How can ESG drive CFO strategic and operational objectives?

Chief Financial Officers (CFOs) and their teams—across FP&A (Financial Planning and Analysis), Treasury, and beyond—are facing mounting pressures from both external and internal forces. Persistent inflation, interest rate volatility, and shifting regulatory landscapes demand continual adaptation to maintain financial stability. Simultaneously, the finance function is becoming increasingly strategic, working closely with peers in strategy, legal, operations, technology, and supply chain. 

In this environment, Environmental, Social, and Governance (ESG) considerations, driven not only by regulatory change but also by strategic opportunity, can play a crucial role in unlocking new sources of value for finance leaders. 

A Growing Landscape of ESG Regulation and Expectation 

ESG-related regulatory and voluntary requirements have grown at an average rate of ~20% CAGR since 2000, with more than 2,500 regulations currently in effect globally. Even in a post-Omnibus era, this trend continues to place new disclosure demands on both financial and sustainability functions. This challenge also presents opportunity: firms can benefit by bringing the COMmercial back into their ESG COMpliance efforts—something we’ve previously written about in depth. This mindset is just as vital for finance teams as it is for the broader business. 

Three ESG Levers for CFOs, FP&A, and Treasury Teams 

Below are three ESG-focused levers that finance teams can use to support and accelerate their strategic and operational objectives: 

1. Increasing Access to Capital Through ESG-Linked Financing

Despite diverging public opinions on ESG, many banks remain committed to ESG-focused lending, offering preferential rates for qualifying projects. Institutions such as DBS, Nordea, HSBC, and Société Générale continue to grow their sustainable finance commitments, with global ESG-linked issuance reaching $1.6 trillion in 2024—an 8% year-on-year increase. 

To take advantage, CFOs should proactively engage with their banking partners on ESG targets and strategies, seeking mutually beneficial alignment. Robust sustainability plans help finance teams demonstrate alignment with banks’ ESG goals and highlight the lower risk profile of their businesses. For example, credible climate transition strategies can suggest reduced insurance and asset risk, potentially lowering loan pricing. Sharing this information early can also streamline bank compliance checks and speed up financing decisions. 

Key questions for finance teams: 

• Have we understood our bank’s ESG criteria and targets? 
• Have we benchmarked our ESG strategy to showcase competitive differentiation? 
• Are we optimising banking conversations to access ESG-linked financing? 

2. Improving Working Capital Through ESG-Driven Value Chain Management

Emerging regulations—including the CSRD in Europe, SB-261 in California, and ISSB standards globally—are expanding corporate accountability across the value chain. This creates an opportunity for finance teams to collaborate with procurement, operations, and commercial teams to enhance resiliency and optimise working capital. 

Central to this is mapping the value chain to understand the flow of materials and goods and to assess ESG impacts at every stage. This analysis allows finance to consolidate supplier exposure, optimise cash conversion cycles, and unlock efficiencies. Strategies may include: 

• Enhancing budget forecasting and reducing inventory to align with actual sales demand 
• Negotiating payment terms linked to supplier ESG performance 
• Using supply chain finance to smooth out payment timelines 

Key questions for finance teams: 

• Do we have a comprehensive view of our value chain, including resource flows and hold times? 
• What ESG and financial metrics are we using to manage suppliers? 
• How can ESG reporting uncover opportunities for working capital and cost savings? 

3. Enhancing Risk Management Through ESGCO Integration

The ESGCO framework—developed by Baringa—extends the traditional double materiality approach by assessing risks across five dimensions: Environmental, Social, Governance, Commercial, and Operational. It enables firms to apply scenario modelling to identify ESG triggers that could breach risk tolerances or disrupt business continuity. 

Finance teams can use ESG value chain mapping—already required for regulatory compliance—as a foundation for broader business stress testing. This helps uncover hidden risks that may affect investment decisions or necessitate further mitigation efforts. For instance, one investor only realised the cash flow risk of a key agricultural acquisition after tracing ESGCO-related vulnerabilities in commodity supply. 

Proactively embedding ESGCO insights into financial risk management and scenario planning allows CFOs to better prepare for disruptions and build resilience into capital allocation decisions. 

Key questions for finance teams: 

• How comprehensive is our scenario planning across the value chain? 
• What is the relationship between our ESG risks and our cash flows? 
• Are we stress-testing ESG factors such as physical climate risk, carbon pricing, and social instability? 

How Baringa Can Help 

We’ve seen firsthand how integrating ESG into financial strategy drives commercial success, particularly in conversations with investors and lenders. Our deep expertise spans sustainability strategy, climate transition planning, and financial transformation. Recent project highlights include: 

• Catalysing Green Finance: Designed credible scope 1–3 decarbonisation pathways for a global mining client, supporting new greenfield projects in Europe. Our work helped secure green financing by identifying the most cost- and carbon-efficient power and heating solutions and developing investor-ready ESG narratives. 
• Working Capital Transformation: Supported a leading UK supermarket by modelling a future supply chain network, reducing inventory holdings, and enhancing operational efficiency. Our approach projected annual savings of £131m for a one-time CapEx investment of £168m. 
• Monetising ESG Impacts: Built a cost-benefit analysis tool for a global energy company to quantify ESG impacts across natural, social, human, and produced capital, providing finance teams with a standardised Social Return on Investment (SROI) aligned to discount rates. 
• Digitising Supply Chain Monitoring: Implemented a real-time digital monitoring solution for a global agri-chemicals firm, improving asset management, resource allocation, and cash productivity across operations. 

As ESG regulations evolve, they offer more than a compliance burden—they provide CFOs, FP&A, and Treasury leaders with meaningful levers to drive value. Baringa can help you navigate these complexities and unlock strategic advantage. 

Get in touch with Shuayb Ismail and Amy Taggart to find out how we can support your journey.