The alignment of global equity and corporate bonds markets with the Paris Agreement

Jakob Thomä, Michael Hayne, Nikolaus Hagedorn, Clare Murray and Rebecca Grattage

Journal of Applied Accounting Research, 2019, vol. 20, issue 4, 439-457

Abstract: Purpose - To comply with the adopted Paris Agreement, global finance flows must be measured against climate scenarios consistent with possible pathways towards limiting global warming to 2°C or less. For this, there must be proven and accepted accounting principles for assessing financial plans of climate relevant actors against climate models. As there are a variety of data sources describing the financial plans of relevant actors, these principles must accommodate a variety of reported information, while still yielding relevant metrics to different stakeholders. The paper aims to discuss these issues. Design/methodology/approach - A set of accounting principles tested by governments, financial supervisory bodies and both institutional investors and mangers, covering global-listed equity and corporate bond investment is described. Findings - The application illustrates that a common set of accounting principles can act across both asset classes and provide relevant metrics to multiple stakeholders. Research limitations/implications - The principles require data of varying quality and are ultimately unverified. Thus, the definitive quality of the output metrics is uncertain and is yet to be characterized. The principles are yet to be applied to the credit market as the information is seldom publicly available, but it too plays an important role in the required market transition and therefore must be incorporated into these guiding principles of analysis. Practical implications - The principles allow for standardised assessment of financial flows of equity and corporate debt with global climate scenarios. Originality/value - It illustrates the acceptance of a common set of accounting principles that is relevant across different actors and asset classes and summarizes the principles underlying the first climate finance scenario analyses.

Keywords: Financial reporting; Social and environmental accounting; Climate change; Scenario analysis; Voluntary disclosure narrative; Paris Agreement (search for similar items in EconPapers)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jaarpp:jaar-03-2018-0034

DOI: 10.1108/JAAR-03-2018-0034

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