Arash Mojabi, UK Head, Sustainable Solutions ING on Debt

Hearing ‘debt’ is an alarm bell that rings for most of us. Usually at the end of the month, or if you’re like me and forgot to go holiday shopping, the end of the year, it’s the first red flag that perhaps the finances haven’t been managed as thoroughly as one would like. 

Carrying a negative connotation, from personal to business finance, debt is the red zone, the bad side of the bottom line and sometimes, a business lifeline. 

Debts, like most specialist financial terminology, is another tool for CFOs to leverage. It can affect business strategy by tipping the scales in your favour.

Debt optimisation is a concept that finance professionals can utilise to maximise capital structure. The process involves originating, structuring and arranging syndicated and bilateral loans, addressing questions around debt-to-equity ratio, refinancing and types of loans. 

With more attention on 2030 environmental, sustainable and governance targets, balance sheets are not looking green enough – until you enter sustainable finance. Designed to fund projects which work toward vital ESG goals, sustainable debt is strongly linked to a company’s broader sustainability performance. 

Arash Mojabi, UK Head, Sustainable Solutions Group, ING, began his career in infrastructure finance before transitioning to sustainable solutions as the market gathered momentum.

For the past five years, he has led ING's sustainable finance activities in the UK, supporting clients with connecting finance and sustainability initiatives for long-term value. 

“Traditionally, debt optimisation focused on pricing, tenor and diversification. Sustainable finance adds a strategic question: does the debt structure support where the business is going?” he says. 

He explains that there are two distinct types of sustainable debt. The first category is use-of-proceeds financing, which includes green loans and green bonds.

In these structures, ring-fenced funds are earmarked strictly for eligible environmentally friendly projects, such as energy efficiency, clean transport or renewable energy.

Sustainability debt as two different categories

In addition to the ring-fenced projects used for renewable energy, or energy efficiency, Arash explains that the other use for it is sustainability-linked loans, an ING specialty.

The bank was the first to introduce a sustainability linked-loan back in 2017, made to Philips. It currently holds the record for the largest-ever sustainability-linked loan after a joint venture with Santander in 2021, to the tune of US$10.1bn.

The revolving credit facility was provided to Anheuser-Busch InBev, and was reported to be a first in for a publicly listed company in the food and beverage industry.

As well as being a corporate finance lifeline, sustainability-linked financing goes beyond just loans and bonds, explains Arash.

It can encompass sustainable supply chain finance and green deposits; allowing banks to meet the demand of corporate clients seeking to implement ESG projects without capital.

Filtering through these products is a task which for any CFO, Arash notes, should begin with a question of strategy, not financing.

“The key question for a CFO is not 'Which sustainable finance product should we use?' but 'What business objective are we trying to achieve?' Whether that's funding growth, improving resilience, reducing transition risk, broadening the investor base or strengthening access to capital, the financing structure should support a strategic outcome” he says. 

Whether the goal is funding digital expansion, improving operational resilience or strengthening capital access, debt choice must support the outcome.

Product choice, as always, depends on the end-goal, and this is deeply interlinked with strategy and even business structure. Banks such as ING play a pivotal role in supporting the loans for this. 

“Sustainable finance can act as a diagnostic tool, testing whether ambition is supported by credible data, clear accountability and a funded action plan. Our role at ING is not simply to provide a product, but to challenge constructively, bring market insight and help clients develop a structure that supports their wider business strategy. The best transactions reinforce priorities the business already owns,” Arash says.

Optimising the sustainability debt 

When looking at sustainable debt, the question always goes back to the balance sheet and the boardroom. Does it support the long-term success of the business? 

Arash notes “the debate often stops at whether sustainable finance is marginally cheaper today,”. 

Instead, he explains that: “CFOs should look beyond pricing to whether it expands the lender and investor base, preserves access to cost-effective capital and supports future funding needs.”

Business strategy doesn’t need to change tack to be successful. Often, the answer is already buried in the lines.

“Across ING’s client base, we have seen companies identify eligible green expenditure within existing capital plans, enabling them to access incremental green financing and accelerate investment, in some cases at preferential pricing,” Arash notes. 

He goes on to explain that the overall vision for the business must be aligned between finance, sustainability and treasury teams. Without cohesion, even a well-structured company could struggle to deliver value. 

“The most effective CFOs use sustainable finance not as a label, but to connect capital strategy, investment priorities and accountability for execution” he explains. 

 “At its best, sustainable finance provides the capital, discipline and accountability needed to turn ambition into execution.”

CFO as the strategy glue 

In order to carefully ensure that capital allocation is aligned with growth opportunities and sustainability objectives, these must be separate goals. 

Sustainability-related investments can work for the business in terms of more than capital allocation, actively working towards long-term value creation. 

Arash says that sustainability-linked loans provide an opportunity for competitiveness, a reduction of operating costs, strengthening future growth opportunities and bolstering resilience. 

“Climate adaptation is a good example. The investment is visible upfront, but the return often comes through avoided losses, reduced disruption and greater resilience rather than immediate revenue. That can make it harder to prioritise, but short-term savings can come at a significant long-term cost,” he says. 

“Few executives are better positioned than the CFO to connect the dots between financial performance, operational priorities and long-term business sustainability.”

Some final takeaways for CFOs looking to optimise sustainability capital is to always think of the long-term value. 

Arash advises finance leaders to embed sustainability priorities into core business strategy rather than managing them separately.

He concludes: “For businesses with credible strategies, a higher bar should be viewed as an opportunity.”

Finance leaders are uniquely positioned to connect financial performance with long-term enterprise sustainability and digital transformation.

Execution should also be prioritised, as the data must support ambitions. Parallel to this is clear accountability and a credible financing or investment plan. 

“Markets have moved beyond glossy commitments and increasingly focus on delivery.” Arash explains. 

Accountability can also come from ensuring that shared objectives are aligned on all fronts between the finance, operations, treasury and sustainability teams. 

Arash comments: “The CFO should own the connection between sustainability and long-term value creation.

“Do not mistake greater scrutiny for declining relevance. Pushback against weak or non-credible structures reflects a maturing market, not a retreat from sustainability.”