Supporting business leaders to execute on ESG

The rising interest in sustainable business practices is undeniable. In this survey, 42% of respondents say their organizations have instituted formal policies around ESG principles while an additional 33% say ESG is being incorporated into decision-making. However, when it comes to investing excess cash, a core activity in treasury, 54% say they’re not being guided formally by ESG factors.

Given their position as financial stewards, treasurers should understand not just the reporting implications of ESG but the financial ones as well. CEOs around the globe are increasing commitments to ESG in numerous ways, and Treasury can play a role in moving the needle to address these commitments and broader sustainability strategies.

Driving esg chart

Implications: ESG is filtering through much of what treasury does—and it's all about finding opportunities.

  • Investments: Consider investing excess cash in assets that are consistent with overall ESG objectives. In companies still developing their sustainability strategy and commitments, treasury should aim to join the conversations so that any policy changes affecting investment practices can be put in place quickly.
  • Financing: Arguably the biggest ESG opportunity (and risk) for treasury relates to financing activities. For context, consider the wide-ranging effects of last year’s EU Taxonomy Regulation, a classification system for sustainable business practices that requires companies to disclose both ESG impact and ESG-related risk. With its responsibility for liquidity and funding, treasury should be familiar with its company’s ESG disclosures, sustainability targets and performance in order to exchange information with investment partners.

    Consider that some banks now factor ESG performance into the pricing of loans, both as part of a standard risk assessment and also in product offerings like ESG-linked loans. Some loans can be structured with lower interest rates if companies meet the ESG objectives set in the contract terms. With credit ratings in the picture, treasury should expect to join the CFO in discussions about protecting the integrity of ESG reporting and how that may influence credit availability and pricing.

    Options for sustainable financing are increasing as the financial sector responds to growing demands. For instance, some major banks now offer green deposits for companies to invest their short-term liquidity in environmentally-friendly initiatives. Beyond traditional lending, sustainable (or green) bonds allow companies to leverage capital markets to raise funds for ESG-linked activities. All of these solutions provide additional avenues for the treasurer to execute financing in a way that aligns with ESG priorities.
  • Supply chain financing: As companies look to advance their own ESG goals, such as carbon reduction, partnerships with those across the supply chain can become critical. Treasurers can leverage supply chain finance (SCF) programs as one way to incentivize improved ESG performance from their supply base. And suppliers with more favorable ESG ratings may see more favorable financing conditions, as the refinancing of SCFs via the financial market can be provided more favorably than non-ESG structures. The challenge for treasury typically lies in obtaining relevant information on the sustainability profiles of suppliers in order to match requirements of the SCF programs. Treasurers should work closely with their supply chain teams to address this challenge and support the broader SCF program.
  • Banking partners: As treasurers align their financing policies with their company’s broader sustainability strategy and commitments, they may consider reevaluating their banking partners based on each bank’s own ESG reporting and sustainability strategies. Subsequently, relationships may be adjusted toward banks that align with the company’s own ESG priorities.

Five priorities for corporate treasury

Delivering on the promise of business partnering

Expect the on-the-spot relationships developed during the crisis to continue and significantly expand as companies focus more on cash flow optimization and those in business development, capital management, operations, finance, tax and other functions tackle new challenges.

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Raising digital acumen to accelerate technology adoption

The cloud foundation required to make greater use of automation and artificial intelligence (AI)—and deliver on treasury-on-demand real-time service—is taking shape. Simultaneously, the required skills and capabilities are changing, and the focus on cyber risk is at an all-time high.

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Supporting business leaders driving ESG

Environment, social and governance (ESG) matters are affecting lending, investments, supply chain finance programs and other areas that go well beyond reporting.

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Responding to demands to optimize cash

Reducing the number of bank relationships and bank accounts—including through advanced liquidity management techniques, such as in-house banking, and on behalf of structures—is a part of an overall streamlining agenda to strategically optimize cash and improve the customer experience.

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Sharpening the focus on financial risk

Risks stemming specifically from LIBOR transitions are on the radar as well as in foreign exchange (FX) management as a result of business disruptions and pressure on margins.

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About the survey

PwC’s 2021 Global Treasury Survey report reflects the views of 340 treasury department respondents contacted by the PwC global network from February through May 2021. The respondents are based in over 30 countries, across 22 industries and in companies with median annual revenue of $4 billion. The report also relies on insights from our global team of treasury function experts. 

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Eric  Cohen

Eric Cohen

Principal, Financial & Treasury Management, PwC US

Tel: (646) 246-7744

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