The CFO as Emerging ESG Leader

In their recently published Harvard Business Review article, “Your Company’s Next Leader on Climate Is…the CFO,”  Laura Palmeiro and Delphine Gibassier,  describe and provide use cases for “smart organizations shifting their sustainability responsibilities toward the finance function.”

Their arguments supporting the need for this shift includes:

  •  The estimated cost to adapt to the demands placed on an organization by climate change “will require close to $1 trillion in investment per year through 2030.” Obviously, corporate CFOs will be responsible for: (1) arranging funding for, (2) developing metrics to measure return on, and (3) providing corporate CSR/sustainability reports related to those corporate investments.
  • Reducing or mitigating greenhouse gas emissions should produce energy cost savings which will have a positive impact on corporate earnings.
  • Business opportunities will result from companies that develop new solutions for addressing the damaging impact of climate change.  Corporation finance departments will monitor, measure and report on the benefits and costs associated with these emerging business opportunities.
  • With large institutional investor groups promoting “impact” investing, corporate finance departments must “look seriously at climate change” and “adapt to shifting financial accounting rules” addressing climate change-related risks and opportunities.  This requires CFOs and audit committees to begin reviewing corporate disclosures related to climate-related risks, climate reporting metrics, and related corporate targets and strategies to achieve such targets.

The article, which I link to above, includes numerous references to specific companies that have (or are in the process of) adapting their finance function to consider the implications of climate change on the way their organizations conduct and report on their climate-related business activities.

Lastly, the article includes links to numerous valuable reports and whitepapers detailing investor views on impact investing and on how the change in corporate focus on their own environmental impacts will influence their corporate finance-related activities.

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