This lesson explores the growing importance of Environmental, Social, and Governance (ESG) factors in treasury decision-making, from green financing to sustainable investment strategies.

7.1 The Emergence of ESG in Treasury
Sustainability is becoming a central theme in treasury. The ACT now includes “Treasury operations & sustainability” as a core micro-topic, examining how treasury is “becoming more digital, secure, and aligned with sustainability principles” . This trend is being driven by investor pressure, regulatory changes, and a genuine desire to align financial activities with broader societal goals.

7.2 Green and Sustainable Financing
Treasurers are playing a key role in the issuance of green, social, and sustainability-linked bonds. These instruments are used to finance projects with a positive environmental or social impact. The role of the treasurer includes structuring these instruments, managing investor relations, and ensuring the proceeds are properly allocated and reported on. ESG factors are also becoming a key consideration in investment and lending decisions.

7.3 ESG Risk Management and Reporting
Treasury must also consider ESG-related risks, such as:

• Climate Risk: Assessing and managing the financial risks of climate change (e.g., physical risks to operations, transition risks to a low-carbon economy).

• Reputational Risk: Managing the risk of being seen to be financing unsustainable activities.

• Regulatory Risk: Preparing for mandatory climate-related financial disclosures and other ESG reporting requirements.
  The move towards sustainability is not just an ethical choice but a strategic and financial imperative, and it is reshaping the treasury landscape .