The time that a company’s financing rates are directly linked to its ESG performance has arrived and non-financial initiatives are inevitably considered as a key part of the appraisal process. ESG has now become a financial matter that CFOs should accurately track and measure.
According to recent findings, ESG can drive growth and contribute to long-term competitive advantage. Some of the leading companies have shifted their operations towards ESG investing, capturing financial benefits. The Estée Lauder Company was recognized by Forbes as the No1 employer for women for its social impact investments, while BlackRock’s decision to shift a portion of its investment portfolio toward ESG has resulted in a 96% growth in sustainable financial products in 2020.
CFOs are in a key position to communicate and translate those financial results of any metric or KPI. If ESG performance is accurately tracked and reported, companies can secure more favorable financing interest rates, boost customer loyalty and selection, and of course, improve share price.
The main steps a CFO should follow to create ESG value are the following:
- Driving ESG strategy by making it a priority and developing a clear vision.
- Linking performance metrics to ESG impact. A CFO should always be in a position to respond to stakeholders questions as ESG initiatives are the most valuable for them.
- Assessing ESG impact and committing to transparency in reporting results.
There’s no better time to start improving ESG than now and the CFO should step up and take the lead. Sustainability is here to stay and the question is no more whether CFOs have a role to play, but how well they are going to respond to this role.
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