In a recent survey of Nordic treasurers and chief financial officers by Nordea, more than half (54%) of the respondents indicated they thought the focus and priority for sustainability in treasury will continue to increase.
According to Treasury Today’s Global Sustainability Study 2024, 56% of respondents have written ESG policies, four in ten have committed to net-zero and 42% have green, social and/or sustainable finance frameworks in place. Close to 30% of respondents have issued sustainability-linked loans (SLLs) and green bonds.
Importantly, the treasury team works closely with ESG/sustainability team(s) in 58% of organisations.
According to Kemi Bolarin, Head of Treasury – Europe, GXO Logistics, treasury can play a crucial role in embedding sustainability by leveraging financial strategies that align with ESG goals.
“Key initiatives include facilitating green financing, such as issuing green bonds or SLLs, to fund environmentally sustainable projects like renewable energy transitions and eco-friendly technologies,” she says. “Treasury can also implement sustainable supply chain financing (SCF) solutions, like green reverse factoring, to encourage suppliers to adopt sustainable practices by offering early payment terms for meeting ESG criteria.”
In addition, treasury can integrate sustainability metrics into financial planning and decision-making, ensuring sustainability targets, such as reducing carbon footprint or waste, align with financial models, according to Bolarin.
“By promoting carbon offset investments and supporting circular economy principles, treasury can help mitigate environmental impacts while optimising working capital,” she adds. “Treasury can also work with procurement teams to incentivise suppliers who meet sustainability benchmarks and incorporate other risk factors into supply chain risk management strategies to reduce exposure to risks.”
Arpana Amin, Global Product Head of SCF at HSBC, agrees treasury departments have an important role to play in promoting sustainability within supply chains.
“By integrating ESG standards into working capital practices, treasurers can help to ensure the financial decisions that are undertaken align with a business’s sustainability goals,” he says.
Cynthia Tchikoltsoff, Head of Global Trade Solutions, Asia-Pacific, BNP Paribas, observes that supplier engagement around relevant sustainability objectives is a growing priority within corporates, and the treasury team can play an active role in enabling these strategies, alongside the procurement and sustainability teams.
“With the increasing amounts of data available, key performance indicator (KPI)-linked solutions are increasingly deployed in the upstream value chain to incentivise suppliers to aid with disclosing their ESG metrics and improving them over time,” says Tchikoltsoff.
She believes these techniques can be powerful to incubate or accelerate responsible sourcing strategies, as the suppliers are given concrete ESG targets and concrete financial incentives, such as accelerated cash flows and preferential rates, to embark on creating responsible value chains, in alignment with their buyers’ ESG strategies.
“Sustainable sourcing can also be encouraged via use-of-proceed transactions, which focus on the specific underlying of the financing and incentive green or sustainability-certified goods or equipment,” she says.
Tchikoltsoff reports that sustainability-linked and use-of-proceed financing are on the rise to help corporates achieve their net zero ambitions. “[These financing tools] also help corporates to tackle not only Scope 1 and 2 but equally important Scope 3 carbon emissions,” she adds.
Not everyone agrees that ESG continues to be a top priority for treasurers. Arnd Weckes, Head of Working Capital D/A/CH, Deutsche Bank, for example, believes interest in ESG is on the wane.
“Climate change has fallen a bit behind on the priority list of many treasurers,” he says. “When it was a hot topic a few years ago, many companies explored quick wins, such as linking ESG KPIs to financing. For example, we have a few SCF mandates which we made ESG compliant. But, at the moment, treasurers have other priorities they’re focusing on.” He points to optimising working capital, liquidity management and risk mitigation.
