Supply Chain Finance

Commentary

What do companies really think about climate change? What are they really doing?

This call on ESG was lively and gave us some valuable insights. I strongly recommend reading the detailed report. 

Two years ago, when we last discussed this, the main takeaways were:

• Treasurers were interested in green bonds and financing, but very wary of the lack of clear standards
• Treasury has a role to play, for example in selecting banks with good green credentials – but this needs to be part of an enterprise wide approach, which was often lacking.
• The “E” part of the equation tends to receive more focus than the “S” and “G”.

This time, the discussion was very different. The reporting issues and the need for standards has received a lot of media attention recently – but our participants have mostly moved on. Interest in these products has waned: one participant said that, if investors consider the company to be green, the bonds will be priced accordingly, while another found it too hard to prove that the proceeds were being used in a green way. Green investments generally presented many issues, including tracking environmental credentials, and the need for unacceptably long tenors.

Instead, a picture emerged where:

• All the companies represented have a real commitment to improving sustainability
• Treasurers are finding it easier to collaborate with other functions for reporting, as ESG goals are becoming more central to corporate strategies. Though one participant finds the US focuses more on “S” and “G” than Europe. 
• From an “E” perspective, European banks were seen as being more proactive than their US counterparts with BNP Paribas, Scandinavian and Dutch banks name checked as thought leaders.
• Many companies are using VPPAs (Virtual Power Purchase Agreements) to help improve their carbon footprint. This tool, also known in the US as a REC

Commentary

Cryptocurrency, digital wallets, virtual everything – there is a huge amount of change. China has been at the forefront of a lot of digital trends, partly due to the fact it had an antiquated banking system which has been thoroughly modernised, and partly because the explosion of internet shopping in the country required a digital payments solution. This is a challenge when there are no credit cards. 

This report is based on a Treasury peer Call which explored how this is affecting members’ companies, and how they are adapting to this brave new, digital, world.

• Most participants are accepting payment using WeChat Pay and Alipay. None is using these tools to make corporate payments.
• The collections process using these tools is efficient and effective: you work with a third party (usually accessed via a banking provider), who will transfer the funds to your account the following day. One participant did an RFP, with two Chinese and two foreign banks, and found the service was identical – though pricing was different, and not transparent.
• There was no mention of billbacks, the excessively high fees and acquirors which blight the use of credit cards in other countries
• The one complaint all participants had was the difficulty linking this process to internal systems, for the reconciliation of receipts or for compliance purposes in terms of identifying the source of cash. The third party companies do provide detailed lists of payors, but it can be difficult to upload these into the ERP system.
• There was a lot of discussion about....please sign in to continue