The Missing part of a Treasury Job Description

10-03-2020 | by Aastha Tomar

Change is where Treasury is

It’s difficult to ignore the word ‘sustainability’ when you are staying in the Netherlands, one of the leaders in sustainability, green finance and green bonds. This makes me wonder that while everyone here talks about the word so much – Why is it absent from the Job description of one of the most crucial team of an organization – Treasury?

Any usual job requirement for a Treasurer includes Cash Management, Risk Management, Hedging, Cash flow forecasting, P&L and similar. But where is one of the most trending consideration? Especially, in times when corporations are weighing sustainability targets not far from their profitability targets. Is it not the responsibility of a “treasury” function to be cognizant and be considerate of possible approaches to impact environment through their decision of investments and borrowings?

This brings us to consideration – Are corporations expecting specific functions (read CSR team/ PR team) to work towards and prove their sustainability efforts to the world? Are corporations willing to implement the sustainability philosophy into organizational DNA?

With evolved considerations, gone are the days when a Treasurer was just involved in risk management and ensuring liquidity. In current scenario of news going viral each action creates a ripple effect. As famous Jane Goodall once said : “You cannot get through a single day without having an impact on the world around you. What you do makes a difference, and you have to decide what kind of difference you want to make”. A Treasurer has to take an active role in policy making and lead her organization towards sustainability and protecting consumers.

How can a Treasurer help in sustainability?

As I advocate sustainability related expertise, lets evaluate how a Treasurer can help in sustainability:

1. Consideration in Investment/Borrowing Rationale

  • Choosing counter-party carefully: A Treasurer while selecting for investing options for excess cash, while trying to increase returns for the company should also ensure that the partners with whom she is working are aligned with sustainability. ESG is the new word which is taking importance nowadays with almost all the organization, banks , asset management companies trying hard to come up with various financial products which are aligned with ESG . Try to choose such sustainable investing options where the counter party is trying to have a positive impact on environment and at the same time you don’t compromise on your returns.
  • Green Bonds / Sustainable finance : You don’t need to be in a renewable space to issue green bonds. You just need to have an intent: Drew Wolff, Starbucks launched green bond within few weeks of joining Starbucks in 2016. Even though it was an infrequent issuer, didn’t have leverage of being a regular issuer in the market they took chance by entering into sustainable bond space. The use of proceeds were supposed to get used to buy sustainable coffee. “The bond acted as lightning rod for a lot of separate social responsibility efforts at the company and helped align financing and these efforts for the first time” said Wolff. Additionally it increased commitment to transparency and reporting. Corporate should try to make best use of the current investment trend where investments both from retail and institutions have increased by 34% from 2016 in green investments. Investors have become savvier and trying to invest more in bonds which have green element in it. Corporates should try to integrate its financing with sustainable finance. Once they incorporate sustainable financing, they will automatically be aligned with guidelines designed for the same which will in turn give them a direction towards sustainability.

2. Business Partnership

  • A Treasurer also has a stake in supply chain, how? Let me answer this by asking one more question? Who had the most sleepless nights when Volkswagen posted loss for the first time in 15 years when caught implanting a sophisticated defeat device it implanted to pass emission tests? What would you have done if in your career you had to bear the scar of posting a loss for an organization due to an unethical supply chain? A Treasurer should increase her influence in company’s sourcing/ manufacture products and extended supply chain because they are the ones to bear the brunt when the cash flows are hit.

3.  Behavioral Considerations

  • Less Paper more technology: In this rapid world of digitization there are still few who take help of paper and pen. You may see print outs of hedging structures lying on tables. Banks sometimes still need hardcopy of underlying from Corporates for their records. A small step of ensuring less/no paper usage by Treasurer will ensure that the team follows her and will eventually impact environment in a positive way.
  • There are times when there is no one in Dealing room but the Television (which is on so that we don’t miss any global news) is on. Dealing rooms have a Televisions as a necessary accessory, and its important also to keep a check on what’s happening in world. But we also know that it can be switched off when no one is in the room.
  • There are many other ways where just by small step a Treasurer can impact the environment positively. Just by saying no to sales/ business development professionals for a physical meeting and instead suggesting a skype meeting may help save fuel and decrease carbon emission.

Eventually it depends upon an individual that she just sticks to what has been asked for or to step forward and do something worthwhile which impacts the organization, its stakeholders and our future generations who look up to us to provide them a health living environment to live.

Sources :

  1. https://www.theglobaltreasurer.com/2019/04/29/green-bond-demand-continues-to-rise-as-esg-returns-grow/
  2. https://ctmfile.com/sections/background/sustainable-green-treasury
  3. https://www.oregon.gov/treasury/invested-for-oregon/Pages/Sustainable-Investing-governance.aspx
  4. https://www.bloomberg.com/professional/blog/treasurers-need-know-sustainable-financing/
  5. https://www.treasury-management.com/article/4/412/3484/the-rise-of-esg-business-drivers-and-treasury-imperatives.html

What are your thoughts?

Aastha Tomar

FX & Derivatives | Debt Capital Markets | MBA Finance
Electrical Engineer | Sustainability

Financing a Livable World

11-2-2020 | by Aastha Tomar

If Greta Thunberg doesn’t inspire us, breathing some Delhi air may. While these might have been in news recently, more of this discussion is on social media rather than real action.

Sustainability has thus mostly been associated with activist connotation and, less with real, on-ground impact.

As we evaluate on-ground actions, investments towards such actions become first step and these need to make “financial sense” for investors to flock in. That’s when, I believe, that traditional financial acumen fails us. The foundational elements of investment rationale shall make such investment difficult. Let’s evaluate how –

  1. It’s all about ROI in purely Financial Terms: All financial evaluations are about monetary returns. Such approach is more likely to make Investing in sustainability related projects unattractive
  2. Organizations as going concern: While some projects have started evaluating impact of climate change, organizations are often considered as going concern without climate change & its impact. It’s it a time that we start considering some serious impact of climate change while evaluating cash flow and hence the project IRR.

Of all, these foundation elements make investment capability of capital markets to adapt in disruptive situations, like we are facing now for climate change, difficult. Financial markets, in its prevailing methods, would only consider climate change once its impacts are visible, but that, I guess, would be too late.

Having worked in Debt capital markets (DCM) my first reaction was to search of how DCM is contributing in sustainability and this led me to know about a beautiful concept of green bonds. The bond by their very name “green bonds” click into mind that there is something related to sustainability in it.

Green bond principles, intended to provide a framework for debt funding for projects which shall contribute to sustainability, is a step in the right direction. It has been framed with four core pivotal elements –

  1. Use of Proceeds
  2. Process for Project Evaluation & Selection
  3. Management of Proceeds
  4. Reporting

It’s the use of proceeds which sets apart green bonds from regular bond issues. The eligible projects for such issuance should be from around ten categories including renewable energy, energy efficiency, pollution prevention and control, green buildings etc.

A cumulative $580 billion of green bonds were sold through 2018, according to Bloomberg New Energy Finance. According to climate bond initiative in quarter 3 of 2019 itself USD 6.2 bn worth green bonds were issued worldwide, which is 87% up YoY. There were 139 issuers from 32 countries. There are many issuers joining the race and many nations as well. European nations being the ones taking the lead.

Though figures for green bonds may seem encouraging when we see them standalone but when compared to the global bond markets which are more than USD 100 trillion market, green bond market is hardly a fraction of it. Europe alone needs about 180 billion euros ($203 billion) of additional investment a year to achieve 2030 emission targets set by the European Union in the 2015 Paris Agreement on climate change.

In nutshell, green finance initiatives are steps in right direction but need more muscle and speed to enable actions on ground.

What are your thoughts?

Aastha Tomar

FX & Derivatives | Debt Capital Markets | MBA Finance
Electrical Engineer | Sustainability