IFAC and CPA Canada Study Says Sustainable Debt Helps Finance Economic Transition

Countries across the world are looking for ways to reinvest resources in activities that will help them transition to a more sustainable, low-carbon economy. Investors and regulators are looking at the sustainable debt market to raise funding for projects that advance environmental, social, and governance (ESG) goals.

The report, Navigating the Sustainable Debt Market: Enhancing Credibility in an Evolving Market, is the outcome of a collaborative effort between IFAC and the Chartered Professional Accountants of Canada (CPA Canada), which commissioned PwC Canada to perform the underlying research.

While the sustainable debt market has changed dramatically in recent years, the study found several concerns that must be addressed for the benefit of all capital market players. The profusion of voluntary, market-driven recommendations; 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.

Kevin Dancey, CEO of the International Federation of Accountants (IFAC), said:

"Trust and confidence in this relatively new, still evolving and rapidly expanding market are critical. Like any financial innovation, there are challenges. Smart regulation, standardisation, and external verification or assurance are needed to protect investor interests, mitigate the risk of greenwashing, and enhance transparency."

"Verifying the details of these bond programs—both pre-issuance and in the form of annual updates for investors—is an essential part of maintaining integrity. The accountancy profession can help drive progress."

The formation of the International Sustainability Standards Board (ISSB) by the IFRS Foundation is welcomed by IFAC and CPA Canada as part of the movement to put sustainability front and centre for business. Globally acknowledged sustainability standards will improve the uniformity and comparability of ESG disclosures, which will assist in offsetting some of the difficulties outlined in the paper.

Pamela Steer, president and CEO of CPA Canada, said:

"Sustainability is increasingly being integrated into business, investment, and financing decisions. 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."

Source: Yahoo Finance

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