Accountants can "save the world": Celebrating HM The King as a champion of sustainable finance

In November 2003, the then Prince of Wales, now His Majesty King Charles III, phoned Sir Michael Peat – a fourth generation accountant, whose family is the ‘P’ in KPMG. As Principal Private Secretary, this was a daily occurrence, but, on this occasion, it was Sir Michael’s accounting expertise that The Prince was seeking. This call led to the establishment of Accounting for Sustainability.

At this historic moment of The Coronation of King Charles III, we are reflecting on the influence he has had on the finance and accounting world, since posing that challenge to Sir Michael in 2003, and establishing A4S. The role that HM The King has played in driving awareness and action in relation to a wide range of environmental and social issues is widely recognized. Perhaps less well known – but of fundamental importance – is The King’s role inspiring a transformation of finance and accounting.

As His Majesty said at the launch of his Accounting for Sustainability project (A4S) nearly twenty years ago, "There was a time when we could say that there was either a complete lack of knowledge, or at least room for doubt, about the consequences for our planet of our actions. That time has gone. We now know all too clearly what we are actually doing and that we need to do something about it urgently. Better accounting must be part of that process.”

Since the beginning, His Majesty has inspired leadership, transformed decisions and scaled up action through A4S. The impact achieved can be traced through three key strands of A4S’s work – reporting, decision making and capacity building. In his own words, The King was setting out “to help ensure that we are not battling to meet 21st century challenges with, at best, 20th century decision making and reporting systems”. The tremendous impact achieved towards this goal is clear.

Reporting

In the early days of A4S, a key workstream was focused on joining the dots between the then-siloed worlds of financial reporting and sustainability reporting, developing early recommendations for a ‘connected reporting framework’, eventually to become the Integrated Reporting Framework. This work, and that which followed, has had a major influence on reporting. In 2009, the International Integrated Reporting Committee (IIRC) was created at an A4S meeting hosted by The King at St James’s Palace. The IIRC was housed within A4S until 2011. After 10 years of promoting integrated reporting, the IIRC merged into the Value Reporting Foundation and then, in turn into the IFRS Foundation, to support the development of the International Sustainability Standards Board (ISSB) in 2021ⁱ. The ISSB is soon to release the first set of global sustainability-related reporting standardsⁱⁱ – a key milestone that has its roots in work started by The King two decades ago.

Another key influence that has shaped the world of reporting is the Task Force on Climate-related Financial Disclosures (TCFD), which emerged from a meeting of financial institutions convened by The King through A4S. As Mark Carney, then Chairman of the Financial Stability Board said, “I’m pleased to say that a few years after Your Royal Highness planted the idea, the TCFD now has supporters around the world.”ⁱⁱⁱ

This taskforce has gone on to produce comprehensive guidance on preparing financial disclosures that reflect the business and financial impact of climate change. TCFD reporting is now mandated by many governments and is supported almost universally by the world‘s largest companies.

A4S’s backing for the TCFD made an important contribution to building market support. Further, the approach and structure of the TCFD recommendations is now being adopted for other areas of focus, including nature (through the Taskforce on Nature-related Financial Disclosures) and social considerations (through the Taskforce on Social-related Financial Disclosures and the Task Force on Inequality-related Financial Disclosures, which have recently jointly announced that they will consolidate into one initiative).

Decision making

Integrating sustainability into reporting is an essential foundation upon which sustainable businesses and economies can be built, but only when the information reported is used to drive decisions. Reporting for its own sake achieves little. The question of how to embed environmental and social issues into strategy and decision making, in particular by accountants and finance professionals, has been a second key strand of A4S’s work since inception.

At the 2012 A4S Summit hosted by His Majesty, and a roundtable held the following June, a group of CFOs were inspired to establish the A4S CFO Leadership Network to provide a space for peer dialogue around sustainability challenges as well as to develop practical guidance to transform strategy and decision making. The network – the first of its kind – brings together CFOs from large organizations globally, with members now representing a total combined revenue of over US$1.5 trillion. Over the years, the network has released guidance covering every area of finance function decision-making – from strategic planning, budget and forecasting, capex, and management information, to valuations, investor relations and engaging along the value chain. This Essential Guide series, has enabled organizations to transform their decisions, putting social and environmental issues at the centre of actions taken. Further, CFOs involved in A4S’s work make annual commitments to action, driving tangible progress towards a net zero, nature positive economy in which people can thrive.

Alongside a focus on climate change and a wide range of social issues, His Majesty has for decades raised awareness of the collapse in ecosystems and biodiversity, and the consequences for society and the economy. In 2014, A4S helped to form the Natural Capital Coalition (now the Capitals Coalition)^iv to create a decision-making framework – the Natural Capital Protocol – that enables organizations to identify, measure and value their direct and indirect impacts and dependencies on natural capital. Natural capital remains a key focus of A4S’s work.

In addition to A4S’s work with CFOs, The King has long recognized the important role that the capital markets play in financing our future. The A4S Asset Owners Network, formed in 2017, was born out of this work. The network brings together chairs of pension funds, their pooling partners, investment committees and endowments to learn from peers and embed sustainability into strategic and investment decision-making processes. Outputs have included the creation of a pension toolkit, sharing learning with others.  

Further, His Majesty has on many occasions helped A4S to bring together leaders from across the investment value chain to identify barriers to action and find solutions. The Finance Leaders’ Summit held in 2018 is one such event, which sparked the Investor Forum at the G20 later that year, “an important first step towards crowding in the private sector investments that will be fundamental for speeding up inclusive and sustainable economic growth to improve the lives of billions across the world and achieving the United Nations’ Sustainable Development Goals by 2030”^v. 

Capacity building

To scale up action at the pace needed, it is essential that the finance and accounting community have the knowledge, skills and desire to respond. This is another area where His Majesty has been instrumental. A4S’s first network, formed in 2008, brought together a group of leading accounting institutes from across the globe to form the A4S Accounting Bodies Network (ABN). ABN members represent around two-thirds of the world’s accountants and have committed to a set of five principles, including to incorporate accounting for sustainability in training programmes and professional development requirements. Annually, His Majesty has brought together these global representatives, together with CFOs, regulators, standard setters and investors, at the A4S Summit to report back on progress and encourage further action.

More recently, in 2021, the CEOs of 14 ABN members committed to net zero targets and to using their reach to encourage and provide their members with the training, support and resources they need to establish their own net zero pathways and reduce GHG emissions. Further they committed to provide sound advice to help governments create the policy and regulatory infrastructure necessary for a just transition to a net zero carbon economy. ABN members have worked with A4S to create a wide range of guidance, including for SMEs, to support action.

As well as building capacity through the ABN, A4S works directly with finance professionals to equip them with the knowledge and skills needed to take action. In 2020, the A4S Academy was launched to provide an 18 month learning and implementation programme, with the outcomes achieved captured in the annual yearbooks released upon graduation. Further, A4S is partnering with a number of accounting bodies to train current and future generations of accountants, leveraging the guidance and practical examples from the Essential Guide series.

The future

A4S is proud to have benefited from His Majesty’s patronage over the past two decades and to remain one of The King’s charitable groups. Substantial progress has been made, but there remains a huge amount to do if we are to stave off the worst impacts of climate change, restore nature and build thriving communities. As The King has frequently reminded us, time is running out. We know what we need to do, and A4S, as well as our many members and supporters are committed to playing our part in taking action.

We look forward to continuing to support our founder HM The King, and wish him a long and successful reign, one in which the changes he has sparked create a sustainable future for all.

References:

[i] The IIRC first merged with the Sustainability Accounting Standards Board (SASB) to create the Value Reporting Foundation in 2021, which was soon after merged into the IFRS Foundation along with the Climate Disclosure Standards Board (CDSB) on the creation of the ISSB.

[ii] The IFRS Sustainability Disclosure Standards

[iii] This quote is taken from a public letter sent to The King from Mark Carney to celebrate the then Prince of Wales’s 70th birthday. At the time Mark Carney was the Governor of the Bank of England and Chairman of the Financial Stability Board, under the auspices of which the TCFD was created.

[iv] Initially called TEEB for Business

[v] https://www.worldbank.org/en/news/press-release/2018/11/30/foro-de-inversores-reune-a-lideres-del-g20-y-ceo-para-captar-inversiones-sostenibles

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