A changing role: How might the Treasurer practically embrace and support the ESG agenda?
31 January, 2022
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I was recently involved in a video covering Environmental, Social and Governance (ESG) considerations for Treasurers which got me thinking about how Treasurers can practically embrace ESG within their operations and financial frameworks.
We are increasingly seeing ESG considerations being built into how lenders assess business risk, so it’s clear the Treasurer needs to be at the vanguard of any organisation's response. However, I believe the Treasurer should aim to go further as the ESG agenda creates great opportunities to add additional value and continue Treasury’s move towards becoming a strategic business partner.
How might the treasurer effectively focus on ESG?
The first point is to ensure that strategic ESG priorities are reflected within key Treasury policy areas. Examples include:
- Debt financing: for example the criteria for issuing social or green bonds and how this might be done; and
- Cash investments; choosing green and sustainable investment options or even ESG related money market funds.
Allied to the above, work with Senior Management to ensure that the business ESG strategy and net zero plans are consistent with your current funding plans, and if not, that they are updated to align.
Secondly, as the key interface with rating agencies, the Treasurer should seek to understand how they view your organisation’s ESG performance and any potential impacts it may have on your rating and hence future financing costs.
Thirdly, work with your finance colleagues to make sure that your non-financial and financial reporting processes are robust, and that the business is collecting the data that will be needed for any sustainable financing or for regulatory standards such as the EU Taxonomy. Your financial counterparts are increasingly going to expect you, the Treasurer, to have detailed and robust ESG data at your fingertips and strong data governance processes, in addition to any reporting your organisation might undertake within its financial statements.
And finally, identify and implement defined ESG criteria when reviewing or selecting your relationships with external banks, financial service suppliers, system vendors and other service providers in line with overall corporate policy. The scope of this may range from thinking about ESG linked supply chain financing to incentivising suppliers to further embrace ESG goals.
The Treasurer is uniquely positioned to have a key role in developing the ESG agenda,owing to their existing connections across various parts of the business, and relationships with external lenders, banks and suppliers. As ESG considerations become more important and further integrated into business strategy, I believe this role can only grow.
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