At a glance
By Engel Schmidl
The devastation of the 2019-20 Australian bushfire season and other climate events have left many of us feeling worried and even depressed about what we can do about climate change. The term “eco-anxiety” has been coined to describe this feeling of ecological dread.
The American Psychological Association first defined eco-anxiety as “a chronic fear of environmental doom”. Mental health studies from Australia and other countries show there has been a surge in people reporting anxiety about the climate in recent times.
Support for climate action is building in the corporate sector, but is it happening fast enough? Can we transform our eco-anxiety into action that moves the dial? And what role does the accountancy profession have to play in all of this?
Shifting from challenge to opportunity
Ellie Mulholland, the director of the non-profit Commonwealth Climate and Law Initiative and a senior associate in the climate risk governance team at commercial law firm MinterEllison, says corporate professionals such as accountants have a significant role to play in mitigating climate change and creating a more sustainable future for the planet.
“Climate change impacts and the market’s responses and regulatory responses are so profound across so many sectors of the economy,” Mulholland says.
“Today doesn't look like the past and the next decade will look vastly different to today. The risks and opportunities are different, and we need to think afresh about how we’re assessing it to make sure capital is allocated to meet the global goals we’ve set to transition to a sustainable economy.”
Fundamental to this work, Mulholland says, are the corporate finance and governance professionals who can integrate the larger concerns of climate change into new ways of looking at the economy and operating successful enterprises.
“We need to integrate these really transformational concepts that are coming out of climate science into our roles as professionals, as investors, as financial regulators, and we need to do it well,” she says.
Mulholland says the acknowledgement of eco-anxiety is something that can fuel this transition to a new economy, both from individuals within corporations who feel empowered to drive change as well as from external stakeholders, like investors, who can apply pressure to make change happen.
She says it is crucial people don’t fall into despondency and inertia about climate change. Instead, they need to look for opportunities within their roles where they can have a positive influence on the outcomes.
Increased support for climate initiatives
In 2015, the Financial Stability Board established its Task Force on Climate-related Financial Disclosures (TCFD). The TCFD was briefed to develop a set of voluntary, consistent disclosure recommendations for use by companies in providing information to investors, lenders and insurance underwriters about their climate-related financial risks.
In 2017, the TCFD released its guidelines on climate-related financial disclosures. Since then, this framework has received ever greater support from companies globally.
In October 2020, the latest TCFD status report found that:
- 42 per cent of companies with a market capitalisation greater than US$10 billion disclosed at least some information in line with each TCFD recommendation in 2019.
- Nearly 60 per cent of the world’s 100 largest public companies support the TCFD, report in line with the TCFD recommendations, or both.
- Expert users of disclosure identified the impact of climate change on a company’s business and strategy as the “most useful” information for financial decision-making. Notably, this information has the lowest level of disclosure across the recommendations, with just one in 15 companies making this disclosure.
- The continually growing support for accountability frameworks such as the TCFD guidelines is a reflection of the broader support climate initiatives have enjoyed in recent years.
While the street protests of groups like Extinction Rebellion have been the public face of climate action, corporate and professional groups have also moved towards embracing the call for action. It’s in this sphere that professionals are playing a pivotal role in reframing discourse and implementing practical improvements to tasks like corporate reporting.
Professional response to climate initiatives
CPA Australia has taken a strong stance on climate action and the organisation was one of 14 signatory bodies to Accounting For Sustainability’s Call To Action In Response To Climate Change accord statement. That pledge and other initiatives show the profession is taking the climate challenge seriously.
CPA Australia policy adviser ESG, Dr John Purcell, believes we’re heading in the right direction, but a lot of difficult work is yet to be done.
“The past year has sharpened our focus around the importance of making sure our economic systems, including elements like corporate reporting, can promote prosperity and protect our planet,” says Purcell.
“Our history has been to ignore externalities and view nature and the planet as something which can be exploited for economic gains.”
He says enacting change at a practical level involves rethinking some foundational finance concepts around risk, wealth and asset management.
“Change is threatening. Change undermines your expectations about your future and your future security. If you put that into a corporate context, you might have to ask, ‘will my business be able to adapt to a new world which is complex and threatening?’ To turn that around, you have to be able to see that this also presents a significant economic opportunity, not just a challenge to your business.
“The view is we have only a decade to address runaway global warming, and when we tie that to its interaction with ecosystem damage and biodiversity loss, no wonder we have the phenomenon of eco-anxiety.
“These may seem to be large, esoteric issues which are remote to what accountants do and think, but these are issues that are moving very rapidly at the moment.”
Change makers
The climate threat may seem overwhelming at times. Eco-anxiety is one of our psychological responses to this external threat to our wellbeing. Using technical skills and professional insights, accountants can play a key role in tackling climate change by identifying risks, quantifying costs and mapping out a more sustainable future.
In the process, at both an individual and corporate level, the psychological dial is shifted from despondency to hope.
The clock is ticking, but accountants still have time to make their climate contribution count and ease our collective sense of eco-anxiety.
