Sustainability

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.

Sustainability has a number of important dimensions in treasury and finance, including environmental sustainability, financial sustainability and social sustainability.

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.

Financial sustainability is achieved when an organisation is able to earn reliable financial surpluses and generate cash in the medium and longer-term.

Financial sustainability includes the ability to pay back borrowings over time, with interest, while maintaining necessary levels of internal investment.

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.

Historically, it was often considered that there was a conflict between environmental sustainability and financial sustainability.

More recently, an increasingly mainstream view is that it is only environmentally sustainable businesses which are fully financially sustainable.

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.

Sustainability is increasingly being used as a component in borrowings and credit evaluation.

Credit rating agencies are also taking sustainability principles into account.

ACT's sustainability awards

"These awards are presented to individuals or organisations in recognition of the contribution the treasury or client-facing team has made towards sustainability in their organisation or more widely.

Criteria may include (but are not limited to):

• Environment: solutions that take into consideration and make a positive impact on the environment.
• Social: solutions that address social challenges, either on a large (e.g. modern slavery) or small (e.g. volunteering in the local community) scale.
• Governance: innovative solutions to manage the demands of greater scrutiny on a team or organisation.
• Innovative finance solution: whether loan, bond, supply chain finance or something other, if you’ve raised debt using an innovative solution or to address an innovative need (e.g. to support the wider social agenda), we’d like to hear from you."

Diversity & Sustainability Awards, Association of Corporate Treasurers.

Treasury needs to understand the company's net-zero journey

"Viktoria Hadarits, assistant treasurer at Lightsource bp, a global leader in solar development and management, told the forum how even a solar business needs to have net-zero targets. “We provide solar energy to companies to help them on their net-zero journey, however, that doesn’t mean that we don’t have to worry about our own journey,” she said.

“In 2021 we published our sustainability framework, which included the three key pillars of the company – people, environment and energy. Building on the sustainability framework in 2022, we have published our first annual sustainability report, confirming the sustainable development goals that we support in our operations. And we have published the first numbers around our own greenhouse gas emissions and set ourselves some KPIs on how to reduce them over the coming years.”

Hadarits described how, when she joined the Lightsource bp team, she made a point of understanding the company’s net-zero journey. “It is very important for the treasury team to be aware of the goals and objectives of the company so that… having people with a sustainability mindset within the treasury team will help embed those [sustainability] processes much faster within our function.”

Examples of sustainability processes include how excess cash is invested, including the use of ESG-based money market funds and ‘green’ bank deposit accounts that can support sustainability development goals. She is also looking at foreign exchange products that can be linked to existing sustainability KPIs so that some funds can be returned to the business via a rebate system, which in turn will be used to support the sustainability objectives of the company.

“This is where I see our banking counter-parties helping us, through informing us about the latest innovations and products in the market,” she said. “Having full visibility of what is out there in the market will help us make good decisions.”"

Treasurers have an important role in the journey to net zero - ACT HSBC Treasury Forum - 2023.

Scope 3 and biodiversity loss

"... panellists agreed that treasurers needed to know and understand their own organisation’s sustainability framework and where the organisation is on its transition pathway. They can then understand where and how finance fits within this. For instance, a revolving credit facility (RCF) can be linked to sustainability elements, with margins flexed up or down depending on performance against sustainability KPIs. Treasurers can also ensure their organisations invest surplus cash in ESG-related funds, and even help employees with their own investments, such as pensions, so that they are comfortable with where their money is invested.

Then there is the supply chain, which is going to become an area of increasing focus as organisations begin to report on their ‘Scope 3’ greenhouse gas emissions. However, there are other fundamentals such as ensuring suppliers are paid on time and absorbing short-term increases in costs, weighed against the long-term goal of net-zero.

The forum also heard how biodiversity loss is set to become an area of increasing focus for many companies, as the Taskforce on Nature-Related Financial Disclosure (TNFD) continues its work to develop and deliver a risk management and disclosure framework for organisations to report and act on evolving nature-related risks."

Treasurers have an important role in the journey to net zero - ACT HSBC Treasury Forum - 2023.

Credit ratings and ESG

"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..."

The Treasurer, web exclusive, June 2019.

See also

• Accounting for Sustainability (A4S)
• Assurance
• B Corporation
• Biodiversity
• Biodiversity loss
• Bottom line
• Business & Sustainable Development Commission
• Cambridge Institute for Sustainability Leadership (CISL)
• Carbon footprint
• Climate benchmark
• Climate transition
• Climate-washing
• Corporate social responsibility
• Corporate Sustainability Assessment
• Corporate sustainability due diligence
• Corporate Sustainability Reporting Directive (CSRD)
• Credit
• Credit rating agency
• Degradation
• Diversity
• Division for Sustainable Development Goals
• Doughnut economics
• Environmental concerns
• Environmental profit and loss
• Environmental, social and governance (ESG)
• ESG investment
• EU Platform on Sustainable Finance
• Fiduciary duty
• Financial sustainability
• Forum for the Future
• G20 Sustainable Finance Working Group
• Global Sustainability Standards Board
• Global Sustainable Development Report
• Global Sustainable Finance Council
• Global Sustainable Investment Alliance
• Governance
• Green finance
• Greenwash
• HLEG
• IFRS S1
• IFRS S2
• IFRS Sustainability Disclosure Standards
• IFRS Sustainability Disclosure Taxonomy
• International Platform on Sustainable Finance
• International Institute for Sustainable Development
• International Sustainability Standards Board
• Least Developed Countries Fund (LDCF)
• Liquidity and Sustainability Facility (LSF)
• Margin
• Metaeconomics
• Moratorium
• Natural capital
• Nature loss
• Net zero
• Organic
• Platform on Sustainable Finance
• Principles for Sustainable Insurance
• Reputational risk
• Return on Sustainability Investment
• Reverse logistics
• Revolving credit facility
• Risk management
• Scope 3 emissions
• Social concerns
• Social sustainability
• SRA
• SRI
• Stakeholder
• Stewardship
• Supply chain
• Sustainability Accounting Standards
• Sustainability Accounting Standards Board (SASB)
• Sustainability bond
• Sustainability bond framework
• Sustainability Bond Guidelines
• Sustainability breach
• Sustainability co-ordinator
• Sustainability Disclosure Requirements (SDR)
• Sustainability-linked
• Sustainability-linked bond
• Sustainability linked bond framework
• Sustainability-Linked Bond Principles
• Sustainability-linked derivatives
• Sustainability linked financing
• Sustainability linked loan
• Sustainability-Linked Loan Principles
• Sustainability matters
• Sustainability performance target
• Sustainability provision
• Sustainability reporting
• Sustainability statement
• Sustainability themed investing
• Sustainable bond
• Sustainable Bond Market
• Sustainable debt
• Sustainable Development Goals (SDGs)
• Sustainable
• Sustainable aviation fuel
• Sustainable blue economy
• Sustainable Blue Economy Finance Principles
• Sustainable bond framework
• Sustainable Bond Market
• Sustainable finance
• Sustainable Finance Disclosure Regulation (SFDR)
• Sustainable finance framework
• Sustainable Finance Working Group
• Sustainable infrastructure
• Sustainable Infrastructure Foundation
• Sustainable investment
• Sustainable investment label
• Sustainable loan
• Sustainable Ocean Principles
• Task Force on Nature-related Financial Disclosure (TNFD)
• Technical Expert Group
• Triple bottom line
• UK Sustainable Investment and Finance Association
• World Business Council for Sustainable Development

Other resources

• Treasurers have an important role in the journey to net zero - ACT HSBC Treasury Forum - 2023