How Can CFOs Take Ownership of Sustainability Initiatives?

According to the World Economic Forum, environmental and social risks are the most significant threats to the global economy over the next decade.

For CFOs, that moves sustainability squarely into the core of financial leadership: pricing systemic risk, directing capital toward resilient growth, lowering the cost of capital through credible transition plans and aligning incentives and disclosures with long-term value creation. 

This is something Dr Tanja Collavo, Director at the Cambridge Institute of Sustainability Leadership, has studied closely.

She released her book "Foundations of Social Entrepreneurship: Theory, Practical Tools and Skills" in 2022, which is currently used as a textbook in university courses across Europe and the US. 

Believing that finance is the key to long-term sustainability, Tanja shares her expertise on financial leadership, as originally reported on by Sustainability Magazine. 

What role does the CFO play in long-term sustainability initiatives?

Finance leadership is one of the primary enablers, or barriers, to sustainability.

Because finance determines what gets funded and to what extent, it dictates what is prioritised in governance and strategic decision-making, particularly in publicly owned companies.

Without the finance sector pushing toward sustainability, business leaders will always struggle to prioritise long-term transitions over short-term pressures.

Conversely, sustainability leadership is incredibly valuable to bankers, insurers and asset managers. It encourages a long-term perspective and an understanding of the interconnections between global issues. By mastering these connections, finance leaders can gain a competitive advantage, better managing risks and identifying opportunities related to climate change, resource depletion and social shifts.

Those who first identify and invest in profitable, sustainable business models will be best positioned to succeed.

What financial initiatives are driving change?

While I often feel the sector could do more, objectively, there has been significant progress.

We’ve seen the rise of green finance, blended finance, ESG investing and sustainable venture capital.

These mechanisms have spurred the growth of purpose-driven startups and funded critical projects in renewable energy, electric vehicles and decarbonisation. 

I am also encouraged to see more asset managers asking corporations to include ESG metrics in their main accounts. However, the core of what must change is incentive structures. Unless we shift away from prioritising short-term profit maximisation at all costs, the pace and scale of the sustainability transition will remain insufficient.

How can CFOs take ownership of sustainability initiatives?

It is the ability to listen to different stakeholders and make sound, responsible decisions that provide value for both society and the environment.

When people feel the finance sector empowers rather than detriments them, it creates the stability necessary for economic growth.

A good leader must also promote the fact that natural and social capital are fundamental to economic capital. 

Overall, it is about leveraging traditional strengths of finance professionals — numbers, scenario planning and risk evaluation — to create value for a broad range of stakeholders, not just shareholders.