Toward Effective Sustainable Finance: Key Strategies for Issuers
Aa
Share
What does it mean for sustainable finance issuers?
- Enhance communication and connection between corporate treasurers and sustainability teams
The continuing commitment to enhance a company’s ESG performance and the use of sustainable finance to realise this commitment need buy-in from the C-suite, as well as the corporate treasurer. But sometimes there are information gaps between these roles and the company’s sustainability team. It is therefore essential to have two-way conversations between these teams on sustainability principles, areas of outperformance and improvement, and align these with the company’s business priorities and long-term strategies.
- Strengthen impact reporting
Issuers need to more rigorously report how their sustainability efforts have made an impact. Of course, for the impact reports to be valuable, a company should have already set up long and short-term science-based climate targets, as well as a sustainable finance framework with credible third-party verification. Reporting impact is becoming more important because it can paint a clearly defined picture of success and largely reduce greenwashing risks. Organizations such as the International Capital Market Association (ICMA) provide issuers with metrics of impact reporting; we would encourage companies to not only follow those but also go more granular about their data. For instance, many companies report renewable energy generation, but there are not always breakdowns by product, operation, project, or geography. There should also be sufficient historical data, as well as a good combination of absolute data (e.g. water usage amount) and ratios (e.g. water usage energy intensity). Lastly, there needs to be greater disclosure on the methodologies companies use to monitor, collect, and report sustainability data. This would add an additional layer of clarity to investors.
- Attract and upskill talent
Companies are already starting to feel the rising competition to attract talent for the clean energy transition. A survey by the US Interstate Renewable Energy Council shows that roughly 90% of US solar companies have experienced difficulties finding the right labour for capacity expansion, largely due to insufficient skills. In the future, the need for labour in the clean energy industry is going to exponentially grow.
Level of difficulty finding qualified solar workers in the US
Top reasons for difficulty hiring solar workers in the US
Sustainability talent is needed not just in the energy sector, but in any other sector as well. Companies will need skilled employees to set sustainability agendas, manage supply chains, report quality ESG data, and enhance ESG strategy implementation. To stand out among peers, companies need to provide upskilling programmes to prepare workers for the energy transition, offer competitive benefits, and more importantly, foster a diverse and inclusive work culture to retain talent.
In the future, companies might also want to pay more attention to climate adaptation. Today, while listed as one of the objectives under the Green Bond Principles, climate adaptation accounts for 2% of the total use-of-proceeds sustainable debt issuance considerations. There could be more adaption-themed sustainable finance products in the long-run when climate change damages do become disastrous enough for more capital to come in to finance efforts against floods, wildfires, heatwaves, and rising sea horizons.
We need to think of fighting climate change as reducing risks – to lower the impact of extreme weather conditions or the rising cost of doing business. We need to think of it as harnessing opportunitie – to develop and future-proof clean technologies that can support our economic activities sustainably. We also need to think of it as preserving humanity – to ensure future generations can continue to thrive on planet Earth. The cost of doing it will be high, but the cost of delaying efforts will be tremendously higher.
