Insight & Analysis

Asia Inc. pivots towards sustainability

Published: Nov 2017

As sustainability becomes a higher priority for corporates in Asia, what does this mean for treasurers – and how can they help their organisations achieve their sustainability goals?

Sustainability is a topic which incorporates a number of different areas, but in the context of business the focus tends to be on environmental and social concerns. “A sustainable business is a business that looks at the environmental, social or governance (ESG) risks that may have a significant impact on a company’s bottom line,” explains Loic Dujardin, Research Director at Sustainalytics.

This topic has become increasingly important to corporates in Asia over the last couple of years. “Broadly speaking, the topic of ESG started out in Europe, where it is pretty familiar to corporates and investors and has been for over a decade,” says Beijia Ma, a strategist on the Thematic Investing team at Bank of America Merrill Lynch in London. “In the last 18-24 months, there has been an explosion of interest among corporates and investors in Asia Pacific.”

What does sustainability mean for treasurers?

Sustainability may not be a core component of the treasurer’s role, but there are a number of reasons why treasurers should pay attention to this topic. “For corporate treasures, the implications are interconnected across green financing, managing supply chains and creating positive social and economic benefits in this region,” explains Cynthia Tchikoltsoff, Head of Supply Chain for North Asia at BNP Paribas.

Treasurers can support their companies’ ESG goals in different ways, for example by replacing paper with digital workflows and thereby helping to reduce their organisations’ CO2 footprints. “There are several large companies who already have extensive programmes towards sustainability and replacing paper with digital work flows is one way corporates can enhance efficiency in a green way,” explains Rakshith Kundha, Managing Director, Trade and Supply Chain Finance, India and South East Asia at Bank of America Merrill Lynch.

Kundha points out that corporate treasurers can initiate transactions and view statements via electronic channels, including mobile, which are directly integrated into their ERP systems. This enables companies to save time and manpower spent on reconciliation and updating while increasing efficiency and visibility.

Green financing

Treasurers may also have an opportunity to tap into the rapidly growing green bond market. “Since the beginning of last year, we have seen a dramatic increase in Chinese issuance,” comments Ma. “This is likewise the case with places like India, Japan, South Korea and several other East Asian countries as well. We have seen quite a few new countries issuing for the first time this year.”

With a growing focus on sustainability at a global level, issuers and investors have much to gain by investigating this area. “Investors are increasingly aware that sustainability, and the commitments the international community has made to improving it – such as the adoption of the Sustainable Development Goals by UN Member States, including China and India – brings with it a host of opportunities across sectors and regions,” says Paul Davies, Partner at Latham & Watkins LLP.

Davies notes that many Asian countries have ambitious renewables targets, and are seeking to bring in the required investment through green financing. “The use of green bond proceeds for carbon reduction energy projects, for instance, is important for many Asian countries as a step towards meeting the Paris COP21 Agreement climate change targets,” he says.

When it comes to using green financing, Davies points out that “the projects for which the proceeds will be used must be carefully demarcated in light of prevailing international and local standards. If this is not the case, certain investors may decline to add the company’s debt to their investment portfolios.” On the other hand, he notes that if a treasurer can build sustainable financing with thoughtful engagement on the company’s sustainability performance, “there is the potential to attract new investors and potentially improve commercial terms.”

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