Chief financial officers are now turning out to hold a critical role in companies’ low-carbon transition.
Because of this, finance leaders are in need to gain expertise to navigate around growing range of risks, said Climate Bonds Initiative’s Fabrizio Palmucci.
According to a research by Climate Bonds Initiative and the CFO coalition of the UN Global Compact, CFOs can leverage their expertise in capital allocation and fundraising to drive low-carbon transition.
In recognising the financial significance of climate-related factors, finance leaders must have their business models keep up with the shifting economic conditions influenced by a number of factors: consumer preferences, shareholder demands, technological advancements, and regulatory changes.
The research also found that 30% of cases of development of a low-carbon strategy was initiated by the CFO, proving that it is crucial that finance leaders move beyond the traditional financial aspects of their role.
In addition, some respondents said their finance teams have been recruiting new talent to fill the required skills, or that their chief sustainability officer reports directly to the CFO.
Palmucci said CFOs must remain alert to the inherent risks posed by low-carbon transition as it has the potential to disrupt traditional business models, as seen in the cases of fossil fuel electricity generation or internal combustion engine cars.
A finance leader must turn this challenge on its head to make it a source of competitive advantage, be it commercial, technological or regulatory, according to Palmucci.
"CFOs need to upskill and develop climate know-how with the potential to not only accelerate the decarbonisation of their organisation, but also support it in developing a strategic advantage and driving bottom-line improvements," Palmucci said.
