Treasury Practice


Published: Feb 2021

It’s no exaggeration to argue that meeting the challenge of climate change promises huge, sector by sector, disruption ahead. Citizen pressure, government policy and fiscal incentives will accelerate a change that is already starting to happen. Falling costs across renewable energy are turning fossil fuels into legacy assets at the risk of being stranded, while food systems will start to look different as the world shifts from intensive meat production and its high emissions. Meanwhile, traditional sectors are already losing market share to innovation – Tesla’s growth has come at the expense of luxury car makers while subsidies on electric-vehicles and charging infrastructure have made countries like Norway and China leaders in these new markets.

Companies that are behind the curve both intellectually and in their development of new products will find it increasingly difficult to catch up as the world races into the future. Corporate laggards could also struggle to access finance as investment shifts away from companies that don’t have a plan for reducing their emissions. Rating agencies promise to make it easier for investors to understand which companies are on the right path to net zero. In the UK, the Chancellor plans wide-ranging greenhouse gas reporting for all UK listed companies in line with Taskforce on Climate Related Financial Disclosures (TCFD) recommendations so investors and banks can see how the companies they are buying or lending to are integrating climate change.

The pandemic could also hasten change. Some of the government stimulus in the wake of the pandemic is going to build back better. One-third of France’s COVID package (around US$30bn) is allocated to green measures, while South Korea’s New Deal is directing US$95bn to green and digital technology. All the while the cost of combatting climate change is falling. A recent report from the Energy Transitions Commission suggests it could cost below 1% of global GDP to achieve net-zero emissions globally by mid-century: solar electricity costs have fallen, wind costs are down, and batteries are cheaper.

Treasury teams sitting at the heart of a corporate’s financial strategy will play a central role in meeting the challenge. Often working alongside sustainability teams, treasury is tasked with how best to finance corporate commitments to reach zero emissions by 2050, structure innovative green and sustainable bond issuance or oversee ESG integration in complex supply chains as well as integrate new, cost saving technologies. Treasury’s role in the transition also comes via its contact and constant conversation with banks, investors and other stakeholders.

Our second Treasury Today Group Global Sustainability Study reveals how treasury is integrating sustainability, your key sustainability priorities, progress and challenges through the last, tumultuous year. We would like to thank you for participating in the study. Findings will be available in the summer.

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