EY CAFTA Case Championship

ESG
Know Your Trainer
Nisha Tomar Bist
Senior Manager, EY
nisha.t.bist@ey.com
Nisha Tomar Bist | LinkedIn
About Me
About Me
Consulting Experience – 1 year
• Have advised and worked with various global corporates and promoters across treasury
• cost
Haveoptimisation
advised and and benchmarking
worked projects.
with various global corporates and promoters across treasury
cost optimisation and benchmarking projects.
Industry Experience – 7 years
• Responsible for overall cash management support to GE businesses, strategically
focused on cost reduction related to global banking. Responsible for defining & driving
the Banking strategy for GE Industrial & Capital verticals in the EMEA & APAC
regions(ex China & Japan). Global lead for the Bank fee analytics' responsible for fee
visibility (TWIST BSB implementation) across 6 continents.
Transaction Banking Experience – 2 years
• Have worked as Product Manager in HDFC providing collections & receivables
management services to Large Corporate, FIG and PSU group on Cash Product,
Deposits, Collections, Payments and Dividend ensuring them complete CMS product
support at all times.
Education
• MBA – International Finance; XLRI & SRCC
 ESG Financing

The definition of environmental, social and governance (ESG) criteria has continued to evolve, now intersecting with the concept of fiduciary duty.

Old world corporate Social Responsibility (CSR) New World sustainability and ESG:
• We contribute to society because we are successful • We are successful because we contribute to society
• We give back • We create shared value

Environmental Social Governance

Defining ESG-
• Climate change and carbon
• Labour relations • Board diversity
The consideration of environmental, emissions
• Diversity agenda • Corruption and bribery
social and governance factors • Energy efficiency
• Employee safety • Anti-money laundering
alongside financial factors in the • Pollution
• Product safety • Business ethics
investment decision-making • Use of natural resources
• Human rights • Risk tolerance
process. • Waste management
• Child labour • Compensation policies
• Clean energy and technologies
• Working conditions • Escalation protocols
Biodiversity

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 ESG Financing
Corporates
Integration of ESG risks along side
business and financial risks for ESG-based
integrated reporting & disclosures
Companies can lower their cost of
funds & earn higher IRR on their capex by
being ESG-compliant
Increased risk for companies in the
fossil-fuel, tobacco, weapons, gambling ,
adult-entertainment, alcohol, meat & junk-
food industry
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What it means for?
Financial services Regulatory
Green Banking & financial services: By Need for inclusion of ESG-
leveraging technology and ESG, banking framework & risks (“The Green Swan”
products & services like green mortgages, event) in central bank’s monetary policy
green project financing, green credit-cards,
underwriting of green bonds, and ESG-
compliant equity raising and corporate Green fiscal policy-making:
restructuring Governments should lead by example in
adopting inclusive sustainability based
fiscal policy and strive towards making
Capital Markets show increasing trend government finances ESG-complaint
towards green-finance based equity & debt
capital-raising
Increasing development, wider recognition &
usage of green financial products: eg.
carbon derivatives
Presentation title
 ESG Financing

ESG Financial Ecosystem

Financial intermediation chain

Issuers End Investors
Rating Asset Inst.
Indices
Providers Managers Investors

All issuers that receive Firms that rate Firms that Firms that rate Entities with
an ESG Rating ESG Issuers construct ESG Construct and fiduciary All issuers that receive
indices. market ESG responsibility an ESG Rating
Funds, ETFs, to manage
etc assets.

Disclosure organization Rules & Requirements Ethical standard Setters

Organisation that determines information to Includes exchange, self-monitoring entities, Includes International bodies e.g. the OECD and the
disclose relevant to ESG and materiality. regulators and supervisors UN, that provides guidelines related to responsible
Includes climate- Specific disclosure conduct and societal value.

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 ESG Financing

ESG rating and indices

Pillar Thomson Reuters MSCI Bloomberg

Resource Use Climate Change Carbon Emissions

Emissions Environmental opportunities Pollution

Innovation Emissions Natural resources Climate change effects

Environmental Pollution & waste Waste disposal

Renewable energy

Resource depletion

Workforce Human capital Supply chain

Human Rights Product liability Discrimination

Community Stakeholder opposition Political contributions

Social Product Responsibility Social opportunities Diversity

Human rights

Community relations

Management Corporate governance Cumulative voting

Shareholders Corporate behaviour Executive compensation

CSR strategy Shareholders’ rights

Governance Takeover defence

Staggered boards

Independent directors

Key Metrics and Sub metrics 186 34 >120

Source: Refinitiv, MSCI, Bloomberg, FTSE; OECD assessment

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 ESG Financing

ESG reporting standards and guidance help organizations provide transparency to the market

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 What is on the agenda of financial sector companies?

Page 8 25 May 2023 Presentation title

 Treasury’s expanding role in supporting corporate ESG strategies

• Motivations for ESG initiatives diverge considerably by region.

• In North America, treasurers say they are focusing on ESG because of
internal drivers
• In Asia Pacific there is a clear focus on the financial benefits
• In EMEA, treasurers are motivated by a combination of financial and
regulatory factors

• The leading driver of ESG-related initiatives remains unchanged since

2021—the need to comply with ESG regulations
• The potential for cost savings (19%) rose from 17th in importance in
2021 to 3rd in 2022

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 ESG Financing –Current Landscape

► Globally, issuers sold $443 billion worth of green bonds in 2022,

down from $596 billion in 2021,
► Issuance by sovereigns was down 38.1% year over year, while
supply from nonfinancial corporates dropped 35.8%.
► In Europe, green bond supply was down 32% to $219 billion in
2022, while issuance plunged 43% to $60 billion in North
America.
► Green bond issuance in China reached $76 billion in 2022,
followed by Germany at $60 billion and the U.S. at $49 billion.

Corporate Finance
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Draft- For discussion purposes only
 ESG Financing –Current Landscape

► Globally, issuers sold $443 billion worth

of green bonds in 2022, down from
$596 billion in 2021,
► Issuance by sovereigns was down
38.1% year over year, while supply
from nonfinancial corporates dropped
35.8%.
► In Europe, green bond supply was down
32% to $219 billion in 2022, while
issuance plunged 43% to $60 billion in Volume of green bond Issuance by world's largest
North America. economies FY 2022 ($B)
► Green bond issuance in China reached China 76.25
$76 billion in 2022, followed by Germany 60.77
Germany at $60 billion and the U.S. at U. S. 50.9
$49 billion. France 20.56
U. K. 18.28
Italy 14.91
Japan 12.42
Canada 11.22
South Korea 7.63
India 1.94

Corporate Finance
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Draft- For discussion purposes only
 2. Trends in ESG Financing

Corporate ESG Bonds sales set to recover in 2023

Financing product is based on its • ~22% drop in

primary objectives for the total issuances in
underlying projects: 2022 as
companies faced
Green bonds significantly higher
• Proceeds earmarked exclusively for borrowing costs
new and existing projects that have due to aggressive
environmental benefits. monetary
tightening actions
Social bonds by global central
• Proceeds is directed toward projects banks fighting
that aim to achieve positive social inflation
outcomes
• It is expected ESG
Sustainability bonds bond sales to grow
by 30% this year
• Proceeds will finance or refinance a
and rebound to
combination of green and social
projects.
almost the same
levels of 2021,
Other projects predominantly
driven by green
• Sustainability linked bonds (non- bonds.
earmarked) / KPI linked
• Transition bonds

Corporate Finance
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Draft- For discussion purposes only
 ESG Financing

Expected trends in 2023 and beyond.

The focus and spotlight on addressing climate change will

continue with pace in 2023. For the Financial Services sector,
this means real consideration of how their activities affect the
natural world
Treasurer’s to steer business towards sustainable finance,
partner with banks to meet ESG standards
1. Financial institutions under pressure to direct capital to ESG
friendly projects
2. Public and private companies will likely look to enter finance
arrangements that reward conformance to their ESG targets
with lower interest rates
3. Enhanced ESG due diligence and reporting requirements
4. Harmonisation and establishment of regulatory standards
5. Improved access to quality and quantity of ESG data that will
be used for credit assessment

Corporate Finance
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Draft- For discussion purposes only
 References

Slide 7 –
► https://impact.economist.com/perspectives/strategy-leadership/treasury-connected/treasurys-esg-evolution/

Slide 8
► https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/global-green-bond-issuance-poised-for-rebound-in-2023-amid-policy-
push-73931433

Slide 9
► https://www.reuters.com/business/sustainable-business/green-bonds-are-set-drive-corporate-esg-debt-out-slump-2023-barclays-2023-01-04/
► https://www.spglobal.com/esg/insights/featured/special-editorial/sustainable-bond-issuance-will-return-to-growth-in-2023

Slide 10
► https://eyfinancialservicesthoughtgallery.ie/esg-and-financial-services-5-key-themes-for-2023/
► Global green bond issuance poised for rebound in 2023 amid policy push
► Exim Bank raises $1 bn via 10-yr sustainability bond issue
► Sustainable Debt Issuance Fell Amid Rates Turmoil, ESG Pushback

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