Virtual conferences might lack the atmosphere of a live event, but they can attract large numbers. The UK Association of Corporate Treasurers’ (ACT) annual event, held online over four days this year,  saw around 2,000 delegates representing 60 countries register to hear speakers who included the Bank of England’s Governor Andrew Bailey.

Among several sessions sponsored by Deutsche Bank, a highlight was a discussion on how banks can enhance the role they play in supporting corporate clients with their environmental, social and governance (ESG) issues. Gerald Podobnik, Chief Financial Officer, Corporate Bank, Deutsche Bank was joined by Arthur Krebbers, Head of Sustainable Finance, Corporates at NatWest and Robert King, Head of Sustainable Finance for HSBC.

Moderator was Jessica Fries, Executive Chair of The Prince of Wales’s Accounting for Sustainability Project, also known as A4S, who noted that the willingness of banks and clients to work cooperatively had enabled corporate treasury teams to embed ESG into their activities and set ambitious targets.

King reported that sustainability has become a part of core strategy and target setting for a growing number of clients in the past year, from multinationals to SMEs. Three in four clients are employing sustainability metrics to measure their performance and sustainability-linked loans have grown hugely in number over recent years.

According to Krebbers several trends are evident, including a move beyond the traditional bank-corporate relationship as both sides share their ESG best practice. Conversations increasingly focus on holistically embedding ESG into an organisation, rather than on individual projects or products. And by identifying specific targets that are most relevant to an individual client, both sides avoid the “rabbit hole” that discussions on ESG can too easily become.

Podobnik admitted that his own focus was a little different; as CFO it was centred on helping Deutsche Bank embed ESG within its own operations. In addition to this role he co-chairs the Bank’s sustainability council that decides on strategy for the business and is also a member of the German government’s sustainability committee.

As CFO, the three main elements of sustainability are target setting, performance management and reporting. Podobnik added that ESG has moved on from mere product development to become a conversation linked to the whole economy. It addresses questions such as how the company clearly connects with the outside world through clear reporting and by adopting a holistic strategy.

Are specific products, such as green bonds, and more advantageous terms helpful in supporting corporate clients as they move forward, asked Fries?

Krebbers thought that despite the attention given to sustainability-linked special products, other areas such as improving the standards of reporting are generally regarded as of greater importance than green bonds and similar offerings.

The past 24 months had witnessed much innovation across the banking and capital markets product range, including use of proceeds statements and also sustainability technology linked to meeting specific targets. Both are still in the early stages of development and challenges remain around the setting of the more ambitious sustainability targets.

King suggested that corporates – and not their banks – should set their own targets, firmly establish them and have a sustainability structure in place before they approach the market. Target setting has, fortunately, is becoming easier assisted by greater consistency and benchmarking.

Use of proceeds is a particularly effective tool for the CFO and treasurer when integrating sustainability and making it part of corporate core strategy, said Podobnik. As involves specifying what is sustainable and what isn’t, this improves the standard of reporting.

Two years ago, Deutsche Bank had changed the way it looked at sustainability when it set itself specific targets for 2025, he added. While it wasn’t one of the first banks to take action, it had been important to “get its own house in order” first before advising clients, which had enabled the original 2025 target to be brought forward to 2023.

Podobnik’s advice to corporate treasurers was therefore to take their time and determine what it was that their company wished to achieve before building those goals into their performance management.

Krebbers said that NatWest is a sponsor of the November 2021 UN Climate Change Conference (COP26) in Glasgow (above), an event that will need to “offer a broad church so that major parts of the economy can make the transition”. Setting net zero targets of 2040 or 2050 is just the first part of the journey, which also needs to detail what the implementation plan is, what investments are needed, and to clearly set out the governance and KPIs applicable.