Environmental, social, and governance (ESG) is a set of qualitative and quantitative standards that outline the key elements for transitioning to a more sustainable world. With a central role inside large and diverse enterprises, treasury teams' priorities and objectives can have a broad influence that spans internal stakeholders, external business partners, investors and our shared communities. That influence can help treasury teams advance business-wide ESG goals and foster a greener and more inclusive world.
Here are nine steps that treasury teams can follow to design and implement an effective ESG strategy.
Positioning corporate treasury teams to drive ESG priorities
Alignment and data
1. Review your company-wide ESG strategy
Understand core ESG priorities like greenhouse gas reduction/net zero targets and sustainability development goals.
2. Create an ESG stakeholder working group
Evaluate ESG priorities across treasury partners and identify internal stakeholders to drive ESG adoption.
3. Benchmark ESG performance
Understand how third parties like rating agencies currently view ESG performance and benchmark against industry best practices.
$1T Green bond issuance has increased 49% YoY with the market set to hit $1 trillion globally in 20211
Strategy and design
4. Determine your hypothesis
Review treasury policies, identify ESG factors to improve and drill-down into financial targets across daily treasury activities.
5. Design KPI methodology
Define treasury key performance indicators for specific ESG targets.
6. Validate design principles
Validate and iterate key performance indicators with stakeholders to ensure ownership and transparency.
90% of the S&P 500 published corporate sustainability reports2
Piloting and execution
7. Develop use cases
Establish use cases to drive progress toward key performance indicators, match use cases with design/pricing framework and test across divisions.
8. Measure internal and external performance
Create transparency around current and future state targets with reporting on internal metrics and external scorecards.
9. Evaluate ESG performance
Engage partner to regularly test whether proof of concept has driven towards solving hypothesis.
21% Of the world’s 2,000 largest public companies have committed to Net Zero Targets by 2030-20503
How J.P. Morgan can help advance your ESG goals
Financial incentives
Access to financial incentives to advance ESG goals through fee discounts or improved yields on deposits validated by internal KPIs and/or external scorecards.
ESG certification
Certify green trade transactions and offer incentivized pricing for these facilities. Additionally, certify J.P. Morgan as a carbon neutral provider in our own operations.
Social inclusion
Advance social inclusion priorities through access to on-demand wage access for employees as well as pre-shipment financing to minority-owned businesses.
Data transparency
Gain visibility on business units with high ESG scores through virtual accounts and improve awareness of supply chain sustainability benchmarking.
Sustainable SCF
Offer an improved cost of funding for suppliers that join supply chain finance programs and score highly on external ESG scorecards.
Decarbonization
Provide carbon neutral/offsetting solutions that assist clients in their global decarbonization agenda.
To explore ways J.P. Morgan can advance your ESG priorities, please contact your J.P. Morgan representative.
References
Climate Bond Initiative https://www.climatebonds.net/2021/08/climate-bonds-updates-2021-green-forecast-half-trillion-latest-h1-figures-signal-new-surge
Governance & Accountability Institute; https://www.globenewswire.com/en/news-release/2020/07/16/2063434/0/en/90-of-S-P-500-Index-Companies-Publish-Sustainability-Reports-in-2019-G-A-Announces-in-its-Latest-Annual-2020-Flash-Report.html
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