Sustainability

From ACT Wiki
Revision as of 15:43, 18 September 2019 by imported>Doug Williamson (Layout.)
Jump to navigationJump to search

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