IGTA Journal - Summer 2020

and standardisation of the terminology,” says Joshi. But he also notes that if requirements become too onerous, investors may be deterred – “so it’s about getting that balanced approach.” Meanwhile, although not all companies will be focusing on green or sustainable nancing at this stage, there may be other steps available to them. Dukes, for example, notes that Drax has embedded ESG metrics into the company’s working capital programme. And as she points out, a further consideration is that listed corporates that do not issue debt are still likely to be rated by one of the ESG rating providers. She advises that companies should nd out whether they have a rating, determine how this compares to their peers and take steps to improve the rating if necessary. “While you may not be looking to issue debt, there is genuinely an increase in other stakeholders – whether that’s customers, suppliers or even future employees – that are looking at that type of information and assessing you against it,” she concludes. “You might not be getting nance on the back of it, but it’s still important to be able to say, ‘we are doing the right thing for the right reasons, and this is what we’re doing to improve’. And if you do then decide to embed that into nancing, you’ll get an easier life and will hopefully be appropriately rewarded.” With thanks to Naresh Aggarwal for his assistance treasurers.org/thetreasurer June/July 2020 19 Rebecca Brace is a freelance business and finance journalist areas develop. “We could certainly look at transition nancing, and in the future we could look at sustainable nancing,” he says. “But we’re waiting to see how the market develops, because those two forms of nancing are currently somewhat behind green nancing.” DOWN TO THE DETAILS For companies looking at green and sustainable nancing, the cost of going down this route will be a major consideration. While companies may save a couple of basis points on margins, this may be erased by the cost of carrying out necessary veri cations. Nevertheless, as Joshi points out, “It’s not actually about reducing margins on the debt facilities or savings on the associated costs.” He argues that the more signi cant bene ts lie in strengthening the company’s relationships with stakeholders, from employees to policymakers and investors. “When you embed a green agenda throughout the whole business, you’ve then got to look at the cost or the bene t across the whole business, too, because the bene ts will really come further down the line – and not speci cally on the cost of the debt,” he says. Alongside costs, treasurers will also have questions about the practicalities. Liu says that where legal and administrative requirements are concerned, a green bond is not very di erent to a standard bond. “The only thing that’s di erent is the use of proceeds statement in the documentation, and there’s the green nancing framework that you have to put in place, the cost of which is relatively small,” he explains. “You also need to get a second-party opinion on the framework.” In addition, Liu says the process involves reporting on the impact of the projects funded by the nancing. While this does take more work, he notes that there is generally a greater demand for this type of information from stakeholders, “so we are probably going to be producing this information anyway.” FINAL THOUGHTS With some parts of the market more developed than others, it’s clear that more progress is needed in some areas. “There are a few things that we need the green product markets to do before things can develop further, and this is mainly around transparency, disclosure STRATEGIC TREASURER Sustainable practices include supporting wind-energy generation IGTA eJournal | Summer 2020 | 43