CPA Canada study shows sustainable debt critical for economic change

Joint research with IFAC also addresses a number of difficulties that must be addressed for all capital market players' benefit

CPA Canada study shows sustainable debt critical for economic change

As countries turn to sustainable debt to help fund projects that advance environmental, social, and governance (ESG) goals, a new report by the International Federation of Accountants (IFAC) and the Chartered Professional Accountants of Canada (CPA Canada) highlights the challenges and opportunities in the space.

"Trust and confidence in this relatively new, still evolving, and rapidly expanding market is critical,” Kevin Dancey, CEO of the International Federation of Accountants (IFAC), said in a statement unveiling the study. “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.”

According to Dancey, the accountancy profession can play a role in maintaining the integrity of the market, particularly through verification of the details of bond programs through both pre-issuance information and annual investor updates.

But even as the sustainable debt market has evolved greatly in recent years, the study, whose underlying research was conducted by PwC Canada for IFAC and CPA Canada, found a number of concerns that must be addressed for the benefit of all capital market players

The profusion of voluntary, market-driven guidance; a lack of shared understanding of what projects and activities qualify as "green" or "sustainable"; and inconsistent reporting, impact measurement, external review, and assurance methods are just a few of the issues.

"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."

Both IFAC and CPA Canada lauded the IFRS Foundation’s formation of the International Sustainability Standards Board (ISSB) as part of the wider movement to put sustainability front and center for business.

Globally acknowledged sustainability standards will improve the uniformity and comparability of ESG disclosures, which will assist to offset some of the difficulties outlined in the report.