Learning Objectives:

  • Understand the impact of ESG on treasury and investment management.

  • Identify technology trends in treasury.

  • Analyse innovation in treasury functions.

8.1 ESG and Responsible Investment

Environmental, Social, and Governance factors are increasingly important in treasury and investment management. Loughborough University’s Ethical Investment Policy states that “the investments held must have regard to normal charity ethical standards and take into account environmental, social and governance (ESG) factors alongside the financial metrics when determining the suitability of investments” .

Key ESG Considerations:

  • Negative Screening: Explicit exclusions for companies involved in harmful activities. The University of Reading excludes investments in “fossil fuels,” “oil and gas (extraction, production and refining),” “tar sands and thermal coal,” and other areas . Loughborough University excludes “direct investment” in “alcohol, armaments, fossil fuels, sanctioned countries, tobacco” .

  • Positive Impact: Choosing investments with positive environmental and social impact. The University of Reading “will look to avoid investments which are seen as promoting obvious harms, and choose investments which have a positive impact” .

  • Active Ownership: Exercising influence through “engagement and voting at AGMs” .

  • Carbon Tracking: Regular monitoring of carbon exposure. Loughborough University’s investment manager provides “regular environmental, social & governance (ESG) and carbon tracking” .

  • Climate Alignment: The University of Reading “seeks to align with the Paris Agreement on climate change” .

8.2 Technology and Treasury Innovation

The ICAI materials highlight the importance of technology in treasury operations:

Automation and Integration: “Significant automation can be attained by integrating corporate systems with their banks, which will cut down on the time required for operations like daily cash position calculations” .

SWIFT Corporate Access: “The creation of SWIFT Corporate Access, which allows corporations to speak with their banks directly through SWIFT channels… has the potential to drastically alter the systems and procedures used in the company” .

Use of IT in Treasury: “Use of Information Technology is necessary for treasury as the Operations / Transactions. It requires modifying software to suit changing circumstances and volatility. Computerization of Investment and Fund operations is absolutely necessary as some of the risk return models can be implemented only through software packages. This will also facilitate the introduction of risk-hedging techniques” .

8.3 Future Trends and Challenges

Treasury as Profit Centre: The ICAI materials emphasize that “Treasury also functions as a profit center of the Bank. It is therefore important that the treasury is managed efficiently” .

Risk-Return Analysis: Mid-office functions include “risk-return analysis” as a core responsibility .

Stress Testing: Mid-office responsibilities include “stress testing and back testing of investment and trading portfolios” .

Operational Efficiency: The ICAI materials note that “efficient use of secure systems can minimize operational risk, increase operational security, and maximize straight through processing. Add to this automatic reconciliation of bank account data, and Treasury can then manage exceptions rather than every item, giving them the time to devote to delivering value-added services across the company

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