Treasurers need to respond to investor appetite for more precise information on how ESG factors, particularly around climate change, are impacting their organisation’s risk position. In order to do that, they may need to improve the quality of data produced around ESG issues, not just the quantity of data.
That was the key finding in a session entitled “The future of ESG: trends, challenges, and opportunities” at the ACT’s recent ESG conference.
Alex Ashby, group treasurer of media giant WPP (pictured above, left), described the overwhelming volume of ESG reporting requirements, emphasising the need for AI (artificial intelligence) to aggregate data. “We need good data, but there’s an awful lot all at once, so I think AI and other tools will help aggregate the information we have,” he said.
We are seeing a lot of new risks, which are clearly in unchartered territory, and the question is how can we make sure that a company’s balance sheet and liquidity can address such risk?
At the same time, Matthew Rose, director of treasury at housing association Bromford Housing Group (pictured above, centre), detailed the intensive effort required for external reporting, noting it took two members of his team two or three months of in-depth work, with help from finance and investment teams to deliver its first use-of-proceeds report. In addition, he said: “Two thirds of our trading statement is probably on ESG.”
But Pierre Georges, global ESG lead of corporate and infrastructure ratings at rating agency S&P, stressed the importance of climate-related issues that needed to be prioritised.
“We are seeing a lot of new risks, which are clearly in unchartered territory, and the question is how can we make sure that a company’s balance sheet and liquidity can address such risk?” he asked.
Naresh Aggarwal, ACT’s associate director of policy and technical, who facilitated the session, summarised Georges’ position as “a lot of the information provided isn’t necessarily relevant to the decisions that you make, and the stuff you are interested in, you want to know more about.”
Fabrizio Palmucci, founder of consultancy Impactivise (pictured above, right), said investors are really keen to see how a company is mitigating risks. “It’s about stranded asset risk, supply chain risk, social risk, they want to see what’s really material to the credit position of the company. At the moment, there seems to be a lack of dialogue between companies and investors in this respect,” he added.
The panel agreed on the need to develop a data strategy to address the increasing regulatory requirements around sustainability reporting. WPP’s Ashby said: “We should invest more in this, even though it’s always quite hard to do as in the current environment there’s a lot of cost consciousness with CFOs. But there are a lot of good tools out there.”
Ashby said a step forward is coming from companies starting to make sure sustainability and finance teams are working together more effectively. “You start seeing sustainability teams, that were used to things being more general and strategic, having to get all the way down to the nitty gritty, as its about bridging sustainability into finance.
“To do that they need to speak the same language and be able to use data that is reliable,” he added.
Lawrie Holmes is a freelance business and finance journalist
