Business has to change its accounting for the climate crisis and Mark Carney needs to go further than he’s suggesting is necessary

Posted on December 30 2019

I'm working on sustainable cost accounting in 2020. Or sustainable cost reporting as it might be renamed, as I realise that means it becomes SCORE. And asking what your SCORE is can be quite useful in an accounting context.

It will not be all I am doing, by a long way. But it will be important because the climate crisis is, and so far the response from business is inadequate. Mark Carney says so this morning, and he would be right even if his Task Force on Climate-related Financial Disclosures recommendations were adopted, because my reading suggests that they are based on some pretty poor greenhouse gas disclosure standards.

There is a mass to do then. But Carney is right on some things: as the FT notes about his interview:

Companies could see many of their assets become worthless if they do not act swiftly enough on climate change, the outgoing head of the Bank of England has said.

And:

The financial sector “is not moving fast enough” to curb investment in fossil fuels, central bank governor Mark Carney said on BBC Radio 4's Today programme.

Adding:

“What we can't have is a financial sector that ignores the problem and all of a sudden it has to deal with it,” he said. The value of some of the companies' assets could plummet if they did not act more quickly.

I believe sustainable cost accounting is a tool to tackle that issue.

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4 Responses

  1. Marco Fante says:
    December 31 2019 at 10:40 am

    Given the customary restraint of Central Bankers, Carney is yelling from the roof tops there and what he sees is an oncoming wave of mass obsolescence in the fossil fuel industries.

    Well, at least that’s one extinction that we can actually look forward to.

    Good! Its about time someone of his standing has called this out. Some of us have seen it coming for a while and, this is isn’t simply about adapting to climate change, its about the implications of an 80-90% fall in the cost of producing renewable power over the past 10 years, its about improvements in the performance and affordability of electric vehicles as well as household and grid scale batteries. When the alternative is better that’s one thing when it is cheaper that’s game over.

    I like this statement from Carney: “What we can’t have is a financial sector that ignores the problem and all of a sudden it has to deal with it,”

    Translation: Those bastards have had ample opportunity to see this coming and they’d better not expect us or anyone else to bail them out.

    Given the convoluted nature of the financial sector (deriviatives and all that ) this won’t just be about direct investment in fossil fuels. It will also be about exposure to fossil fuel exporting nations, their currencies, the Petrodollar and, as such, the US dollar as global reserve, all sorts of stuff.

    One thing that I find interesting is the suggestion in your post is that some are hiding behind inadequate Climate-related Financial Disclosures. In the face of rapid obsolescence I don’t see how lying about it or hiding is going to assist them or anyone else involved, commercially at least, not in the long-run.

    That doesn’t diminish your work in this area of course. Amidst the confusion measures that reveal the truth are important.

    https://theconversation.com/market-forces-are-driving-a-clean-energy-revolution-in-the-us-95204

    https://www.businessinsider.com.au/solar-power-cost-decrease-2018-5

    https://www.investopedia.com/terms/c/creativedestruction.asp