Now on the CFO’s To-Do List: Navigate Climate Change

This week I had the privilege of joining 60 CFOs from the world’s largest companies to discuss the promise and pressure of ESG measures (link to event ). “We are at a turning point where ESG, and particularly environmental issues once led by a Chief Sustainability Officer are now managed by the CFO and CEO,” stated Fortune’s CEO, Alan Murray , as he introduced Brian Moynihan, CEO of Bank of America .

“Indeed,” responded Moynihan, “Our customers have told us they want their money invested in ESG, and particularly in climate-smart ways. That’s why we’ve committed $1 trillion to accelerate the transition toward a low-carbon, sustainable future . If you’re a business-to-business company, your customers are already asking you how you’ll get to net zero emissions before 2050. Sixty percent of global emissions are already covered by net zero commitments (source ). Any company not already disclosing and reducing their direct emissions is missing the boat. This is a big new responsibility for CFOs.”?

The International Business Council , led by the World Economic Forum, Deloitte, EY, KPMG, PwC, and chaired by Moynihan, is establishing harmonized ESG metrics that will allow investors to consistently compare one company to the next without having to interview each and every company bilaterally. “That way large institutional investors can channel their funds to the top ESG performers,” explains Moynihan. “The next step is for governments to require disclosure of these shortlisted metrics.”?

And that is coming soon. Like, in the next three months kinda soon.

“Any good CFO knows that the real risks to an organization are ones you can’t measure,” began Former SEC Commissioner (2018-2020, Robert Jackson at the Fortune CFO Collaborative this week. “Investors and companies are already measuring and acting on ESG metrics but the lack of comparability doesn’t serve anyone. Europe is already standardizing them using IFRS . In the US, the SEC is establishing an agreed-upon approach as we speak that will put you on a level playing field. Before this December, the SEC will issue draft disclosure requirements on climate change. Chair Gary Gensler will invite corporate leaders to share your views on it, but make no mistake, he will push as much through as possible in a short amount of time, so be sure you have the necessary expertise in-house. CFOs need to be on top of this not just because it will become part of the 10K or 10Q but because the Vanguards, Fidelitys and Blackrocks of the world will ask you if they haven’t already.”

Many of the CFOs in the room welcomed the SEC guidance. “We don’t want things assumed about our company that don’t paint the whole picture, and clear rules of the road will mean we can report with confidence on the whole picture. “ There was also general support for ESG being the CFO (and CEO’s) responsibility so as to be integrated with standard financial protocols for things like carbon accounting and enterprise risk management.

An informal poll showed that the biggest challenge in managing ESG metrics was that “data is housed in disparate systems with different business units”, a business opportunity the event’s sponsor, Workday, should be salivating over. ?