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In This Issue

There’s Gold in Them Thar ESGs

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November 29, 2019

By Ted Howard

We begin the December issue with BNP Paribas’s take on sustainability-linked financial products. These are the so-called environmental, social and governance (ESG) investment vehicles to which investors are sprinting like a modern-day Gold Rush.

Treasurers, despite some skepticism, are taking note. “Treasurers should be preparing for a tsunami of sustainability-linked finance products,” one member of NeuGroup’s Tech20 said at a recent meeting. This is a view that is being adopted by increasingly more and more market participants, particularly after the CEOs of nearly 200 companies announced this year that shareholder value is no longer the main objective and Larry Fink, BlackRock’s chief executive, announced plans last year for his $6 trillion fund firm to become a leader in sustainable investing.

BNP Paribas, like most other banks, is getting ready. Hervé Duteil, chief sustainability officer for BNP Paribas, outlined for Tech20 members three waves that will be washing over the market soon if they haven’t already. One is labelling the “use of proceeds” from loans, with the guiding principle being that these loan proceeds be identified, or labelled, as being used for something sustainable. Another is linking returns with sustainability performance and impact, while the third is linking cost of risk with sustainability performance and impact.

But investors should tread lightly before going full ESG. There have been some concerns that asset managers are pouring money into ESGs because of their current popularity. Further, a lack of expertise may lead to disappointing returns. That’s why it’s critical to listen to the likes of Mr. Duteil and others with some knowledge of the sector to help with decision-making.

In our Anticipated Exposures stories, we discuss how cloud accounting may require new controls and impact covenants. This means that financial execs should consult with their accounting team to stay ahead of any impacts on loan covenants and operational elements affecting treasury. The section also looks at how Chatham Financial is strengthening its global position with the acquisition of European frenemy, JCRA, and how virtual accounts, while growing in popularity, may not be ready for prime time.

We also discuss the consternation the coming demise of Libor and the consequent switch to SOFR or another benchmark is causing among treasurers, particularly as it relates to fallback language, which is triggered if (when) Libor ends and existing contracts are more or less left out in a legal wilderness.

We have compilations of key takeaways from NeuGroup’s 2019 H1 Treasurers’ Group of Thirty Meeting (T30) and from the 2019 H1 Treasurers’ Group of Thirty Large-Cap Edition (T30LC). At the T30 meeting, members discussed a wide range of topics, including the benefits of an Excel workbook and giving treasury ownership of it and how a company with an insurance problem turned to a captive. At the T30LC meeting, members discussed striking the right balance between a centralized versus a decentralized treasury, ESG finance and more.

Finally, read about how ION, which has been acquiring treasury technology companies over the past several years, is creating single-instance innovations good for all of its stable of companies.

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