Despite the turmoil seen in the financial markets over the past two years, treasurers report that sources of funding remain similar to previous years, with debt capital markets (28%) and bank finance (24%) continuing to be the most popular forms of funding globally, according to the ACT’s The Business of Treasury 2024.
Within this, however, the UK shows a higher proportion of funding coming from debt capital markets (34%), primarily at the expense of improving working capital (see below).
Beyond the UK, treasurers have placed much greater importance on improving working capital over the past 12 months (see Fig 11).
The ACT commented: “One reason for this may be that many UK treasurers have already optimised working capital – especially as a source of finance. This is still a ‘work in progress’ in many jurisdictions.”
Over the past two years, there has been considerable growth in sustainability-linked finance, particularly in bonds (SLBs) and loans (SLLs). This is reflected in the growing proportion of funding being put forward to boards that is linked to sustainability. What is also interesting is that, while ESG-related financing is growing, levels of concern with ESG issues in general are falling (see Fig 12).
This does not mean ESG will be slipping down the treasury agenda, however, as evidenced by some of the comments collected during the survey (see below).
The ACT commented: “This apparent inconsistency may be a result of many organisations now having a clear strategy in place and the shine coming off sustainability-linked finance. Three or four years ago, ESG-related financing was very popular as a way of demonstrating an organisation’s green credentials. With the development of sustainability teams and organisation-wide sustainability strategies, the need to demonstrate ESG credentials through financing has declined significantly, particularly given the considerable challenges or disincentives to the use of such products for many organisations.”
“Access to capital will always be a potential challenge, given there is more ESG-related focus on lenders. Companies where ESG is lagging will start to find they will get a lot of pressure from lenders, and it will be harder to access funds or in the way they want it.” Head of treasury, Asia Pacific
“The biggest opportunities could be ESG and sustainability. It is still developing, people pay more and more attention to that, and they want their company to be more ‘green’, to care about the planet and contribute to developing technology or procedures that will help to lower the carbon footprint.” Head of treasury, Europe
“ESG is certainly keeping me awake, and probably the commercial funding solutions and making sure we are not behind our competitors on this.” Head of treasury, UK
Philip Smith is editor of The Treasurer
This article is based on the ACT’s The Business of Treasury 2024 survey.
Read the survey here
Find out more about the ACT ESG Conference here
