In today’s ever-changing landscape, sustainable and inclusive growth can be interpreted differently by various stakeholders, but at its core – it means incorporating considerations for people, the environment, and profit into every facet of a company’s strategy and operations.

The ever-growing role of treasurers in ESG is evident, and what is clear is that treasurers play an important role in achieving sustainable and inclusive growth in companies. Often leading interactions with external parties, such as regulators, rating agencies and export credit agencies, treasury is integral to a corporate’s sustainable strategy.

There are three key areas where treasury can take a leading role:

1. Linking sustainability performance to financing and liquidity management: there has been significant growth in adoption of debt and lending products with sustainable finance labelling by corporates – sustainable finance loan issuance volume has grown c.49% CAGR in Asia between 2020 – 2023. Treasury can issue sustainable bonds and loans to demonstrate the company’s commitment to sustainability. In addition, sustainability-linked financial instruments, such as placing surplus cash into ESG funds, can be used to meet overall cash and liquidity management needs while furthering its sustainability goals.

2. Advocating and demonstrating the company’s sustainability performance: treasurers can serve as the voice of a company’s ESG performance externally such as with rating agencies, investors etc. The emergence of multiple regulatory reporting requirements can create complexities – treasurers can spearhead the combining of financial and sustainability reporting, as well as following standards such as ISSB, to reduce such complexities while providing transparency to the company’s ESG performance through data. Additionally, they can lead on the ESG ratings process, given such ratings are now leveraged by investors in various ways. Strong ESG performance has been linked to higher valuations and increases access to capital – a M&A analysis by Deloitte (2022) has found ESG investments tend to provide higher returns than non-ESG, triggering increased valuations, partly due to increased investor demand.

3. Identifying and implementing ESG evaluation criteria externally: Scope 3 emissions can account for more than 90% of a company’s total emissions. Therefore, collaborating with external parties and suppliers is critical to achieving a company’s sustainability goals. Treasury can raise awareness about key ESG issues, target setting and data collection as part of the overall process to evaluate ESG credentials of suppliers and external parties. In addition, treasury can leverage Sustainable Supply Chain Finance as a tool to mobilise and incentivise suppliers to take actions that will contribute to a company’s overall supply chain sustainability targets.

As part of the above, treasurers need to ensure adequate capital is allocated to invest in transition initiatives, including ongoing R&D, and data and infrastructure for sustainability performance measurement. Moreover, collaboration is crucial for successful implementation in all these areas. Treasurers must work closely with senior leadership to align with the company’s holistic sustainability strategy and direction, allowing them to amplify their success.