The role of Sustainability Treasury Teams

Our ESG specialists have contributed to a new book about responsible investments for fixed income investors – listen to our second podcast

16 Jun 2023 . 3 min read

“When sustainable treasury teams and investors work closely together they can create a virtuous circle that helps further advance sustainability and grow the sustainable finance market,” was a key message from our ESG specialists during their second podcast about the new book on “Responsible Investment in Fixed Income Markets” - which includes a chapter on “The Role of Sustainable Treasury Teams” from NatWest’s Dr Arthur Krebbers, Head of Corporate Climate and ESG Capital Markets, and Jaspreet Singh from our Sustainable Finance US Capital Markets team.

The 530-page compendium covers every angle of ESG and its impact on the fixed income markets and market participants, while also offering detailed case studies from different parts of the fixed income market from a range of organisations with a variety of investment approaches. Furthermore, the book provides in-depth analysis of key issues such as the role and influence of credit rating agencies, green bonds, data and public policy in shaping investment practice.

In our second podcast, we caught up again with one of the book’s editors, Joshua Kendall, Head of Sustainable Fixed Income at Bloomberg, and our two NatWest authors to discuss in more detail the role of Sustainable Treasury Teams. They were interviewed by Carla Floyd, Managing Director, Head of Debt & Financing Solutions at NatWest.

These were the main talking points and messages from the specialists:

1. On the key message of the book’s chapter about “Sustainable Treasury Teams”:

We’ve seen an evolution from the very public and high-profile sustainable bond issuances, to corporate treasury teams now also prioritising sustainability in their day-to-day decisions. Our chapter introduces this new concept of sustainable treasury teams and the workstreams these teams should set-up to integrate sustainability holistically in their decisions, covering aspects such as: how do I place my excess cash? How do I select my suppliers? How do I tell my credit story? Looking through a sustainability lens for each treasury consideration has become a ‘must do’, and we’re seeing more and more treasurers with the ambition of becoming sustainability leaders.

2. On the speed and scope of the evolution of treasury teams:

Over the past three to four years, we’ve seen significant momentum in treasury teams establishing those best practices of integrating sustainability in their function. A few years back, it would have been quite common that the responsibility for sustainability would have been considered to sit fully outside of the treasury and a sustainability specialist would have joined meetings with us, but today, the majority of treasurers, particularly in larger corporates, will say it has become an integral part of their role. This approach is still permeating down to smaller companies, which have a little less access to the required data, but we’re seeing an evolution there, too.

3. On the main sustainability tasks treasury teams should focus on:

The most critical one – based on what we hear from investors – is for treasury teams to support the company’s overall quality of sustainability reporting and target setting. Retrieving the relevant data out of a vast pool of data is often a major challenge, but with investors scrutinising sustainability progress and with the regulatory landscape changing and demands for reporting increasing, it’s crucial for treasury teams to put in extra resources to extract meaningful data. In this context, it has been interesting to see the sustainable finance asset class become a lot less instrument-centric, with green, social or sustainable bond frameworks becoming overarching sustainable finance frameworks which encompass a much wider suite of ESG-labelled instruments – meaning that treasurers can marry their treasury and debt sourcing and corporate finance objectives with their sustainability objectives.

4. On the collaboration between treasury teams and investors:

Treasury teams ought to see direct investor engagement – in the form of surveys or face-to-face meetings – as a true positive and as an extremely useful opportunity to learn what really matters with regards to sustainability. Because of their interactions with investors and with the wider market, treasury teams hold a unique position and can leverage the feedback they receive from investors and other market participants about sustainability best practices and channel it within the company to achieve improvements not only in their function but in other areas and departments, too. We’ve seen examples of fruitful collaboration in many sustainability working groups like for example within the International Capital Markets Association (ICMA) which sets best practice standards.

5. On how banks engage with treasury teams on sustainability:

Many banks offer much wider support than just advising on a suitable ESG-labelled financial product. Increasingly banks are developing “Centres of expertise” to drive sustainability best practices in different industries. Also, NatWest can help customers further define their sustainability strategies, develop their finance frameworks, keep on top of ESG rating management and regulatory changes, and we advise on sustainability reporting and, of course, on choosing sustainability KPIs for sustainable finance instruments.

At the same time, it’s important to realise that a company not issuing an ESG-labelled instruments doesn’t mean it isn’t actively pursuing sustainability. It’s simply always the case of finding the best product for each company depending on their individual circumstances.

Want to know more about sustainable treasury teams? You can listen to our full podcast here or find more information about the book here: Responsible Investment in Fixed Income Markets

Please follow these links if you missed the previous article and podcast on “Responsible Investment in Fixed Income Markets”.

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