Governor, Ladies and Gentlemen, I can’t tell you how delighted I am to welcome you here to St James’s Palace this afternoon, and am extremely grateful that you have all taken the time out of your busy diaries to be here – some of you may have been here before in which case, again, I’m afraid to inflict yet another dissertation on you - particularly as I understand that many of you have been working rather hard since yesterday to contribute to A4S’s work and also consider actions which you might take to support progress towards a sustainable future. And I am afraid that we haven’t quite finished with you yet! For those of you who haven’t so far plucked up the courage to commit to action, I hope that I, and of course the good old Governor of the Bank of England, Mark Carney, might just convince you to do so.
Now, as I suspect one or two of you may have heard, I had my 70th birthday last week. It is, I suppose, quite an important biblical milestone to reach! One you never think you are going to and are horrified when you’ve found you have. It has, above all, provided the opportunity to reflect on how much the world has changed over the last seven decades, and how much progress we have made in many areas. It has also, however, underlined just how much social and economic progress has been at the expense of the environment. The “Great Acceleration” as Professor Will Steffen has called it – a rapid growth in indicators such as GDP, and the ownership of telephones and cars – has led to a correspondingly rapid rise in the demands we are placing on the environment – for example, the increase in greenhouse gas emissions or water use.
But I fear I have now reached the point in my life where, having tried for so long to warn of the consequences of failing to take the necessary action soon enough, I do begin to despair of the world we are bequeathing to future generations. Looking back through the archives recently, my sons, to my astonishment, managed to find an early recording of a speech I made in 1970 – 48 years ago! – in which, amongst other things, I highlighted the issue of plastic pollution. At long last, serious attention is being given to find solutions to this, and other environmental crises, but only after we have allowed the problem to grow to a point where it is nearly insurmountable. We are facing a truly terrifying combination of risks, such as dangerously accelerating climate change, water scarcity, ecological degradation, unsustainable population growth and massive resource depletion. And I have just come back from a visit to West Africa where you can see these huge challenges that people are facing in these parts of the world, and of course, these risks are exacerbated by a projected increase in global temperature.
So what world, Ladies and Gentlemen, will our grandchildren face when they reach their 70th birthdays? Without urgent and decisive action, climate scientists have warned that global temperatures could rise on average by nearly five degrees above pre-industrial levels by 2100, and are set to continue to rise until we achieve a net zero carbon world. Five degrees – let alone a two degree rise – would make many parts of the world virtually totally uninhabitable, not only for us humans, but also for many other species which attempt to share this planet with us. Having recently visited the hurricane-devastated islands of the Caribbean and those of the Pacific Ocean last year – equally devastated by, in the Pacific’s case, cyclones – whose populations are now struggling on the front line of catastrophic climate change, I can now report first hand that this terrifying prospect is already starting to become a reality, and will only get worse if no drastic action is taken now. And the impacts of these events are not just social; they also have severe economic effects. Earlier this year I visited the Great Barrier Reef in Australia and saw the devastating effect of rising sea temperatures causing coral bleaching. Deloitte, for instance, has calculated that the total economic, social and “icon” asset value of the Reef is 56 billion U.S. dollars. You can understand, therefore, why the report’s authors called the Reef “too big to fail”. And coral reefs around the world, which are vital breeding grounds for the essential fish stocks on which millions of people depend, are similarly threatened.
So ladies and gentlemen, what grandparent could ever countenance leaving such an appalling inheritance to their grandchildren, that’s what I want to know, let alone their children. Could you? All of you? This is precisely why the situation demands such urgent action.
The trouble is that the recent Intergovernmental Panel on Climate Change, or IPCC, report makes clear that our current actions fall woefully and alarmingly short of those necessary to avert catastrophic climate change. Indeed, we are rapidly running out of time to deliver the ambition of keeping the rise in global average temperature to well below two degrees as set out in the Paris Agreement, let alone the more ambitious 1.5 degrees which is absolutely crucial for so many communities around the world.
As the report highlights, as many people may already know by now, the difference between 1.5 degrees and two degrees is actually stark, with a terrifying combination of risks predicted as a result. Extreme weather events, such as the devastating hurricanes recently experienced in Florida, and they tell me last year in the Caribbean that the temperature of the sea has just gone above 30 degrees centigrade and it starts off these appalling hurricane systems developing. The recent typhoons as well testing the resilience of cities in Asia will only increase in frequency. The impact on the Natural world will be limitless – if the planet reaches the two degrees threshold, we could expect to lose 99 per cent of coral reefs, and one model shows marine fisheries would lose three million tonnes of stock at this rise – twice the decline modelled at 1.5 degrees. As I was saying, I have just returned from West Africa where Lake Chad, which provides food for over 40 million people in Nigeria, Cameroon, Niger and Chad, has been shrinking by 90 per cent in size since the 1960s.
Ladies and Gentlemen, all is not yet quite lost, but this really is the final call, I hate to tell you. According to the IPCC report, carbon emissions will need to be cut by 45 per cent by 2030 and come down to zero by 2050 in order to limit temperature rise to 1.5 degrees. However, I would argue that the most alarming part of the report is the assumption of negative net emissions over the second half of the century. In other words, we will need to find ways to extract more carbon out of the atmosphere than we are emitting with, as yet, undeveloped and certainly unproven technologies – which is why, the preservation, and regeneration, of rainforests, along with restoring soil fertility locally, are so crucial as natural carbon sinks.
So what can we do now to bring our world back into some form of balance? It is only by each and every one of us doing everything in our power to highlight the urgency of these issues, to put identification of the solutions to the top of the list of priorities, and to take whatever actions we can to achieve progress, that we might retain the hope of a peaceful, sustainable world in the future. In this regard, a proper, realistic price for carbon and urgent action on tackling perverse subsidy regimes for fossil fuels, fisheries and agriculture would make a big difference.
As you may be aware, in 2015 the United Nations ratified 17 Global Goals for Sustainable Development. These Sustainable Development Goals provide a vision for the future – a vision around which action can be mobilized and where we put Nature and society back at the heart of our considerations. The SDGs call for leadership and practical action from both the public and private sectors, and there is an extremely compelling business case for organizations to deliver the goals. Indeed, it has been estimated that achieving the SDGs will open up 12 trillion US dollars of market opportunities by 2030. Of course, the cost to society, business and the finance community of not achieving a sustainable future is far, far greater.
Well this, Ladies and Gentlemen, is where you come in. If we are to have any hope of achieving these targets, a systematic change is required within both the economy and society. The finance community is absolutely critical to this change in enabling the flow of finance towards sustainable outcomes, as well as enabling sustainability to be considered in all business decision-making. You are all vital in ensuring that this monumental shift, which absolutely must take place, occurs in a measured and transparent way.
People always think there is no life after death. People always think this is going to be death, but it isn’t actually, there are huge opportunities, it seems to me, in doing things in a more sensible way, bearing in mind we have so much of the evidence and information at our finger tips.
So one of the goals of my Accounting for Sustainability Project – A4S – which I established I think, looking back amazingly now, in 2004 - how we ever got it off the ground I have no idea - was to make business decision-making based on sustainability considerations the norm, not this unusual, mad thing. One of the first areas tackled was reporting. A4S launched the International Integrated Reporting Council in 2010, after I’d gone to address the accounting bodies dinner, (the most terrifying experience, just imagine, they all sat there looking absolutely appalled!) so back in 2010 we developed a reporting framework that clearly demonstrates the connection between the strategy that an organization is pursuing and the often hidden social, human and natural capital upon which it depends. I am delighted that the IIRC has been such a success in driving the uptake of truly integrated reporting. And building on this work, I am thrilled that A4S played an important part in the establishment of the Natural Capital Coalition, which is focused on ensuring that the true value of Nature is placed at the heart of decision-making. More recently, A4S helped to inspire the creation of the Task Force on Climate-related Financial Disclosures, which I understand is now having a significant impact on the disclosure of risks and opportunities to the market.
But, of course, reporting this information is not enough, and that is why “integrated thinking and management” has been central to A4S’s work since its inception, most recently through the launch of the A4S CFO Leadership Network in 2013. Needless to say, I am so pleased to have seen the Network develop practical tools that help organizations to embed sustainability into decision-making. And there are two new guides to help you take action. The Canadian Chapter has produced worked examples showing how to account for Social and Human Capital, and the European Chapter has developed guidance on building a finance culture that is fit for the future.
And, ladies and gentlemen, I am also delighted to hear that the Network continues to expand globally with the latest Chapter soon to be launched in the United States, thanks to the hard work and support of Mark Hawkins from Salesforce and Ruth Porat from Alphabet.
Now none of this, Ladies and Gentlemen, would have been possible without A4S’s Accounting Bodies Network which celebrates its 10 year anniversary this year. Members have supported the work of the IIRC, the Natural Capital Coalition and the CFO Leadership Network, and have signed up to five principles, including undertaking thought leadership to engage current members, and embedding sustainability into their professional training. Perhaps, Ladies and Gentlemen, you would all consider making sustainability training more accessible in your organizations too?
As the world moves towards the adoption of sustainable business models – with those organizations which find ways to eliminate the throwaway society and to use natural resources in a sustainable, “circular” way, being the ones which uncover new opportunities and reduce their risks – companies are going to require ever more robust data on which to base decisions. Who is better placed than accountants to provide them with this information?
Now, I am not suggesting that this transition to a sustainable future will be easy. I am suggesting that it is utterly essential for the ultimate viability of life as we know it. We simply have to ensure that our economy is in harmony with Nature’s own economy. So it will require every one of us to work together to “future-proof” our economy, our organizations and, ultimately, our very survival. So ladies and gentlemen, the time for action is right now. Thank you.