Responsibility Of Directors To Enable Transition Towards New Economy — Diplock




(c) 2021 Bernama – Malaysian National News Agency

 KUALA LUMPUR, Aug 17 (Bernama) – Company directors are responsible for the transition towards the new digitalised economy, said former International Organisation of Securities Commissions (IOSCO) executive committee chairperson Jane Diplock.

To address the challenges of the new economy, Diplock, who served IOSCO for seven years and is currently a board member of the Singapore Exchange, said directors need to focus on the strategies of the companies they served.

“The digital revolution is transforming all aspects of commercial activity including transforming markets, market participants, and the way capital is measured, assessed and deployed.

“At the same time, the climate change revolution is upon us and as a result, a new global economy is emerging,” she said in a keynote address at the Malaysian Alliance of Corporate Directors (MACD) online Corporate Directors Summit 2021 today.

To that effect, Diplock shared that in June 2021, the Group of Seven (G7) Finance Ministers and Central Bank Governors emphasised the need to green the global financial system and announced their support to make climate related financial disclosures mandatory, based on the Financial Stability Board’s Task Force on Climate-Related Financial Disclosures (TCFD).

The TCFD requires a number of disclosures concerning the governance of assessing climate change risks and opportunities, including the actual risks and opportunities, the effect of these on strategy, the metrics used to assess them, and how the analysis is integrated into current enterprise risk management strategy.


She also noted that it was not only governments and regulators who are calling for climate and sustainability disclosures as demands are sounding loudly in the ears of corporate boards from investors.

“Importantly, investors are following this call with their funds.

“Noting the growing momentum in both public and private sector initiatives on sustainability-related disclosures, regulators including IOSCO have called for the International Financial Reporting Standards (IFRS) Foundation to take on a significant role,” she said.

The IFRS Foundation has been asked to improve the consistency, comparability and reliability of sustainability reporting for investors by developing a common set of global sustainability standards, she said.

These standards will be set to meet investors’ needs, to enable markets to price sustainability-related information and to support capital allocation, said Diplock, adding that they provide a sound baseline for jurisdictions to consider when setting and implementing their own standards.

“The purpose of business is to solve the problems of people and planet profitably, and not to profit from causing problems.

“Companies should understand and be able to clearly communicate how their corporate purpose directly benefits specific stakeholders and address the challenges of climate and sustainability.

“This purpose then drives the business model of the enterprise,” she opined.

Diplock said that in a world where the future is uncertain, and change happens quickly, companies need to be able to withstand unpredictable threats and change and emerge stronger.

“Business as usual is not enough. While many companies still think about risk and resilience in terms of financial risk, today’s world demands more than financial resilience.

“Severe climate hazards will threaten sourcing, production and distribution of products and services.

“The changing climate presents structural shifts to companies’ risk/return profiles which will accelerate nonlinearly,” she said.

At the same time, Diplock believes that the uncertain geopolitical future also provides an interconnected world with commercial ties and supply chains under threat.

“Companies will be required to have the flexibility to respond quickly to change.

“All of these risks need to be addressed to enable corporate resilience and to ensure corporate sustainability,” she said.

Diplock noted that it was encouraging to see so many directors of companies around the world embracing the new direction and starting the journey of climate and sustainability reporting, revising their business models, engaging with technology, assessing and understanding their risks and upgrading their resilience.

“The technological and climate change revolutions will significantly change the face of capital markets over the next decade.

“Hopefully, as we emerge from this horrific pandemic, we will see the energy and commitment being shown around the world by governments, regulators, standard setters, company directors, investors, communities and consumers in addressing these issues toward a more prosperous global capital market,” she added.

TAGS: Jane Diplock, IOSCO, Corporate Directors, MACD Corporate Directors Summit 2021