ESG: Treasurers take centre stage

Environmental, Social and Governance (ESG) has shot up the agenda in boardrooms over the last few years, leading to treasurers being called upon increasingly to spearhead the implementation initiatives in the space.

The growing reliance on treasurers to help deliver on ESG owes much to the evolution in their role over the last decade. As guardians and anchors of a company’s financial health, treasurers key priorities remain liquidity, funding and risk management.  But nowadays, especially in larger corporates, they play a more strategic, collaborative role – a state of affairs that has evolved gradually since the financial crisis of 2007-2008. The combination of their control over key operational levers and strategic responsibilities means they are seen as being best placed to drive ESG policies and initiatives across the organisation, from investments to supply chains and beyond.

The challenges before corporate treasurers as they look to help their firms get on the path to a low carbon future, however, are considerable. In recent years there has been a growing recognition that implementing meaningful ESG initiatives effectively requires a holistic approach that considers not just responsible finance and investments but also operational resilience, risk management and regulatory compliance.

Success with such an approach depends heavily on the collection and analysis of accurate data and the transparent presentation of performance metrics for scrutiny by regulators, investors and consumer watchdogs. On the sustainability front this challenge will become increasingly pressing for treasurers over the coming years and decades as their companies come under pressure to address all indirect emissions that occur in their value chain, including both upstream and downstream emissions. According to the UN, these Scope 3 emissions typically account for more than 70% of a business’ carbon footprint, making it crucial that organisations tackle them to meet the aims of the Paris Agreement and limit global warming to 1.5°C and the ultimate goal of net zero by 2050.

Despite already having their work cut out having to contend with the pandemic, an uncertain geopolitical and economic outlook and volatility, treasurers by and large have responded enthusiastically to the ESG challenge. Global green bond issuance for example is expected to hit a trillion dollars this year alone, with financial and non-financial corporates already responsible for around 45% of the cumulative volume, according to data from the Climate Bonds Initiative. For many treasurers, such initiatives are proving a vital first step for their launching other ESG initiatives in support of the organisations’ low carbon strategies.

With ESG pressure on corporates from customers, investors and other stakeholders only set to intensify over the long term, treasurers are destined to play an even more crucial role in helping companies meet their responsibilities.

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