Promoting Green Finance: Treasury’s Strategic Role in Corporate Sustainability

As businesses work to reduce their environmental impact, treasury functions can be aligned with broader sustainability goals through several key strategies.

Treasury’s Expanding Role

Traditionally, treasurers managed a company’s financial assets, ensured liquidity, and reduced financial risks. Today, their responsibilities have grown, and treasurers are now expected to help meet sustainability targets. This shift highlights the connection between financial strategies and environmental goals.

Integrating Sustainability into Treasury Operations

1. Sustainable Financing: One of the most impactful ways treasury can support sustainability is through sustainable financing. Treasury teams can drive sustainability by issuing green bonds and sustainability-linked loans, financing eco-friendly projects. In 2023, green bond issuance hit a record $575 billion, surpassing the previous peak of $573 billion in 2021, which highlights the rising trend in sustainable financing¹.
2. Risk Management: Climate change poses risks to all businesses. By factoring environmental, social, and governance (ESG) considerations into risk assessments, treasurers can help reduce the impact of these threats on the company’s finances. According to a 2021 S&P Global report, 90% of S&P 500 companies now publish sustainability or ESG reports, emphasizing its importance².
3. Cash Management: By optimizing cash flow and investing in sustainable projects, treasurers contribute to profitability while supporting sustainability initiatives. Digital cash management tools, reducing paper use, also play a role in cutting operational costs and helping the environment.
4. Stakeholder Engagement: Treasurers are well-positioned to engage with investors, regulators, and rating agencies. By communicating the company’s sustainability performance transparently, they can attract socially responsible investment, boosting financial performance.

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Best Practices for Treasury in Sustainability

• Set Clear Objectives: Establish specific sustainability goals that align with the company’s strategy, ensuring measurable progress.
• Cross-Department Collaboration: Treasury should collaborate with procurement, sustainability teams, and other departments to align financial strategies with broader sustainability initiatives.
• Leverage Technology: Emerging technologies like blockchain and AI can improve transparency in treasury operations and track the environmental impact of financial decisions.
• Commit to Continuous Improvement: Sustainability is an ongoing journey. Treasury teams should regularly update their strategies to adapt to new developments in sustainable finance, staying ahead of market trends.

Conclusion

Treasury departments can be powerful drivers of corporate sustainability through sustainable financing, risk management, and engaging stakeholders, ensuring companies meet their environmental goals and build resilience for the future.