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Effective Finance & Treasury in Africa | Eurofinance
07-02-2023 | Eurofinance | treasuryXL | LinkedIn |
Join senior treasury peers on March 7th in London at EuroFinance’s 10th annual Effective Finance & Treasury in Africa. Understand changing developments and the unique opportunities and challenges of doing business in this dynamic region.
This year’s speaker line-up includes experienced treasurers – all active in African markets – including:
● Edward Collis, Treasurer, Save the Children
● Neiciriany Mata, Head of finance, Angola Cables
● Marta de Teresa, Group treasurer, Maxamcorp
● Chigbo Enenmo, Finance and treasury manager, Nigeria LNG
● Folake Fawibe, Integrated business service lead, Danone, Southern Africa
● Jan Beukes, Group treasurer, MultiChoice Group
They will discuss important topics including cash and FX, payments, liquidity and financing, digital transformation, share success stories and provide practical guidance on how to optimise your treasury operation for growth.
For the full agenda and to register, please visitt this link.
Quote discount code MKTG/TXL10 for an exclusive 10% discount for TreasuryXL readers.
If you have any questions, you can contact the EuroFinance team directly at [email protected].
Registration is open – find out more and register now.
Sustainable Finance Framework – A tool To Align Financial Decision-Making and Sustainability
06-02-2023 | Anastasia Kuznetsova | treasuryXL | LinkedIn |
The recent increase in ESG awareness among consumers and investors, along with regulatory pressure, has prompted companies around the world to incorporate ESG aspects into their business models in order to become sustainable.
However, a transition to more sustainable operations is not possible without new financing. Thus, Corporate Treasurers can significantly help companies to achieve their ESG goals by raising funds for the company’s sustainable initiatives. This can be done through the creation of a sustainable finance framework, which has gained popularity among companies in recent years.
Sustainable Finance Framework and its Components
A sustainable finance framework aims to align financial decision-making with the principles of sustainable development. The framework outlines how a company uses environmental, social, and governance (ESG) factors in its financing, refinancing, and investment processes. As a starting point, corporations typically establish a sustainable finance framework to arrange debt financing for a certain group of projects with positive environmental or social benefits. Many organizations set up their sustainable finance framework in accordance with international guidelines such as the Green Bond Principles (GBP) or Social Bond Principles (SBP), which support the issuance of ESG-related debt.
A well-defined sustainable finance framework will typically contain five components:
The use of Proceeds clause defines categories of projects for which a company can use debt proceeds that were raised under its sustainable finance framework. For instance, the Framework of a property developer may cover the issuance of green and social bonds for three project categories:
Each project category will also have specific ESG criteria that will help to identify truly sustainable investment opportunities eligible for sustainable financing. For example, a project category “acquisition/development of low carbon buildings” may only allow spending debt proceeds on the acquisition of buildings with an energy efficiency rating of A. Projects that do not fall under eligible project categories, or projects that do not satisfy the established ESG criteria within each project category, will not receive sustainable financing and, thus, will not be undertaken by the company.
Another crucial component of a sustainable finance framework is project evaluation and selection. Corporate Treasurers should establish a method for determining whether new projects available for the company fit eligible project categories and, therefore, can be adopted. All selected projects included in a sustainable finance framework should be reviewed on a periodic basis and before new financing is raised. As a rule, a full list of eligible projects is examined and approved by the CFO to confirm that they meet the ESG criteria of the Framework and, thus, can receive financing.
After the sustainable financing is raised, Treasurers should ensure that funds are properly allocated and used in accordance with the “use of proceeds” clause. Thus, the sustainable finance framework should specify how a company will track the disbursements and allocation of debt proceeds among eligible projects.
The fourth component of the sustainable finance framework is the periodic disclosure of debt-related and project-related information. As long as a company has some outstanding debt raised within its sustainable finance framework, it should disclose, at least annually, the total amount of ESG debt raised, the remaining outstanding proceeds and the allocation of the proceeds across eligible projects. Such disclosures will help the company’s debtholders to understand how and to what extent their capital has been deployed by the organization.
Companies should also evaluate the environmental/social impact of funded projects via verifiable Key Performance Indicators (KPIs). For instance, a property developer can measure the environmental impact of projects under the “acquisition/development of low carbon buildings” category by energy consumption (kWh) and/or energy intensity (kWh/m2) KPIs. Impact reporting is crucial to assess whether the projects that received sustainable financing have achieved the expected positive environmental/social benefits.
The last attribute of the sustainable finance framework is independent external assurance. This step is needed to confirm the credibility of the established Framework as well as attest the compliance of the debt issuance process with the principles of international guidelines adopted by the company as a foundation for its sustainable finance framework.
The Enhancement of the Sustainable Finance Framework
The ultimate objective of a sustainable finance framework is to drive the financing of all corporate activities that align with the company’s sustainability goals. As such, Treasurers should gradually broaden the Framework by incorporating other sustainable finance instruments, such as convertible green bonds or sustainability-linked revolving credit facilities, to finance a diverse range of sustainable initiatives that support a company’s transition towards more sustainable operations. Over time, the Framework should be continuously expanded to include the development of new products/services and other sustainable business activities, instead of being limited to the financing of specific project categories that were initially defined in the use of proceeds clause.
Core Benefits of the Sustainable Finance Framework
The implementation of the sustainable finance framework can potentially result in the following benefits for the company.
By inclusion of ESG factors in the financial decision-making process, the Framework ultimately forces companies to consider environmental and social risks as well as their interdependences when evaluating investment opportunities. This enables businesses to receive a more complete picture of their risk exposures and, therefore, timely put in place adequate risk management tools that are required to keep company’s exposure to risks at an acceptable level.
The improved risk management that accounts for ESG-related risks is also likely to increase the confidence of capital providers in the company’s ability to survive in the long-term and remain profitable during challenging times. This, in turn, might improve a company’s credit rating, decrease the cost of capital, and enable businesses to obtain new financing on more favourable terms.
Sustainable finance has gained significant momentum in recent years. Therefore, companies that are perceived as environmentally and socially responsible are more likely to receive investment from impact-oriented investors and financial institutions. Thus, the implementation of the sustainable finance framework can increase a company’s access to capital and provide new source of financing in the face of ESG-oriented investors.
The implementation of a sustainable finance framework also demonstrates a company’s commitment to sustainability, which can lead to a better reputation among stakeholders, and enhance the company’s credibility and trust. This may translate into a wider pool of investment options and stronger relationships with suppliers, customers, and other stakeholders.
Key Takeaways of the Sustainable Finance Framework
Thank you for reading!
Anastasia Kuznetsova
Uncovering the benefits of a multicurrency world
03-02-2023 | treasuryXL | Kantox | LinkedIn |
We’re living in a multicurrency world and we’re multicurrency treasurers. You can get a head start on your competitors by simply understanding the benefits of operating with multiple currencies. Start leveraging the multicurrency world we’re in.
Disclaimer: This information is being shared for informational purposes only and was originally published by Kantox (Source)
With so many benefits to operating with the different foreign currencies out there, it is crazy to think that some companies are not taking advantage of this.
In this week’s episode of CurrencyCast we discussed why businesses should consider implementing a multicurrency approach to their FX risk strategy. This article will take a deeper dive into the benefits and give you some insight into how to be a more strategic treasurer.
Why we are in a multi-currency world
In this episode, we analyse a development that many find surprising, but that stands at the core of our thinking at Kantox: the multi-currency world. The prevailing view of a world dominated by a handful of currencies like the dollar and the euro is being challenged as we speak.
We’ll reveal how you can take advantage of the benefits that lie ahead in this multi-currency world and contribute to enhancing your profit margins.
How is technology pushing forward a multi-currency world
The currencies of a number of small, but well-managed economies (together with the natural rise of CNY) are gaining in importance: SEK, NOK, CAD, AUD, NZD, SGD and KRW among others.
The change is not driven in a top-down manner by macroeconomic forces. Instead, it reflects a bottom-up and microeconomic phenomenon, made possible by technology.
Today’s multi-currency world is mostly driven by corporate treasurers taking advantage of Multi Dealer Platforms such as 360T. These platforms have led to a dramatic compression of spreads, increasing liquidity beyond the major currency pairs and reducing the network effects of the USD.
For example, whereas a CAD-MXN transaction used to require two trades involving USD and CAD on the one hand, and USD and MXN on the other, now CAD-MXN can be directly and competitively traded on Multi-Dealer Platforms.
Advantages of the multi-currency world
Back to the issue of the multi-currency world. Let me mention some of the benefits of selling in more currencies (we discussed the advantages on the contracting side earlier on):
Let’s take this example if you are a company operating with imports from a foreign country there could be some hesitation regarding whether to work with the local currency or not. In certain cases, using the local currency translates into better deals from a commercial perspective, as FX markups from suppliers are avoided. Also, firms get access to a wider range of suppliers.
From a liquidity management perspective, you may benefit from extended paying terms as well giving you more runway to finalise your sales. Finally, from a strictly financial perspective, there could be a wider forward discount of currency pairs which is a way to generate more positive forward points when hedging.
A strategic issue in the age of innovation
By taking FX risk out of the picture, you put your business in a position to confidently use more currencies in day-to-day operations. Additionally, if you then implement the best automation solution that will help you remove time-consuming and error-prone tasks, you could have a strong currency management strategy that becomes a great strategic asset.
On top of that, there are other bonuses to implementing technology:
Wrap up
Now you know all the benefits of a multicurrency world for currency managers. By empowering commercial teams to always buy and sell in the most profitable currency, the finance team acts as a strategic business enabler within the enterprise. That is the promise of the multi-currency world that is taking shape as we speak.
You are now prepared to face the future of currency management and reap all the benefits of the multiple currencies available. But to keep the ball rolling and make the most of foreign currencies, you need a tool that allows you to have full control of your FX exposure.
That’s why Kantox offers a unique currency management automation solution that enables treasurers and CFOs like you to optimise your FX workflow. Talk with our currency management experts and find out how today.