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.
| | ''Floating interest rates - risk management - repricing risk.'' |
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| Sustainability has a number of important dimensions in treasury and finance, including environmental sustainability, financial sustainability and social sustainability.
| | Reset risk is a type of repricing risk. |
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| | Repricing risk is the risk of adverse effects resulting from changes in floating interest rates. |
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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.
| | Reset risk is the additional risk resulting from a relevant reference rate being observed on a single day - and then incorporated into a longer contractual period. |
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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.
| | "There is [ ] no ‘reset risk’ in Risk Free Rates (RFRs) since the interest rate coupon will be reflective of market observations over the entire interest rate period, not just on the reset date." |
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| Financial sustainability includes the ability to pay back borrowings over time, with interest, while maintaining necessary levels of internal investment.
| | ''Pieter Bierkens, former chair of Australia's LIBOR reform working group - The Treasurer, December 2023 Issue 4, p30.'' |
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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. | |
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| Historically, it was often considered that there was a conflict between environmental sustainability and financial sustainability.
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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) | | * [[Assets]] |
| * [[B Corporation]] | | * [[Behavioural gap]] |
| * [[Bottom line]] | | * [[Contractual gap]] |
| * [[Business & Sustainable Development Commission]] | | * [[Coupon]] |
| * [[Carbon footprint]] | | * [[Exposure]] |
| * [[Climate benchmark]] | | * [[Floating rate]] |
| * [[Corporate social responsibility]] | | * [[Gap report]] |
| * [[Credit]] | | * [[Gap risk]] |
| * [[Credit rating agency]] | | * [[Interest]] |
| * [[Environmental profit and loss]] | | * [[Interest gap ]] |
| * [[ESG investment]] | | * [[Interest rate]] |
| * [[Fiduciary duty]] | | * [[Interest rate risk]] |
| * [[Forum for the Future]] | | * [[Liabilities]] |
| * [[Global Sustainable Investment Alliance]] | | * [[Liquidity gap]] |
| * [[HLEG]] | | * [[Maturity ladder]] |
| * [[International Sustainability Standards Board]] | | * [[Rate reset]] |
| * [[Metaeconomics]] | | * [[Repricing ]] |
| * [[Moratorium]] | | * [[Repricing risk]] |
| * [[Natural capital]]
| | * [[Risk-free rates]] (RFRs) |
| * [[Organic]]
| | * [[Risk management]] |
| * [[Reputational risk]]
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| * [[Return on Sustainability Investment]] | |
| * [[SRA]]
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| * [[SRI]]
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| * [[Stakeholder]]
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| * [[Stewardship]]
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| * [[Sustainability reporting]]
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| * [[Sustainability Accounting Standards Board]]
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| * [[Sustainability bond]]
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| * [[Sustainability Linked Loan Principles]]
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| * [[Sustainable Development Goals]]
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| * [[Sustainable finance]]
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| * [[Sustainable Finance Disclosure Regulation]] (SFDR)
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| * [[Technical Expert Group]] | |
| * [[Triple bottom line]]
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| * [[UK Sustainable Investment and Finance Association]]
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| [[Category:The_business_context]] | | [[Category:Financial_products_and_markets]] |
| [[Category:Corporate_finance]] | | [[Category:Identify_and_assess_risks]] |
| [[Category:Investment]]
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| [[Category:Long_term_funding]]
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| [[Category:Ethics]]
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| [[Category:Manage_risks]]
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| [[Category:Risk_reporting]]
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Floating interest rates - risk management - repricing risk.
Reset risk is a type of repricing risk.
Repricing risk is the risk of adverse effects resulting from changes in floating interest rates.
Reset risk is the additional risk resulting from a relevant reference rate being observed on a single day - and then incorporated into a longer contractual period.
"There is [ ] no ‘reset risk’ in Risk Free Rates (RFRs) since the interest rate coupon will be reflective of market observations over the entire interest rate period, not just on the reset date."
Pieter Bierkens, former chair of Australia's LIBOR reform working group - The Treasurer, December 2023 Issue 4, p30.
See also
