Sustainability: Difference between revisions

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


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




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


Arguably though, it is perhaps only environmentally sustainable businesses which are fully financially sustainable.  
More recently though, an alternative view has arisen that it is only environmentally sustainable businesses which are fully financially sustainable.
 
This alternative view suggests that there need be no conflict between an organisation’s environmental and financial objectives, when a sufficiently long-term view is taken.


This proposition 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.


Sustainability is increasingly being used as a component in the purchase of loans/credit facilities. This has led to some credit rating agencies taking into account sustainability principles.
Credit rating agencies are also taking sustainability principles into account.




<span style="color:#4B0082">'''''Credit rating'''''</span>
<span style="color:#4B0082">'''''Credit ratings and ESG'''''</span>


:"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 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.''
:''The Treasurer, web exclusive, June 2019.''

Revision as of 15:43, 18 September 2019

Sustainability has two important dimensions in treasury and finance, environmental sustainability and financial 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 sustainable 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.


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

More recently though, an alternative view has arisen that it is only environmentally sustainable businesses which are fully financially sustainable.

This alternative 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.


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

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