Over the next 15 years most companies are predicted to face new climate challenges,
and in 20 to 40 years’ time all companies will
Moscow, 17.11.2020 – The Russian Chapter Directors’ Climate Forum, in partnership with Deloitte CIS, hosted the roundtable “How Climate Considerations Are Transforming the Agendas of Audit and Risk Committees”. During the event leading experts shared their best practices, discussed pressing issues with colleagues and got up to speed on the latest news on the climate agenda.
Participants emphasized enlarging role of Audit and HSE committees in minimizing carbon footprint of industrial enterprises. Experts discussed recent developments that could speed up the progress towards global sustainability reporting standards in Russia, and ways environmental, social and governance (“ESG”) considerations could change corporate boards’ approach to risk and opportunity management.
Over the next 15 years, companies in most sectors will have to adapt their business models to a new set of realities. Carbon-intensive industries are already beginning to experience the direct impact of the climate change, and in 20 to 40 years’ time, all sectors are predicted to face challenges related to the global warming.
Audit Committee plays a key role in the activities of the Board of Directors. It is established to facilitate the effective performance of the Board of Directors’ functions in the area of control over the accuracy, completeness and reliability of financial reporting and, more recently, non-financial reporting,risk management and internal control, as well as internal and external audit emphasized Elena Haykin(Sapozhnikova), Founder and Member of Management Board at Russian Chapter, during the roundtable opening.
The word “climate change” is not among the requirements of International Financial Reporting noticed Olga Pascault, Founder and Chair of Management Board at Russian Chapter. However, International Standards do take climate risks into account through their recognition in individual financial reporting positions and through financial disclosure. The TCFD (Task Force on Climate Related Financial Disclosures) must also be mentioned. This is a working group on climate change related financial disclosure. TCFD takes four aspects into account: the management of the company, its strategy, risk management and the system of indicators used to assess climate risks.
Veronica Poole, Partner at Deloitte, DTTL Global IFRS Leader and Head of Accounting and Corporate Reporting for Deloitte North and South Europe explained, how ESG considerations could change corporate boards’ approach to risk and opportunity management. She also told the audience about the recent developments that could speed up progress towards global sustainability reporting standards including the Consultation Paper published by the Trustees of the IFRS Foundation. Veronica highlighted the importance of disclosure of climate-related information in annual reports, including in line with TCFD recommendations. Finally, she talked about investors’ expectations for the disclosure of climate-related risks and reporting of related to financial impacts, and how the role of corporate boards might change.
Andrey Yakushin, Head of Corporate Affairs Development Division at the Central Bank of Russia, said that a number of recommendations on ESG accounting and disclosure of information on environmental and social responsibility and corporate governance were outlined in the Corporate Governance Code recommended for application by the Bank of Russia in 2014. The Bank of Russia has developed recommendations on implementing responsible investment principles for institutional investors and their asset managers. The Bank of Russia expects investors to be interested in implementing the recommendations, which will ultimately benefit not only financial market participants, but will also have a positive impact on the country’s financial system and the development of society as a whole.
The Bank of Russia is constantly working on a methodological basis to improve the maturity of corporate governance, the efficiency of the Board of Directors, and the level of trust in the financial market. In particular, in October 2020, recommendations on risk management, internal control, internal audit and the work of the Audit Committee were published. A fundamental “success factor” in the organization and effective risk management is the formation of a risk management culture by the Board of Directors. “The Board of Directors is therefore recommended to pay increasing attention to strategic and risk management issues,” added Olga Antonova, Deputy Head of Corporate Affairs Development Division at the Central Bank of Russia.
Chair of the Audit Committee of Severstal, Alun Bowen talked about the challenge facing the steel industry where there are currently no viable solutions for dramatic greenhouse gas reduction. He also discussed how the Severstal, its Board and committees are organized to ensure that climate change issues are addressed with appropriate oversight. He also addressed the issue of how climate change might impact financial statements and the opportunities provided to Audit Committees to engage directly with investors and stakeholders through consulting on an Audit and Assurance Policy.
Alexander Chmel, Independent Director of EN+GROUP IPJSC, said that addressing the climate crisis had been a key element of En+ Group’s strategy for over a decade. The company invests in new research and programmes to improve the environment in the region of its operations and to help the global aluminium industry reduce its impact on the natural world. “At the same time, we are increasing the transparency of our activities by improving our reporting. We believe that for the world’s largest industrial companies’ transparency is critical in supporting the global fight against climate change,” mentioned Alexander.
The roundtable was supported by DLA Piper and international public relations agency PBN H+K Strategies. The recordings of the event can be found at the Russian Chapter’s site.
Russian Chapter serves as the Russian hub for the global platform on climate change for board members, that operates under the auspices of the World Economic Forum. By implementing the Climate Governance Initiative (CGI), the World Economic Forum supports the growing awareness and competencies of boards of directors for effective climate governance.