The ACT’s first conference dedicated to ESG was held in London on 7 December. Interest in the conference was clear as I’m told that all the places were snapped up within a few short days and I know from personal requests that we had a long waiting list! The ACT has previously had specific ESG related sessions at its other conferences, but it was great participating in a full day conference dedicated to ESG.
The audience comprised treasurers and their teams from a diverse group of organisations ranging from those with dedicated sustainability teams to ones where the treasurer did it all. It was a reminder that ESG affects all businesses and that the resources available can vary significantly.
We heard from some companies that are further along their journey and I met others that are still at the early stages of updating treasury polices (such as their approach to investing in ESG linked money market funds). Treasurers from a diverse group including Anglo American, Burberry, Chemring, Optivo, PageGroup, and Wates Group shared their own stories of success and challenges. One thing that was clear was that there is lots to learn from other treasurers as well as from the financial services sector who have some amazing resources available to corporates.
Over the course of the day, we ran 13 different sessions covering topics that treasurers face including:
liquidity and cash management with an ESG lens
challenges with financing businesses with ESG linked instruments
the different types of debt related frameworks available from ICMA and the LMA
how rating agencies are assessing ESG related risks
reporting on ESG related activities to lenders and investors
navigating the various taxonomies
how banks are applying an ESG lens when dealing with clients
sources of capital available to businesses
embedding ESG into the business.
One of the reflections from COP 26 in Glasgow in 2021 was the increasing role that the business community was playing in the transition towards a more “just society”. The conference was a reminder of the significant financial resources available to corporates as they look to finance their own transition plans.
The scale of the challenge can feel daunting and reports from the IPCC and other organisations can make it feel that our actions are too small or too late. However, the conference was also a reminder of the scale of efforts and organisations (at both a global as well as a national level) being applied to the task ahead. All the sessions were encouraged to provide treasurers with practical tips and actions to take away. These were as follows:
make sure you proactively engage regularly with your sustainability team (if you have one)
if you don’t have a dedicated sustainability team, then help convene one
build your own treasury roadmap that aligns with your corporate plan and supports the wider business strategy
don’t do it all yourself but assign roles across your team and harness their own interests and passions
proactively engage with your banks and other providers in the financial ecosystem if there are areas you’d like to finance and are not aware of any suitable products currently available
ask your banks and lenders about their own ESG roadmap and areas of focus, and challenge them on their level of transparency
even if you’re not ready to commit to specific ESG KPIs, there are mechanisms and legal structures that demonstrate a pledge to an ESG roadmap without requiring the board to sign off on key metrics if the company is not fully ready to make such a guarantee.
The role of banks and regulators
One of the polls run asked where treasurers go to for advice on ESG and it was interesting that almost 60% turned to their banking partners.
It’s easy to think that banks are only there to finance businesses but one of the sessions talked about the wider role that banks are playing – from designing new products to provide a range of transition finance (from electric vehicles through to the charging stations as well as green mortgages) to partnering with other organisations (for example to offer carbon tracking). It shows the importance of the role that banks are expected to play in this space. Banks seem keen to help their clients develop and progress their own ESG journey and treasurers would be remiss if they didn’t avail themselves of the opportunity being offered to them.
This was reinforced in the session chaired by James Winterton with Chris Faint - Head of Climate Hub Division, Bank of England. Chris commented on some of the results of the Climate Biennial Exploratory Scenario that the Bank undertook with the 9 largest banks in the UK and that were released in May 2022. It was useful hearing how the Bank set the different scenarios and what the results meant for the Bank and the banking sector in general.
Although it does not seem that banks will have to apply a specific regulatory ESG risk weighting to their assets anytime soon, as ESG risks become clearer and more quantifiable, it is likely that companies with greater exposure to ESG risks will face a higher credit charge by banks as part of their normal credit risk assessment.
As well as the Bank of England, delegates heard from another regulator – the FCA. Carlos Martin Tornero, Senior ESG Specialist – Policy & Advisory talked through the work that the FCA is doing on setting reporting requirements based on key principles and taxonomies and how to address the lack of consistency. He was joined by a director from one of the major accountancy and advisory firms who talked about how to manage the challenges of working across different jurisdictions and reporting regimes. His key messages included avoiding a generic approach but choose one that suits your organisation and its sector, and the importance of being able to articulate a coherent story. This session complimented an excellent earlier session from the Chief Connectivity & Integrated Reporting Officer of the IFRS Foundation who covered the role of the newly formed International Sustainability Standard Board and the emergence of global standards including the following proposed exposure drafts:
IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information (General Requirements Exposure Draft) which sets out the overall requirements for an entity to disclose sustainability-related financial information about all its significant sustainability-related risks and opportunities, to provide the market with a complete set of sustainability-related financial disclosures
IFRS S2 Climate-related Disclosures (Climate Exposure Draft) which builds upon the recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD) and incorporates industry-based disclosure requirements derived from SASB Standards.
Delegates heard from a money market fund manager about acceptable and non-acceptable trade-offs in investment policies and the balance between yield and sustainability in a policy. As one of our polls showed, investment solutions is an area that treasurers do not currently feel well served by and they should ensure their providers know they need to work harder in this space.
Many other topics were covered during the day. It is impossible to cover the entirety of ESG in one day and many of the sessions could have gone on even longer. We welcome your feedback on what went well and what could have been done differently as well as details of topics, companies and speakers that you would like to hear from at future ACT events.
Finally, the one key message I took from this day was the importance of communication – internally: to identify the organisation’s strategy and ensure treasury is involved in the debate; externally with key stakeholders so they understand the journey that the organisation is on and how they can support transition.
The Policy and Technical team would love to hear from those that attended the conference on what actions they have taken away to work on and from anyone with a story that feel is worth sharing with their peers. Drop a note to technical@treasurers.org
Naresh Aggarwal
Associate Director, Policy & Technical
