This year’s annual ACT conference was big on disruption, urging treasurers to embrace it.
Treasurers can’t get away from disruption. Whether its markets responding to wayward political interventions, radical technological advancements forcing change, or an environmentally-focused existential crisis, treasurers have to keep their wits about them.
This year’s ACT annual conference – marking the 40th anniversary of this professional body’s foray into events – fetched up in the UK’s northern powerhouse city of Manchester. It’s remit was to ask the 1000+ delegates, hailing from 26 countries, to ‘embrace disruption’ and then ‘dare to think differently’.
The role of technology was much in evidence, with all the usual talk of AI, machine learning and robotic processing amongst the usual offering of track sessions, fringe sessions and keynote addresses spread over its two days. But the event, apparently fuelled by over 4,000 coffees, was given over to transformation in other ways too.
Of course, change of all kinds can be for the better or for the worse, depending on how it’s managed. Perhaps for this reason, the opening address saw veteran British current affairs journalist, Jon Snow, coin the collective noun ‘a remarkable of treasurers’, impressed as he is by the profession’s capacity to deliver strong results in difficult circumstances.
Snow, a seasoned campaigner for fairness and equality around the world, linked the conference’s theme of disruption to his belief that, although we are more generally aware of the world at large than ever, we are woefully less aware of the needs of others.
Despite the advancement of the classless digital self, we still exist very much in an ‘us and them’ society. Stemming from the banking crisis, the ensuing austerity has consolidated this social divide. From this we have Brexit, the rise of right wing extremists and the posturing of the Trump administration; effects largely arising as a demonstration of populist despair.
Although the wisdom of having so much digital power invested in so few companies is debateable (and only now coming under scrutiny), the digital world nonetheless has tremendous power for mutual understanding.
The key to real innovation exists in diversity of access to technology. The interplay between business and society is thus vital. If corporates take it upon themselves to release staff to do work in the voluntary sector, the richness of ideas that return will more than pay for the time given.
Indeed, with the world at a geopolitical tipping point, companies should be taking risks and embracing diversity; only then can societal compassion and cohesion be assured in the digital age. It’s a disruptive model that might just save us from ourselves.
The politics of economics naturally featured in this event. One panellist suggested that the world is currently experiencing a general bull market in intellectual pessimism. As such, it was argued that with China versus the US in a trade war, Europe – which always does best in an open world – is now facing the potentially damaging outcome that ensues from taking sides. However, statistics showing higher levels of financial and regulatory instability in key markets than just half a dozen years ago could mean there are more opportunities to invest in new markets.
Indeed, what will shape trade over the next decade is the demographic shift seen in emerging markets. With ageing populations in, for example, Germany and China (both with labour supply problems constraining growth), opportunities for corporates in Africa and Asia will be boosted. Digital know-how and infrastructure development are creating investment prospects. Meanwhile, the US, which has an unerring ability to reinvent itself to survive economic shocks, can call upon waves of youthful inward migration, as long as such movement is not prevented…
And this notion returns us, via another session, to the view that it is only populism that is giving voice to the disenfranchised. This is being amplified by a liberal elite who should have listened to the genuine grievances of those who have been marginalised, rather than dismissing their voices as outwardly intolerant.
With actions such as Brexit, Trump’s trade war with China/Mexican border debacle, and the rise of the right in countries such as Italy and France, all are being largely driven by populist nationalistic viewpoints (with various scapegoats targeted just to ram home the point). The resultant erection of barriers does not bode well for co-operation on the next major disruptive theme of the conference; tackling the serious environmental issues faced by the planet.
Having risen from a side-issue at treasury conferences in previous seasons, this now has a definite and increasing presence on the circuit. The idea that sustainable finance is becoming mainstream is no longer far-fetched. Reporting on sustainability issues – including climate change, pollution and bio-diversity management – is indeed hitting the big time.
NASDAQ has recently released an ESG reporting guide and now some institutional investors are applying ESG criteria to close to 100% of their investment portfolio (Swiss Re, for example). Many others are certainly asking more questions around this theme. Companies undertaking investor roadshows are expected to at least produce an ESG aspect to their information packs, or face snubs by portfolio investors.
There is, one speaker suggested, a moral imperative to make the effort to find the claimed US$5trn to US$7trn investment required to meet the internationally agreed figures on carbon reduction. With more awareness of the issues amongst the public, the reputational element is rising for corporates. Indulgence in so-called ‘greenwashing’ no longer aligns with widely held expectations of sustainability, making concepts such as carbon credit trading defunct.
But there needs to be an easier way to make sustainable goals achievable for it to gain further ground (as if possible extinction was not sufficient grounds). Ideas such as sustainable link loans, where margins are linked to independently agreed and measured sustainability targets (referred to by the UN as Sustainable Development Goals or SDGs), are coming on stream. Today, green bond issuance is not the only form of corporate engagement with sustainability, even though these are now relatively easy to achieve once the (often cut and paste) green framework is in place.
Indeed, the attraction of opening up a wider pool of investors, versus shutting down opportunities, has appeal for many more issuers today. More could take this path and action is being taken at an internationally collaborative level to ease that involvement.
The Corporate Forum on Sustainable Finance, formed of 17 businesses – over two thirds of the world’s green bond issuers – are seeking to define national, regional and international standards to which all can subscribe. The aim is to create an environment where many more are in a position to use green bonds and loans and credit facilities, as well as other sustainable financing tools to develop low carbon infrastructure. They are doing this because ultimately it will be the corporates charged with delivering change; this presents a unified voice, pre-empting regulation.
As more sectors get involved, the loose current definition of ‘green’ will be refined. A proposed EU green taxonomy is expected to bring clarity. However, one delegate suggested that if this comes across as too strict and rigid, it could prove self-defeating.
In any transformation of this nature, some companies will start from a lower base point than others. Oil and gas and other extractive industries are clearly at a disadvantage in the sustainability stakes. But even these companies can begin to modify their practices, as opposed to greenwashing. Investors want to see some action in the right direction and increasingly will not accept ‘no action’.
To find out what to do next with sustainable funding, one of the sessions here at the ACT annual conference advised companies to talk openly to their customers and investors about their needs and expectations. It’s a good idea to find a number of internal champions too, from different functions, to start the wider organisational conversation. If the idea of climate disaster is not sufficiently compelling (the UK government has declared a climate emergency), companies should at least take action to get ahead of the regulatory curve, because that pressure is coming, warned a panellist. In fact, as another speaker commented, companies will not be able to borrow forever without sustainable financing.
Finally, with Manchester City having flaunted their multiple footballing victories around town the evening before the conference kicked off, it is perhaps time for fans of their old foe from across town, Manchester United, to acknowledge that disruption can visit at any time.