The announcements by the UK Government on 25 June 2025, including plans to support banks and large companies in developing climate transition plans, help demonstrate why it is increasingly vital for corporate treasurers to understand sustainable finance. Environmental, Social & Governance (‘ESG’) considerations are no longer just a reputational issue—they’re reshaping how capital is raised, allocated, and reported.
I’m an Associate Director for Policy & Technical at the ACT, so you might expect me to say this! But, reflecting on the past week alone - just by way of example - I’ve participated in a discussion of Transition Finance with the All Party Parliamentary Group on Financial Services & Markets at Westminster; I’ve attended the Net Zero Delivery Summit, the City of London’s flagship sustainable finance event, as part of London Climate Week; and, as a member of the Financial Markets Standards Board, I’ve noted publication of the FMSB’s Statement of Good Practice on the Governance of Sustainability-Linked Products, setting out globally applicable good practices to promote robust and consistent governance frameworks for these instruments when they are used by corporate treasurers to raise finance.
We know from our regular meetings with FTSE100 treasurers, banks, the FCA, and the Bank of England that sustainable finance remains on the agenda even when other geopolitical factors are claiming a greater share of the spotlight.
So, notwithstanding some of the negative headwinds and media comments around ‘ESG’ in recent months, here are a few reasons why sustainable finance still matters to corporate treasurers:
The market for labelled (‘green’) bonds and sustainability-linked loans has surged in recent years. There are interesting developments in transition finance and carbon credits in Asia, where infrastructure tends to be younger than in Europe. The Government has stated its ambition for the UK to become the sustainable finance capital of the world. Treasurers who understand these instruments may tap into new pools of capital with potentially lower costs, especially when ESG targets are met by their businesses.
Institutional investors, credit rating agencies, and even your insurers increasingly scrutinise ESG performance and risks. A poor ESG profile can raise borrowing or insurance costs or limit access to funding altogether. At the least, treasurers need to be able to articulate their business strategies, risks, and responses encompassing ESG factors.
Treasurers are particularly well-positioned to embed sustainability into the company’s financial DNA, structuring sustainable finance frameworks, aligning KPIs with ESG goals, and ensuring transparency in reporting. But they also need to understand the challenges of misaligned metrics and timelines between treasury and the business. Increasingly, sustainability is seen as part of Business As Usual (BAU). As an example, treasurers need to identify financial exposures arising from joint ventures – will your partners pay their share of environmental decommissioning costs at the end of the project?
ESG risks – such as climate exposure or supply chain ethics - are now seen as material financial risks. Treasurers are expected to help identify, quantify, and mitigate these risks as part of the broader financial strategy for their businesses. What’s new is that until recently the focus of Transition Finance was on reducing a company’s greenhouse gas emissions, whereas in recent meetings I’ve heard ‘transition’ referenced to the adaptation of businesses to mitigate the consequences of climate change on their businesses – for example, investment in flood defences or air conditioning for factories. Yet some climate-related risks may be becoming uninsurable (see Pilita Clark's FT article, 26 June 2025: ‘How the next financial crisis starts’).
With evolving disclosure requirements (such as new ISSB standards, the EU’s CSRD, or the UK’s TCFD-aligned rules), treasurers must ensure that financial practices align with external sustainability reporting standards. The UK Government’s latest proposals (see above) include a requirement for Transition Planning, which means businesses will have to set out a roadmap that outlines how they intend to adapt and transform their operations, strategies, and business models to align with their climate goals.
James Winterton
Associate Director, Policy & Technical
