The CFO and Sustainable Finance Part I
This article kicks off a four part series from Gustavo.
Including effective sustainability concepts into the financial strategy of companies is a major challenge CFOs face today.
The implementation of sustainable business models presents several aspects to consider. Among them, new skills that must be acquired to meet the requirements, complying with reporting obligations, complications arising from using non-financial indicators and compliance with the different global and local regulations stand out. In this article we will address the skills that CFOs must develop to get the most out of these initiatives. Here is the first aspect to consider:
The CFO and sustainable finance: the skills
The transformation requires leaders and guidelines to direct them. CFOs are a key element in the corporate evolution towards sustainability. Example of sustainability responsibilities that fit the CFO include reporting, compliance with specific regulations, incorporating technological tools and reconciling the interests of investors.
Communication with the market and stakeholders is a key aspect in the implementation of changes towards sustainable finances. Managers must engage in proactive communication actions with investors about their ESG (environmental, social and governance) objectives and strategies. This is another opportunity for the CFOs to lead these actions, along with the disclosure of the financial reports that must integrate the financial and sustainability aspects of the businesses.
Investor’s point of view is changing radically. If companies fail to show commitment to sustainability principles, they may find it difficult to raise funds.
When a company defines and designs the key aspects of its SDG (sustainable development goals), there is often a lack of agreement and consensus among managers. There is an opportunity for the CFO, and independence that comes with it to lead the process by coordinating the financial aspects, and systematizing the non-financial data that will serve as support. The CFO should take the leading role in setting sustainability goals and aligning them with the companies’ financial goals. The CFO should also oversee the quality of the data managed, ensuring it is complete and sufficient to assess the progress of the ESG goals the company has set.
The United Nations Global Compact has launched a coalition of CFOs[1] for Sustainable Development Goals (SDGs[2]). Its objective is to shape the agenda these leading CFOs will use to implement sustainable finance at their companies, accelerating the adoption of the SDGs. The CFO Coalition for the SDGs promotes the development of ideas and recommendations to unlock private capital and create a market for large investments with SDG criteria. CFOs can take inspiration from the suggested ideas to create the necessary link between sustainability and financing strategies.
Find Part II of Gustavo’s four part series here: The CFO and Sustainable Finance Part II
[1] https://www.cfocoalition.org
[2] https://www.unglobalcompact.org/
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