THE SOUTH AFRICAN TREASURER: NEXT GENERATION TREASURY

12 TMI | THE SOUTHAFRICANTREASURER NEXT GENERATIONTREASURY There’s still much confusion among stakeholders: What are the different types of ESG financing? How can corporates raise ESG financing? Are there specific requirements related to ESG financing? What are green bonds? Green bonds function the same way as any other bonds, i.e., they are a fixed income debt issuance financial products. However, unlike traditional bonds, green bond proceeds (i.e., the cash received by issuer, from the investor in the bond) are intended to be allocated to financing new or existing projects with specified climate and environment-related objectives. What is sustainability-linked financing? Sustainability-linked financing is any form of funding arrangement, for instance a bond or loan, which Interest in Environmental, Social and Governance (ESG) financing, including green bonds and sustainability-linked financing facilities, is growing significantly.The green bondmarket is estimated to be around $1trn1 with growth fuelled not just by business need but also by political will for a ‘green recovery’. By Lindy Schmaman, Associate Director, Financial Services Advisory, Deloitte Africa, and Steve Farrell, Partner, Financial Services, Deloitte UK incorporates specific features related to a set of ESG Key Performance Indicators (KPIs). For example, a sustainabilitylinked bond would have many of the typical features of a conventional bond, but the coupon payable by the issuer could vary depending on whether the issuer achieves predefined ESG objectives agreed at pre-issuance, such as reducing greenhouse gas emissions or achieving diversity targets on board committees. ESGFinancing for Corporates

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