In the company of BNP Paribas’ Hervé Duteil, Chief Sustainability Officer, Americas, Alberto Ayerza, Managing Director, Global Trade Solutions, and Indra Kish, Director, Liquidity & Investment Advisory, the webinar, ‘Transforming ESG through a Treasury Lens: sustainable strategies from the heart of the organization’, explored progress made – and still required – as treasurers build on their knowledge of sustainability and help their organizations meet the needs of all our futures.
The total belief at BNP Paribas that finance can have an impact on sustainability has, over the last two decades, been guiding its policies, said Duteil in the recent webinar. Indeed, with a clear exit timeline strategy on funding coal-based power plants, a very restrictive unconventional oil and gas policy, and the publication last year of its ocean bio-diversity policy, the bank exhibits a determined strategy to help clients transition to net-zero carbon emissions by 2050.
BNP Paribas already has at least €185bn of on-balance-sheet financing directly contributing to the fulfilment of the UN’s Sustainable Development Goals (SDGs). And as a signatory of the UN Principles for Responsible Banking and the Collective Commitment to Climate Action, it continues “tilting the balance in favour of sustainable practices”, said Duteil.
However, client appetite for sustainable finance solutions induces “mixed signals” said Ayerza. He cited Treasury Today’s 2020 Sustainability survey, which suggests treasury’s ESG awareness is still maturing. For it to be embedded in company culture, it is his belief that education will prevail. With respondents spending less than 10% of their time on ESG matters, he urges “a little more involvement”, indicating treasury mindsets should shift further towards the longer-term goals of their organizations.
For Kish, the financial pressure created by the ongoing pandemic could present the perfect opportunity for many companies to re-focus priorities right across the sector spectrum. This would allow treasury to lead the education of senior management teams on available products and the boost these can give to overall corporate sustainability KPIs and goals.
Products, commented Duteil, have shifted from the simple “labelling of proceeds” (as per green bonds), to the “impact assessment” mode of sustainability-linked products. But where next? Ayerza believes the trade and supply-chain side is ripe for development. With many companies publicly stating measures to curb emissions in their own, and their suppliers’, activities – and 52% of treasurers saying they have metrics related to selection and management of their supply-chain partners – he feels progress towards the financial resilience of supply-chains is “encouraging”.
Integrating ESG goals into liquidity management and investment strategies also presents an opportunity for treasurers, said Kish. She suggested starting with a review of investment policies, along with bank counterparties and asset management providers, employing a broad and flexible approach to innovation and market development. Sample language could highlight an organization making earnest attempts to incorporate ESG related investments in its practice, while insuring that these investments comply with the top priority of safety and preservation of principal followed by maintaining liquidity and generating yield. Kish emphasized the importance of creating consistency with the organization’s overall ESG policies and priorities, which will offer, she stated, “another chance for treasury to work ESG language into company consciousness”.
Further opportunities for treasurers to contribute to their organizations’ ESG strategies referenced in the webinar included green deposits (including CDs), sustainability-linked deposits, ESG-focused prime money market funds, and tailor-made solutions such as separately managed accounts, and structured deposits linked to a specific ESG index.
On the trade and supply-chain side, Ayerza cited as an example BNP Paribas’ own work with Siemens in Spain to create a €600m sustainability-linked syndicated guarantee facility, incorporating dual environmental and social objectives. “There are many opportunities out there that we are open and willing to explore with our clients,” he declared.
With all the damage caused by COVID-19, will the pandemic deter implementation of sustainability measures? “Absolutely not,” asserted Duteil. “If anything, COVID-19 has given us a glimpse of what the future may hold.” Indeed, with the private sector “embracing and raising the bar for the sustainability agenda”, he foresees greater adoption of longer-term perspectives, a better grasp of what systemic risk means in socio-economic terms, and an absolute need for a ready and rapid response as the transition to a new normal advances.
Duteil believes that treasurers now have an opportunity to play a leading role in how their organizations respond to the urgent call of sustainability. He concluded the webinar with his view that although sustainable finance has created a virtuous “race to the top”, if the transition is to happen successfully, all stakeholders – especially treasurers – face a “collective challenge” and must continue in open dialogue to accelerate the future we want.
If you missed the webinar and would like to hear the full recording: