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Raising a new Generation of Leaders

STRATEGIC FINANCIAL MANAGEMENT

Emerging Issues in
Strategic Financial Management

Benjamin Ehikioya

2021/2022 ACADEMIC SESSION

LEARNING OBJECTIVE

At the end of this discussion, students should be able to

identify emerging issues in SFM, enumerate factors giving
rise to these issues and explain strategies to addressing
these issues

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Outline
• Introduction of emerging issues in SFM
• Green financing and its consequences on the Business
Environment
• Sustainability Reporting
 The reason for sustainability reporting among companies

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Introduction
 Emerging issues and development in the environment and field
of SFM.
 These issues have continued to shape our approach to business
activities. Some of these issues and development in SFM are;
 Green finance
 Sustainability reporting
 Social cost
 Financial globalization
 Financial crisis
 Collective Investment Schemes (CIS)

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Green Finance

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 What is Green Finance
• Green finance refers to financial support for green growth.

• It is a phenomenon that combines the word of finance and

business with environmentally friendly behaviour.

• Green finance is about avoiding the promotion of any business

or activity that could be damaging to the environment now or for
future generations.

• Green finance is when financial activities are under the

consideration of environmental factors, and somehow involved
in operations which are aimed to improve the environment.
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How Does it work?
• Green Finance is providing product &
service to promote environmentally
responsible investments and stimulate low-
carbon technologies, projects, industries
and businesses by financial activities like:
Investments, Lending decision, Risk
management processes etc.

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Objective of Green Finance
Green finance is to promote Global Green Growth through the harmony between the
Economy and the Environment:
• To achieve the goal of a low-carbon economy.
• To promote green industry.
• To support environmental pollution prevention projects.
• To encourage renewable energy development projects.

Why Green Growth?

Green growth is the solution to three current threats to the global economy:
Climate change
Energy constraints
Financial crisis in Sustainable Growth.

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Consequences of Green Finance on
the Business Environment
 Payback Period Is Too Long
 Profitable Projects Are Lacking
 Data Is Not Available
 Cases are Unclear
 Transaction Cost Is Too High
 Lack of Knowledge
 Lack of Leadership
 Risk Is Too High
 Client Confidence Is Low

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 Benefit / Impact of Green Finance
 Green Investment
 Green Industry
 Clean Technologies and Energy
 Competitive knowledge of the Economy
 Sustainable Environment and Valued Natural Resources.
 Social Development and Improved Quality of Life.
 Sustainable Use of Resources.
 Climate Action
 Increase the reputation.
 Long term sustainability
 Attract potential investors
 Environment friendly

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User of Green Finance

The major emerging countries practicing Green Finance:

 Argentina
 Brazil
 China
 India
 Indonesia
 Saudi Arabia
While Singapore, Egypt, Laos and Kazakhstan are also in the
process of participating Green Finance.

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Sustainability Reporting

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 Overview on Sustainability Reporting
• What is Sustainability Reporting?
 Disclosure in public domain about non-financial performance. Here,
non-financial means Governance, Environment, Social, Health &
Safety in simple words.
 It is an organizational report that talks about the performance of four
key areas namely economic, environmental, social and governance.
 Sustainability reporting is the practice of measuring, disclosing and
being accountable to internal and external stakeholders for
organizational performance towards the goal of sustainable
development.
 Sustainability reporting is a process of communicating information
that explains the economic, social, and environmental impacts of
operations taken by a company. It helps organizations to set goals
and strategies to help them become more sustainable.
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 The Sustainability Report
Environmental Issues
– Climate change and energy • Social and Economic Issues
– Local environmental impacts – Community and society
– Local content
– Human rights
• Health and Safety Issues – Business ethics and transparency
– Workforce protection – Labor practices
– Product health, safety and
environmental risks
– Process safety and asset integrity

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 The 3Ps Policy
The 3 dimensions of Sustainability Reporting
• Planet - minimize the environmental impacts and work for
the better utilization of natural resources
• People - social and community view on people’s
autonomy and quality of life
• Profit - longevity of the organization is ensured by the
goal of profitability earned through operational efficiency,
strict cost controls and ethical and transparent behavior
Planet + People + Profit = Sustainable Development
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Who’s Reporting?
• Corporates
• Public Agencies
• NGO’s
• Small Enterprises

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 Benefits of SR
Understanding the benefits of SR can help to get motivated to overcome the
challenges that may arise along the way. Here are some of the benefit:
• Internal benefits for companies includes
 Increased understanding of risks and opportunities
 Emphasizing the link between financial and non-financial performance
 Influencing long term management strategy and policy, and business plans
 Streamlining processes, reducing costs and improving efficiency
 Benchmarking and assessing sustainability performance with respect to laws,
norms, codes, performance standards, and voluntary initiatives
 Avoid being implicated in publicized environmental, social and governance failures
 Comparing performance internally, and between organizations and sectors
 Improving compliance.

- Enhanced business value – Improved operations – Strengthened relationships – Enhanced trust and credibility

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• External benefits of sustainability reporting can include:
 Mitigating or reversing negative environmental, social and
governance impacts
 Improving reputation, brand protection and customer loyalty
 Enabling external stakeholders to understand company’s
true value, and tangible and intangible assets
 Demonstrating how the organization influences, and is
influenced by, expectations about sustainable development
 Attract investors, customers, creditors, employees and
professionals
 Helping to build stronger relationships with stakeholders.
 Improve access to capital

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Who offers guidance on Sustainability Reporting?
• The following organizations offer sustainability reporting guidance (globally)
 The Global Reporting Initiative Organization for Economic Cooperation
and Development(OECD Guidelines for Multinational Enterprises), The
United Nations Global Compact (the Communication on Progress),
International Organization for Standardization (ISO 26000), International
Standard for social responsibility etc
‒ As firms worldwide embrace sustainability reporting, the most widely adopted
framework has been the Global Reporting Initiative (GRI) Sustainability Reporting
Framework
 Now in Nigeria, the SEC through NGX has made it mandatory for all listed
companies on it premium board to provide sustainability report effective
January 2019

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The Cost of Sustainability Reporting
The cost related to implementing sustainability reporting may differ from one company
to another. In most cases, the cost will depend on the company’s choices to implement ESG
sustainability reporting. Here are some of the components to note when calculating the cost
of ESG sustainability reporting.
• Hiring professionals: To make sustainability reporting more effective, some companies,
especially large enterprises, might opt to hire professionals. However, firms might want to
pick a team from the current employees to implement the reporting.
• Data-relate expenditure: To gather data, analyze, and generate reports, company need
to have the right tools. Most companies prefer using sustainability management software
that is designed to make the process easy and efficient.
• Equipment costs: If companies run a manufacturing facility, it might be good to change
or regularly service the current equipment for higher efficiency. These activities come at
a cost.
• Training-related costs: To make sustainability more effective, the staff, especially the
team that will be directly involved, might require additional training. The cost involved
will depend on the size of the team and, nature of the training.
• Other costs associated to the making the ESG sustainability reporting

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 Summary of the Benefit of Compulsory
Sustainable Reporting
• The social responsibility of business leaders increases
• Sustainable development and employee training
become a high priority issues for companies
• Corporate governance improves
• Corporate boards supervise management more
effectively
• Corporations implement more ethical practices
• Managerial credibility increases
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Summary
• The value of the sustainability reporting process is that it
ensures organizations consider their impacts on these
sustainability issues, and enables them to be transparent
about the risks and opportunities they face.

• While it is true that there is some cost involved when it comes

to implementing sustainability reporting, the benefits far
outweigh them. In the long term, enterprise is likely to enjoy
lower costs of production, higher efficiency, and more profits.
More importantly, the organization would have helped to
make the world a better place.

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Thank you

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