imported>Doug Williamson |
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| Sustainability considers the long term environmental and other effects of an organisation's activities, seeking to ensure that they do not degrade the physical environment or other necessary conditions for well being.
| | 1. ''Reference rates.'' |
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| Sustainability has a number of important dimensions in treasury and finance, including environmental sustainability, financial sustainability and social sustainability.
| | Generally, a base rate is a widely recognised and quoted interest rate - such as the Fed funds rate, the prime rate, or SONIA - by reference to which a rate of interest is calculated. |
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| | More properly, these are a "reference rate" or a "benchmark rate". These terms avoid confusion with Base Rate (see below). |
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| '''''Environmental''''' sustainability involves making decisions and taking actions which expressly take responsibility for the impact on the environment, and avoid depleting or degrading natural resources such as soil, water, forests, and biological diversity.
| | For example, in the phrase ‘SONIA plus 50 basis points’, SONIA is the base (reference) rate. |
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| '''''Financial''''' sustainability is achieved when an organisation is able to earn reliable financial surpluses and generate cash in the medium and longer-term. | | 2. ''Central bank rates.'' |
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| Financial sustainability includes the ability to pay back borrowings over time, with interest, while maintaining necessary levels of internal investment.
| | More particularly, a central bank rate may be known as Base Rate. |
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| | This is normally the rate at which the central bank will lend overnight funds, commonly of a secured basis, to financial institutions. |
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| '''''Social''''' sustainability seeks to identify and manage the impact of business and other activities on people. For example, employees, customers, suppliers, others employed by customers and suppliers, and host communities.
| | By changing this Base Rate, the central bank may hope to influence market rates generally. It seems that anticipated changes to Base Rate are one of the largest influences on movements in general market interest rates between actual Base Rate changes (Paul Mizen and Boris Hofmann - "Working Paper No 170: Base rate pass-through: evidence from banks' and building societies' retail rates" - London, 2002, ISSN 1368-5562). |
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| Historically, it was often considered that there was a conflict between environmental sustainability and financial sustainability.
| | Base Rates, if secured, are like the [http://www.federalreserve.gov/monetarypolicy/discountrate.htm discount rate] applied to loans to eligible institutions from the US Federal Reserve Banks under the primary credit program of their "discount window". |
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| More recently, an increasingly mainstream view is that it is only environmentally sustainable businesses which are fully financially sustainable.
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| This view suggests that there need be no conflict between an organisation’s environmental and financial objectives, when a sufficiently long-term view is taken.
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| Sustainability is increasingly being used as a component in borrowings and credit evaluation.
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| Credit rating agencies are also taking sustainability principles into account.
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| :<span style="color:#4B0082">'''''Credit ratings and ESG'''''</span>
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| :"The European Commission’s Sustainable Finance High-Level Expert Group (HLEG) says that credit rating agencies should “systematically integrate” relevant environmental, social and governance (ESG) criteria into their credit-rating analyses, along with factors related to longer-term sustainability..."
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| :''The Treasurer, web exclusive, June 2019.''
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| == See also == | | == See also == |
| * [[Accounting for Sustainability]] (A4S) | | * [[Alternate Base Rate]] |
| * [[Assurance]] | | * [[Benchmark]] |
| * [[B Corporation]] | | * [[Benchmarks Regulation]] |
| * [[Bottom line]] | | * [[Forward guidance]] |
| * [[Business & Sustainable Development Commission]] | | * [[Official Bank Rate]] |
| * [[Cambridge Institute for Sustainability Leadership]] (CISL) | | * [[Pass-through]] |
| * [[Carbon footprint]]
| | * [[Reference bank]] |
| * [[Climate benchmark]]
| | * [[SONIA]] |
| * [[Climate-washing]]
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| * [[Corporate social responsibility]]
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| * [[Corporate Sustainability Assessment]]
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| * [[Corporate Sustainability Reporting Directive]] (CSRD)
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| * [[Credit]]
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| * [[Credit rating agency]]
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| * [[Degradation]]
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| * [[Environmental profit and loss]]
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| * [[ESG investment]]
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| * [[EU Platform on Sustainable Finance]]
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| * [[Fiduciary duty]]
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| * [[Financial sustainability]]
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| * [[Forum for the Future]]
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| * [[Global Sustainability Standards Board]]
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| * [[Global Sustainable Finance Council]]
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| * [[Global Sustainable Investment Alliance]]
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| * [[Green finance]]
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| * [[Greenwash]]
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| * [[HLEG]]
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| * [[International Platform on Sustainable Finance]]
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| * [[International Institute for Sustainable Development]]
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| * [[International Sustainability Standards Board]]
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| * [[Liquidity and Sustainability Facility]] (LSF)
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| * [[Metaeconomics]]
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| * [[Moratorium]]
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| * [[Natural capital]]
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| * [[Organic]]
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| * [[Principles for Sustainable Insurance]]
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| * [[Reputational risk]]
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| * [[Return on Sustainability Investment]]
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| * [[Reverse logistics]]
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| * [[Risk management]]
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| * [[SRA]]
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| * [[SRI]]
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| * [[Stakeholder]]
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| * [[Stewardship]]
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| * [[Sustainability Accounting Standards]]
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| * [[Sustainability Accounting Standards Board]] (SASB)
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| * [[Sustainability bond]]
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| * [[Sustainability bond framework]]
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| * [[Sustainability Bond Guidelines]]
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| * [[Sustainability-linked bond]]
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| * [[Sustainability linked bond framework]]
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| * [[Sustainability Linked Bond Principles]]
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| * [[Sustainability linked financing]]
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| * [[Sustainability linked loan]]
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| * [[Sustainability Linked Loan Principles]]
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| * [[Sustainability performance target]]
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| * [[Sustainability reporting]]
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| * [[Sustainability themed investing]]
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| * [[Sustainable bond]]
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| * [[Sustainable Bond Market]]
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| * [[Sustainable debt]]
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| * [[Sustainable Development Goals]] (SDGs)
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| * [[Sustainable ]]
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| * [[Sustainable finance]]
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| * [[Sustainable Finance Disclosure Regulation]] (SFDR)
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| * [[Sustainable Finance Working Group]]
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| * [[Sustainable infrastructure]]
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| * [[Sustainable Infrastructure Foundation]]
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| * [[Sustainable investment]]
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| * [[Sustainable loan]]
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| * [[Technical Expert Group]]
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| * [[Triple bottom line]]
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| * [[UK Sustainable Investment and Finance Association]] | |
| * [[World Business Council for Sustainable Development]] | |
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| [[Category:The_business_context]]
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| [[Category:Corporate_finance]]
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| [[Category:Investment]]
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| [[Category:Long_term_funding]]
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| [[Category:Ethics]]
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| [[Category:Manage_risks]] | | [[Category:Manage_risks]] |
| [[Category:Risk_reporting]]
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1. Reference rates.
Generally, a base rate is a widely recognised and quoted interest rate - such as the Fed funds rate, the prime rate, or SONIA - by reference to which a rate of interest is calculated.
More properly, these are a "reference rate" or a "benchmark rate". These terms avoid confusion with Base Rate (see below).
For example, in the phrase ‘SONIA plus 50 basis points’, SONIA is the base (reference) rate.
2. Central bank rates.
More particularly, a central bank rate may be known as Base Rate.
This is normally the rate at which the central bank will lend overnight funds, commonly of a secured basis, to financial institutions.
By changing this Base Rate, the central bank may hope to influence market rates generally. It seems that anticipated changes to Base Rate are one of the largest influences on movements in general market interest rates between actual Base Rate changes (Paul Mizen and Boris Hofmann - "Working Paper No 170: Base rate pass-through: evidence from banks' and building societies' retail rates" - London, 2002, ISSN 1368-5562).
Base Rates, if secured, are like the discount rate applied to loans to eligible institutions from the US Federal Reserve Banks under the primary credit program of their "discount window".
See also
