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To meet sustainability targets, the finance system must transform

Author: ICAEW Insights

Published: 18 Sep 2023

Global UN Sustainable Development Goals progress shows we’re halfway through but not halfway there in the race to take action on climate and the environment.

The establishment of the United Nations Sustainable Development Goals (SDGs) in 2015 sent a clear and decisive message, resonating across the globe. Nations had to take immediate action to ensure that by 2030 we achieve prosperity for all people, a stabilised climate and protection for the natural systems on which humanity depends. ICAEW embraced the vision of the SDGs and adopted them as part of its 2020-2030 strategy, recognising the critical role they play in shaping a sustainable future.

Global progress has been made in some specific areas of the SDGs. Under SDG 8, Decent Work and Economic Growth, economies have shown resilience and adaptability. The pandemic, while introducing challenges, has accelerated digital adoption and transformed access to finance. As economies recover, there has been a measurable decline in global unemployment.

That is, unfortunately, where the good news ends. Halfway to the 2030 deadline, we are far from halfway there in terms of progress. The latest UN Sustainable Development Goals Progress Report warns that the world is currently on track to meet only 12% of the SDG targets by 2030. Headway on more than 50% of the targets is weak and 30% have stalled or gone into reverse. These include critical global targets on poverty, hunger, climate and nature. The UK is on course to meet only 17% of our targets.

As we fail to collectively tackle the climate and nature crises, inequalities are growing at an alarming rate, and developing countries are bearing the brunt. But this isn’t just a crisis of people and planet, it affects our economies and global financial system. Our destructive impacts have been acknowledged since the 1992 Earth Summit. It is a crisis we have knowingly created.

As we stand at this halfway point, more needs to be done to fulfil the promise of the SDGs. UN Secretary-General, António Guterres, suggests that to deal with the root causes of the problem we need “deep reform of our outdated, dysfunctional and unfair international financial architecture”.

Science tells us that we have fewer than seven years to cut carbon emissions by half and reverse global nature loss to avoid catastrophe. The time to be radical is now. Business as usual has brought us to where we are today – we cannot achieve the SDGs if we continue on the same path.

We need to reimagine our economies, how we do business and how our financial systems operate, rapidly shifting financial flows towards net zero, nature positive, socially just outcomes. This is not only the right thing to do, it is an economic imperative. Inertia will be far more costly than decisive action.

The UK has made notable advances on some fronts. Since 1990, it has reduced greenhouse gas emissions by 44%. It was the first major economy to set a legally binding net zero target. The UK has also invested heavily in low-carbon technologies, expanded its renewable energy base, and supported climate adaptation and mitigation in developing countries.

Following the groundbreaking Dasgupta Review on the Economics of Biodiversity, the UK government made clear commitments to align the UK economy and finance system with a nature positive future, and is introducing mandatory biodiversity net gain requirements for developers.

However, the pace and scale of action falls far short of what's required. Mixed policy signals are stifling investment in low-carbon solutions, threatening UK competitiveness and putting the UK’s net zero target at risk. Finance is still overwhelmingly flowing to activities that damage nature, including through UK supply chains and lending and investment overseas.

As COP28 approaches, we have an opportunity for world leaders, businesses and civil society to align commitments with action and put us back on track. We urge governments to show bold leadership, to reaffirm their commitments and ramp up ambition; to put in place the policy frameworks that help businesses across all sectors rapidly transform how they operate and allocate capital.

Governments must use all levers at their disposal, including fiscal policy, to provide the right incentives and support for businesses (particularly SMEs), including considerations for the current and future skills of the workforce. We need to keep fairness and justice at the heart of the transition. Developed nations must be held to account on their financial commitments to developing nations.

Accountancy and finance professionals are well placed to help drive this transition, playing an important role working across all areas of the economy. By integrating sustainability into financial decisions, analysing risks, identifying opportunities and ensuring transparent reporting, they can actively contribute to bridging the gaps identified. The profession can leverage its influence to reshape practices across business and the wider finance system, catalysing positive change aligned with the SDGs. It has a responsibility to drive change as fast as possible.

Consider what story you want to tell your grandchildren about the role you played. We either transform the way things are done or fiddle while Rome burns.

ICAEW recognises this shared challenge is monumental. It is committed to stepping up and playing its part, and is willing to work with and support the government to create the frameworks needed to accelerate business action. Through our role in the UK’s Transition Plan Taskforce, we will continue to help shape development of a gold standard for climate transition plans that also delivers on nature and social justice.

We will continue to equip our members with the knowledge, training, support and infrastructure to embed climate, nature and social justice into decision making and disclosure – we support the global alignment of disclosure and reporting frameworks. Through our strategic alliances and partnerships, we will continue to advocate for the necessary changes in accounting practices.

The journey toward achieving the UN SDGs is a continuous effort that demands our collective commitment. It is crucial to rally together, acknowledging the work accomplished while channelling our collective efforts towards a sustainable, equitable and prosperous future for all.

Latest Insights on UN SDGs

Open letter to the UK Government

On 18 September 2023 the world’s leading accountancy and finance bodies published a letter to the UK government urging transformative action to achieve the global SDGs and secure our collective future.

The UK houses of parliament

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