Treasury Contrarian View: ESG in Treasury—A Passing Trend or the Future?

Environmental, Social, and Governance (ESG) considerations have been a growing focus in corporate finance, but is ESG in treasury truly transformative, or just another temporary compliance-driven trend? Many organizations are embedding ESG into their financial strategies, while others remain skeptical about its long-term value. So, is ESG in treasury here to stay, or is it just a passing trend?

The Case for ESG as the Future of Treasury

  1. Investor and Stakeholder Expectations
    • Institutional investors, rating agencies, and regulators are increasingly evaluating companies based on ESG performance. Treasury teams that align financial strategies with ESG goals may gain better access to sustainable financing and improved credit ratings.
  2. Access to Sustainable Financing
    • Green bonds, sustainability-linked loans, and ESG-driven funding mechanisms offer attractive financial terms. Companies with strong ESG commitments may secure better borrowing rates and attract ESG-focused investors.
  3. Regulatory Pressure and Compliance
    • Governments and regulatory bodies worldwide are tightening ESG disclosure requirements. Treasury teams need to ensure compliance with emerging regulations to avoid penalties and maintain market credibility.
  4. Risk Management and Long-Term Value Creation

ESG factors directly impact financial risk management. Climate change risks, social governance challenges, and regulatory shifts can affect supply chains, investment decisions, and operational costs.

The Case Against ESG as a Lasting Priority in Treasury

  1. ESG as a Checkbox Exercise
    • Some treasury teams implement ESG policies simply to satisfy regulatory requirements or investor expectations, without fully integrating ESG into decision-making processes.
  2. Lack of Standardization and Clear Metrics
    • ESG reporting and measurement remain inconsistent. Without a universally accepted framework, treasury teams struggle to assess the real financial impact of ESG initiatives.
  3. Cost vs. Benefit Considerations
    • Implementing ESG strategies often requires significant investment in new reporting frameworks, compliance tools, and sustainability initiatives. Some treasurers question whether the long-term benefits outweigh the costs.
  4. Market Cycles and Shifting Priorities
    • Economic downturns and market volatility may shift corporate priorities away from ESG in favor of immediate financial performance and cost-cutting measures.

A Pragmatic Approach: ESG as an Evolving Opportunity

Rather than viewing ESG as either a short-term trend or a mandatory requirement, treasury teams can take a strategic approach:

  • Adopt ESG Initiatives that Align with Business Goals: Focus on ESG elements that create tangible value rather than following generic frameworks.
  • Leverage ESG Financing Opportunities: Explore green bonds, sustainability-linked loans, and partnerships with ESG-focused financial institutions.
  • Improve ESG Data and Reporting: Strengthen data collection and analytics to better assess the financial impact of ESG policies.
  • Monitor Regulatory Developments: Stay ahead of evolving ESG regulations to maintain compliance and strategic flexibility.

Let’s Discuss

  • Is ESG in treasury truly driving value, or is it mostly a regulatory and investor-driven trend?
  • How is your treasury team incorporating ESG principles into financial decision-making?
  • Do you see ESG financing instruments as a viable long-term strategy?

We’ll be sharing insights from our board members and treasury partners on how they view ESG in treasury—join the conversation and let us know your perspective!

COMMENTS

Jessica A. Oku, Treasury Masterminds board member, comments:

It’s neither a passing trend nor a silver bullet, really.

I’ve seen companies jump on the ESG financing trend, securing lower interest rates on sustainability-linked loans, only to realize later that the ESG targets tied to those loans were either too vague or too difficult to measure. If there’s no clear way to track progress, ESG financing can quickly become more of a branding tool than a strategic financial move.

The real question is: Are these funds truly being used to drive sustainable business practices, or are they just an easy way to access capital? If treasury teams don’t have strong ESG performance indicators in place, they could end up in a tough spot, either failing to meet investor expectations or facing penalties for not hitting sustainability goals/loan covenants.

I’ve seen it happen too often, companies rolling out ESG policies just to tick a box for investors and regulators, without actually making meaningful changes. They publish polished sustainability reports, but when you look at their treasury or company-wide operations, it’s business as usual. Short-term financial goals still take priority, and ESG is more of a PR move than a real strategy.

The real question is: Are ESG initiatives actually influencing treasury decisions, or are they just another reporting requirement? If ESG isn’t shaping how cash flow is managed, how investments are made, or how financial risks are assessed, then it’s not truly integrated.

Another issue is the disconnect between treasury teams and sustainability departments. Treasury might be focused on financial performance, while sustainability teams are pushing ESG goals, but if they’re not working together, ESG remains a separate, surface-level initiative. For ESG to actually mean something in treasury, it needs to be baked into everyday decision-making, like factoring sustainability risks into funding strategies or using green financing to create real financial advantages.

At the end of the day, ESG shouldn’t be treated as extra work or just another compliance or marketing “checkbox.”

Lack of standardization and metrics is a big roadblock. I’ve spoken with treasury teams who struggle with multiple ESG frameworks, making meaningful financial comparisons difficult. Without clear, standardized ESG metrics, how can we expect treasury functions to make informed decisions? Until the industry consolidates around universal ESG standards, this will remain a challenge.

Csongor Máthé, Product Manager/ESG Lead at TreasurySpring, comments:

Traditionally, treasury decision-making has focused on security, liquidity, and yield, but ESG is adding a new dimension to consideration. However, a recent downshift in ESG sentiment, driven by macroeconomic factors, increased scrutiny of greenwashing and the politicisation of the topic, may prompt a more cautious approach. 

While ESG in treasury may often be perceived as driven by regulation and external pressure, our most recently published ESG survey of treasurers (2024) painted a more nuanced picture. Only 5% of respondents identified investor or lender pressure as the primary driver of their ESG strategy, while 53% pointed to corporate social responsibility (CSR). In terms of regulatory changes like the Corporate Sustainability Reporting Directive, only 16% of treasurers have actively adapted their ESG cash investment strategies and practices in response. 

Treasury teams are integrating ESG principles into decision-making, but its impact varies across financial areas. Our ESG survey found ESG principles are most commonly applied to cash investing (47%) and long-term financing (44%), followed by supply chain management (35%) and short-term financing (28%). 

When it comes to financing, ESG is already well-established in some areas (and less so in others). The sustainable bond market, for example, benefits from a high level of standardisation, with the vast majority of issuances aligning to the ICMA Principles. This reduces the risk of greenwashing, seemingly making these instruments a more reliable and easier fit within long-term ESG treasury strategies.

Eleanor Hill, Freelance Content Creator at Treasury Storyteller, comments:

It’s easy to take pot shots at ESG, dismissing it as marketing fluff, regulatory box-ticking, or just another way for companies to look good. Of course, with CSRD and other ESG-related rules and regulations, some companies’ ESG efforts are compliance-driven. But does that make all ESG initiatives meaningless? I’d say not.

Many corporations are genuinely trying to drive change. And we must remember that it is still early days for ESG, so there will be missteps. Regulations also still need to evolve. But that doesn’t mean it’s not worth doing. And we only learn through trying – not through criticising from the sidelines, without presenting solutions.

While the focus on ESG may be rolling back in some parts of the world, it’s certainly not in Europe. And the global challenges we face – climate risk, resource scarcity, and social inequality – aren’t disappearing just because the narrative is shifting.

In terms of the ‘cost’ of ESG, yes, all changes involve some expense. And doing ESG right sometimes means implementing specialist systems or employing experts. But ESG can also be a profit driver.

According to Equity Quotient, “Companies that proactively embrace their pursuit of stakeholder diversity and other ESG principles tend to be more successful, outperforming peers on every major performance metric.” These include:

  • 5.79% higher stock price impact
  • 19% higher revenue
  • 3.5% increase in EBITDA
  • 50 bps lower cost of capital
  • 3x stronger retention

Managing ESG risks also potentially means fewer supply chain disruptions, reduced regulatory fines, and better resilience to climate-related shocks. What’s more, ESG efforts at an operational level frequently cut costs. Think energy savings, supply chain efficiencies, and smarter resource management. Less waste, lower expenses.

For treasurers, the challenge is turning ESG from a buzzword into a tangible strategy. Goals and KPIs can be a big help, as can appointing an ESG champion within the treasury team. It’s also important to challenge service providers around ESG, especially in terms of carbon footprints.

So, as well as looking to ESG-focused investments, bonds, loans, SCF solutions, and so on, treasurers can also:

  • Embed ESG into RFPs. Not just for financing, but everything. New TMS? Ask about their sustainability credentials and how their carbon footprint stacks ups. When enough treasurers start pushing, vendors will respond.
  • Asking tougher questions. Banks and asset managers talk about their ESG credentials, but are they walking the walk?  Are they transparent on Scope 3 (GHG Protocol)? Challenge them.
  • Think beyond compliance. CSRD and other frameworks are just the start. The real power of ESG comes when treasurers use it as a lens for smarter decision-making.

In short, global challenges won’t wait for us to get comfortable with ESG. Treasurers have the influence to drive meaningful change while capturing real business benefits. Acting sooner rather than later, with purpose and measurable outcomes, can only be a good thing in my book. And I truly hope ESG is here to stay, at least until it simply becomes BAU.

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