As the Doomsday clock ticked closer to midnight, scientists had a very stark message for world leaders gathered at Davos. “Pull your finger out” or we’re all doomed. The world is in the last chance saloon if it is to prevent catastrophic climate change. Only a major transformation will turn things around…

All of which will have enormous implications for every part of society, especially finance. This sector will find itself at the forefront and will come under pressure from all quarters to become more sustainable – it already is feeling the pressure.

At Davos, some of the world’s largest companies including the Big Four accounting firms signed up to the most comprehensive set of sustainability standards yet.

The EU’s Taxonomy for sustainable economic activities was published in December and will form the basis for the EU action plan. There will be standards for green bonds, eco labels for sustainable funds and transparency on how much of a firm’s activity comes from sustainable activities. It will establish benchmarks to help investors understand the impact of their capital and introduce obligations for institutional investors.

In the UK, outgoing Bank of England Governor Mark Carney has been appointed to advise the government on climate change ahead of the UN summit. The FCA says it is taking measures to address greenwashing, and the Taskforce for Climate Related Financial Disclosures has made recommendations encouraging companies to improve their reporting on sustainability issues.

Larry Fink, Chief Executive of Black Rock has said he will be demanding more clarity in sustainability reporting from the funds he invests in.

“Investors can no longer ignore climate change,” he writes in a 16-page report. “Some may question the science behind it, but all are faced with a swelling tide of climate-related regulations and technological disruption.”

Change is coming, whether firms like it or not. Customers demand it and governments will insist on it. As we’ve reported elsewhere, sustainability is fast becoming a regulatory issue as well as an ethical one. Those who get out ahead of the curve will find themselves at a competitive advantage, as KPMG recently forecast.

In their response to the EU Sustainable Finance Paradigm, they said: “Those with highly-developed sustainable investment processes and an offering that resonates with the preferences of responsible asset owners will likely gain a competitive advantage over their peers.”

There is a growing realisation that climate risk should be considered alongside economic risk. For example, investing in firms which engage in environmentally harmful activities could become risky if governments seek to curtail their activities. The push towards renewable energies could reduce the performance of oil and gas companies.

Reporting will come under the spotlight. Firms will face pressure to incorporate sustainability issues in their company reports and to demonstrate what measures they are taking to improve performance.

Buy-in will be vital from all workers. Corporations will need to establish a clear set of principles and ensure everyone adheres to them, providing clear accountability and reporting at every stage.

From both a commercial and regulatory point of view, the pressure is on for a greener and more sustainable financial sector. The smart money is on those companies that act now and get ahead of the game before they become mandatory.