ACT's core pillars of treasury 2025: Sustainable finance

“Sustainable finance generally refers to the process of taking due account of environmental, social and governance considerations when making investment decisions.

Environmental considerations refer to climate change mitigation and adaptation, as well as the environment more broadly, such as preserving biodiversity, preventing pollution and promoting the circular economy.

Social considerations refer to issues of inequality, inclusiveness, labour relations, investment in human capital and communities, and human rights issues.

The governance of public and private institutions, including management structures, employee relations and executive remuneration, plays a fundamental role in ensuring the inclusion of social and environmental considerations in the decision-making process." (European Union)

From the initial excitement in the sector, 5 or more years ago, when the issuing of sustainable finance was seen as innovative and positive, the debate has become more nuanced and sustainable finance has become part of the wider corporate strategy around climate change, the transition to net zero and corporate social responsibility more generally.

From the perspective of the treasurer, the decision of whether to raise sustainable (or transition) finance is not particularly straightforward. Issues such as:

• Concerns about perceived greenwashing
• Challenges about labelling of products
• The impact on ratings of issuance of ‘green’ products
• Identifying appropriate partners to work with for assurance (audit) purposes
• The cost of issuing sustainable finance
• Complicated (and sometimes contradictory) taxonomy and reporting requirements across jurisdictions
• The timing mismatch that can occur between the frequency of adjusting corporate targets compared to those in any debt documentation.

All of these factors come together to make the decision to issue sustainable finance far from automatic.

Nevertheless, sustainability is now firmly embedded in the strategic decision-making of most organisations; this topic is not going anywhere, and treasurers need to make sure that they are up to date with the latest developments, not just in their own jurisdiction, but internationally, and understand the role that they (and sustainable finance solutions) may play in the wider corporate strategy. In particular, decisions about whether or not to issue labelled products can be complicated and have far-reaching consequences.