieldcos and crowd funding. The world is thus seeing both resistance and the embracing of new renewable technologies changing at a rapid pace.
As a firm, KPMG is clear that climate change is happening and that urgent action is needed to tackle it now. The evidence is not in doubt. Governments around the world, with help from business and civil society, must work to decouple carbon emissions from economic growth, and move the world towards a low-carbon economy. We must act now.
One of the most important measures is to put a price on carbon, because sending the right market signals prompts change. KPMG has signed the Carbon Price Communiqué that calls for a clear, transparent and robust price on carbon and forms part of the World Bank’s carbon pricing initiative.
Last week, we launched the KPMG Global Survey of Corporate Responsibility 2015 Reporting, this year taking a timely look at Carbon Reporting across the world’s largest companies. Our KPMG report found that only half the G250 (53 percent) stated carbon reduction targets in their company reports. In fact, reporting from the world’s largest companies continues to lack consistency, making it almost impossible for investors to compare one company’s performance against another.
The KPMG Corporate Responsibility (CR) Survey analyses the reporting by 4,500 companies across 45 countries — including the top 100 public and private companies by revenue in Australia. An encouraging local result was the rate of CR reporting — now higher in Asia Pacific than it was in Europe or the Americas. The highest rates in our region were found in emerging economies such as India, Indonesia, Malaysia and South Africa; Australian companies had improved their compliance but there is still a long way to go.
This issue is firmly on the radar of local institutional investors. The market has witnessed pressure from stakeholders on companies to comply with more stringent environmental, social and governance investment guidelines. This has been an influence in Australia’s top resources companies and banks emerging as global trendsetters in corporate responsibility reporting.
There has been a sea change: if you don’t report on CR in Australia, you are now the exception to the rule. Our survey found that while the reporting rate of Australian companies had remained stable year on year with 81 companies producing a CR report in one form or another, 59 (74 percent) of those produced a stand-alone CR report in 2015. This was up from 51 (62 percent) two years ago.
It comes down to the fact there are stakeholders who care about these non-financial metrics. Many long-term investors are starting to realise long-term metrics are more useful than last year’s profit announcement. If an organisation isn’t managing these metrics, it can flow through to both reputational and cost issues.
Whilst in Paris attending COP21, I am looking forward to providing updates on progress at the Conference on important initiatives. I am hoping to be able to transmit some positive news as the world’s leaders get on board with developing a practical agenda to mitigate rising global temperatures and turn climate change around.
A key source of information will be the blog site: climatetalksorg.com.