also an important sustainability impact areas for us and we have prioritised diversity, equity and inclusion as one of our focus areas for 2022. Even with the evident policy onus on corporates to act, the financial sector has been slow to adapt for several reasons. The seemingly complex language and metrics used by sustainability departments which focus on the measurements of water, waste and carbon don’t easily correlate with financial markers on cost of capital or even shareholders’ interest. We’ve also seen that the lack of diligence when it comes to tracking the gains of existing sustainability investments is a significant barrier, too. Although the jargon of ESG can feel out of reach for many boards, this is certainly not an excuse not to act; climate change – and an evolving corporate landscape – has no sympathy for ignorance in this realm. Looking at the sustainability movement through a practical lens, another problem area has been for sustainability teams to tangibly present the positives of their ESG initiatives in correlation to monetary benefits. Demonstrating return on investment has been impacted further by the lack of accounting systems available to capture ESG performance data. Put simply, without proof of return on investment, it was historically hard to paint the picture of why investing in this area was worthwhile. Although the debate of whether investing in ESG and sustainable practices is beneficial has been prevalent for some time, recent research shows that ESG investments outperform conventional ones. The average annual return for a sustainable fund invested in large global companies is 6.9% a year, while a traditionally invested fund would make 6.3%: there’s a genuine commercial opportunity at hand for CFOs to jump on for investor relations. One of the key areas to improve the relationship between finance and sustainability is measurement. Coherent and transparent sustainability metrics are a must across each line of business to understand how they can move from seeing sustainable investments as a cost into a value-driven opportunity. To move forward, the opportunity to fully integrate financial metrics with these sustainability metrics will help to effectively report long-term investment strategies to stakeholders, that really are long-term. Putting the huge growth opportunities aside, there is also a risk mitigation angle that’s impossible to ignore. In the current climate, being able to assess how climate change may negatively impact business performance is increasingly important and so must become part of your company strategy. We need to be able to review, analyse and report on certain elements such as the use of energy within the business to allow us to make financially sound decisions internally as well as recommendations to shareholders in areas such as reduction of costs. Current affairs highlight the benefit of being on the front foot of ESG when looking at the ability to mitigate costs. While we can’t predict volatility to such a niche detail, acting responsibly with an ESG lens on financial and corporate decisions can help to mitigate the long-term instabilities we face as businesses which are impacted by a global landscape that is rocked by environmental issues. As CFOs, we have a clear view of the entire company structure, leading the capital allocation and accountancy of a company. We are therefore in a position of significant power to introduce internal carbon pricing or triple accounting methods that will eventually make us more effective in leading and meeting our environmental goals. Having sustainable credibility as a corporate is no longer a USP strictly managed by aspirational team members; it’s now a fundamental aspect of business operations and CFOs who ignore this will undoubtedly feel this impact on their commercial performance. vision & strategy
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