Governance

The importance of Governance is becoming increasingly important for treasurers. External governance is leading to major changes in sustainable finance and reporting. Financing without taking ESG-factors into consideration is becoming rarer every day. Sanctions and Transaction Monitoring have been delegated to banks. Companies have their own responsibility to act according to international law and regulation. Where many departments have trusted their internal risk management teams, Treasury departments will have to take their own responsibilities. Please join us in reading the current state of mind of the respondents.

External governance

Combating climate change and global warming is high on corporate agendas and an increasing number of companies needs to comply to sustainability regulations. New regulations regarding sustainable finance have accelerated the adoption of it. In the early days of green financing, it was very much a task of the Treasury department to deal with the green angles. Recently, it is increasingly becoming a topic that is embedded in the entire finance function and even cross-departmental. This increasing attention is reflected in the results of this year’s survey as more companies are involved in green and sustainability linked financing compared to last year’s results.

Future evolvement and likely impact on the Treasury departments are according to the survey not known yet. The results indicate that capital markets are in a transition phase and that companies are implementing the new regulation requirements and are searching for ways to provide the required transparency to external stakeholders. Both companies that do well in sustainability as well as the more conventional institutions that still need to transition to a more sustainable business will need to increase transparency about what they do, how they do it, and how they look for sustainability improvements to attract and retain investors and other stakeholders. They want to get a sense of the intrinsic motivation of companies and want to see if sustainability is part of the company’s DNA. Operating in “sustainable sectors” nowadays is not sufficient anymore to attract investors.

Pie chart showing to what extent organizations are using Green or Sustainability Linked Financing as a financial instrument to contribute to the environment or climate.

Green and Sustainability linked Financing as a financial instrument

Green and Sustainability Linked financing solutions are a growing matter in Corporate Treasury. 88% of the respondents are looking into possibilities to get started with the topic or already use it to positively contribute to the environment or mitigate the impact of climate change. 42% of the surveyed organizations already have Green or Sustainability Linked financing in their portfolio.

Chart on what are percieved as big challenges for green and sustainability financing.

Challenges for green or sustainability financing

Respondents see clear KPI target-setting and integrated reporting requirements as the biggest challenges for Green and Sustainability Linked financing. EU taxonomy and information demand from investors are not perceived as a challenge at all. “Other” is the most frequently selected answer, but respondents did not get to comment on what these other challenges are.

Reporting on EU Green taxonomy-related disclosures

Most respondents (48%) indicate that close collaboration in multi-disciplinary teams within their organizations is necessary to organize reporting on EU taxonomy-related disclosures. 38% answered that engaging with an external party would be the route to go, whereas 37% indicates to deal with it through integrated reporting. The ‘other’ answers comment that a special sustainability department will be responsible for the reporting.

Bar chart on the kind of KPI's are embedded in organizations.

Type of sustainable KPIs

The answers indicate that organizations use a variety of sustainability KPIs whereby environmental KPIs get the most attention with 73% of the organizations having this as a KPI, followed by social KPIs (48%) and Financial en Governance KPIs (35% and 31%, respectively).

Radar chart showing how many treasurers agree or have no opinion to 4 different statements on sustainabily.

Statements on sustainability

Sustainability embedded as a KPI within the organization

75% of the respondents confirm that sustainability is embedded as a KPI in their organization.

Green or sustainability financing getting more important for organizations

Answers to this question support the prediction accompanying the question on Green and Sustainability Linked financing as a financial instrument. Almost 77% of respondents foresee the growing importance of green financing.

Prevention of greenwashing and re-orientation capital towards green and sustainable activities by the EU Green taxonomy

The EU Taxonomy is a classification system establishing a list of environmentally sustainable economic activities. The vast majority of the respondents in the survey (77%) expect that the EU Green Taxonomy will prevent greenwashing or re-orient capital to flow towards green and sustainable commitments.

Extensive reporting on EU Green taxonomy-related disclosures playing a part in the Treasury function

Most of the respondents (62%) have no clear view of the extent to which EU Green Taxonomy-related disclosures will play an important role in the Treasury function in the foreseeable future.

Sanctions and Detections

Banks have been given an important role in Sanctions & Detections policy execution. During recent years, corporates have taken their own responsibility. What technologies are used to execute Sanctions and Detections takes, thereby meeting international regulations? A large minority of Treasury departments trust risk management departments, but not all. Doing business with counter parties in high-risk countries or executing risky payments can be detected by Treasury departments long before risk managers raise a flag. Artificial Intelligence is considered by a few leaders, whereas others are considering looking into AI. Do you agree with the respondents that robotics may well be too difficult at this stage to be deployed in your department?

Chart on departments carrying the primary responsibility for the execution of sanction policy

Primary responsibility for the execution of the sanction policy

81% of the respondents indicate that specific compliance departments have been established or a legal department has received delegated authority to be responsible for the execution of the sanction policies.

Bar chart showing if organizations are using AI and robotics to detect money laundering

AI and robotics detecting money laundering

Only 8% of respondents declare to use AI to detect money laundering. The vast majority (62%) of the respondents reply that adopting AI in their systems is too difficult. Moreover, 29% declare that they are looking into it right now, which might indicate far wider usage of AI for this purpose in the future.

Answers to the robotics parts of this question are very much in line with the AI-related question, having even more respondents (65%) declaring that adopting Robotics is too complicated in their systems, with the same rate of answers (29%) showing that adopting robotics to detect money laundering is being considered.

Pie charts showing what organiations are doing to comply with international sanction policies and what concrete measures are.

Being compliant

Most answers (56%) indicate that complying with sanction policies is ensured internally via risk management processes and clear responsibilities. Appointing a task force is also quite frequent (27%). Only 10% of respondents hire an external party to stay compliant.

Most respondents declare not to do business with high-risk countries (58%) as a concrete measure to be compliant. Otherwise, stringent measures are taken (37%), the use of high-risk payment methods is reduced (23%), or AI/Robotics (8%) is used to implement sanction policies in core processes.

Share your story!

What was the most interesting result for you? On what sustainable action in your Treasury department are you most proud? Do you agree that, at this stage, robotics may be too difficult to be deployed in your department? What other experiences or opinions do you have on this topic? Please share them below or on LinkedIn to learn more from each other. We are excited to read your input.

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Governance

External governance

Green and Sustainability linked Financing as a financial instrument

Challenges for green or sustainability financing

Reporting on EU Green taxonomy-related disclosures

Type of sustainable KPIs

Statements on sustainability

Sanctions and Detections

Primary responsibility for the execution of the sanction policy

AI and robotics detecting money laundering

Being compliant

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DACT Treasury Barometer
In cooperation with Enigma Consulting and Rabobank.

For

"For and by treasurers"

Governance

External governance

Green and Sustainability linked Financing as a financial instrument

Challenges for green or sustainability financing

Reporting on EU Green taxonomy-related disclosures

Type of sustainable KPIs

Statements on sustainability

Sanctions and Detections

Primary responsibility for the execution of the sanction policy

AI and robotics detecting money laundering

Being compliant

Share your opinions and experiences

Leave a Reply

Leave a Reply Cancel reply

DACT Treasury Barometer In cooperation with Enigma Consulting and Rabobank.

For

"For and by treasurers"

DACT Treasury Barometer
In cooperation with Enigma Consulting and Rabobank.