ICFOA Perspective on Sustainability in Finance

The International CFO Alliance (ICFOA) advocates for the strategic integration of sustainability with financial reporting. Understanding that today’s global finance challenges are not just about numbers but also about how those numbers impact the wider world, ICFOA promotes a comprehensive approach where sustainability becomes a core component of financial strategies.

The article “Connecting Sustainability and Finance,” published by the Institute of Chartered Accountants in England and Wales (ICAEW) today, arrives at a pivotal moment as it aligns with and deepens the ICFOA’s commitment to integrating sustainable practices into financial reporting and strategy, providing both foundational
knowledge and practical tools that are essential for navigating the evolving
landscape of corporate finance.

Authored by Marie-Josée Privyk, Founder & ESG Advisor of FinComm Services and David Wray, Board Member & ESG Working Group Chair for the International CFO Alliance (ICFOA), the paper reflects the wealth of insight and expertise from its internationally recognised contributors. Their combined expertise form the backbone of this important publication, ensuring that it not only presents the case for connecting sustainability and financial information but does so with a nuanced understanding of both fields.

The authors articulate how both regulatory and corporate developments will ensure that sustainable practices are implemented while being measurable and verifiable,
all of which underpins decision-usefulness. It sets the stage for a future where business operations are inherently sustainable and aligned with the welfare of people and planet.

Recognizing and building connectivity will allow companies to leverage insights from their sustainability initiatives to enhance financial performance and strategic
planning:

• Material Impacts: Understanding how sustainability affects material aspects of
  the business is crucial. For example, a textile company might realise that
  sustainable material sourcing not only reduces environmental impact but
  also mitigates the risk of supply chain disruptions, prevents forced
  labour which enhances brand reputation, leading to better market
  positioning and potentially higher sales.
• Risk Management: By integrating sustainability data, companies can identify
  and mitigate environmental, social and governance risks before they
  escalate. For example, a coastal resort might invest in erosion prevention
  infrastructure to manage anticipated climate changes, thus protecting its
  assets and ensuring business continuity.
• Opportunity Identification: Companies can identify new opportunities by analysing
  sustainability trends and data. For instance, an automotive manufacturer
  may notice a growing demand for “green” vehicles and decide to invest in
  the development of a new hydrogen vehicle, tapping into new markets and
  customer segments.
• Value Creation: By effectively managing the insights gained from
  sustainability data, companies can create tangible financial value. This
  might be through training investments, building new energy-efficient
  operations, revenue from new sustainable products, or increased investor confidence as a result of improved  sustainability performance.

Applying “Connecting Sustainability and Finance” within ICFOA:

The article highlights clearly the evolving connection between sustainability and finance, an area critical for what CFOs need to lead through. This is reflected in our working groups in a few key ways:

1. ESG Working Group:
   
   • Strategy: Continue to support the CFO communities to accelerate its
     understanding of and capabilities within sustainable matters allowing it
     to remain the trusted business partner for cross-functional executives.
2. Automation and Digital
   Transformation Working Group:
   
   • Strategy: Support CFOs with data management suitable for ESG
     information, share technology best practices and showcase transformation
     use cases that connect and leverage sustainability and financial
     information.
3. International Tax Workgroup:
   
   • Strategy: Understand and communicate more on international tax matters
     around sustainability practices, such as potential changes in taxation
     (e.g., carbon taxes, fair country taxation, etc).
4. CFO Certification Workgroup:
   
   • Strategy: Help ready CFOs for future proof-skills in collaboration
     with the CEN standardisation project.