Environmental sustainability is a hot topic across virtually all industries these days, and it’s something financial leaders need to consider strategically for their organizations, says Mathieu Morin, CFO of Direxyon Technologies, a Montreal, Canada-based company that provides advanced financial modeling tools for asset-intensive industries including electric, gas and water utilities, municipalities and transportation.
Morin has been Direxyon’s CFO since 2020. He has been part of the company’s leadership team for 16 years, including fulfilling numerous mandates with government and para-governmental entities such as Hydro-Québec, Caisse de dépôt et placement du Québec, Investissement Québec and City of Montréal. “The best thing financial leaders can do to be prepared for the clean energy transition is to start prepping now and make long-term asset investments with this shift in mind,” he says.
Morin spoke with StrategicCFO360 about what to expect and how CFOs can keep their organizations ahead of the game.
Clean energy and sustainability have been hot topics in 2021. How can companies incorporate these factors into their financial strategies?
Climate concerns are forcing structural changes in all industries. Organizations will need to go beyond environmental, social and governance (ESG) compliance, and take giant steps toward maintaining their proactive stance. Making modernized, massive leaps in how we justify cost-effective, consolidated strategies will assist teams in analyzing future asset health and risk tolerance in the global clean energy transition.
The three Ds—decarbonization, digitalization and decentralization—will play huge roles in financial decisions moving forward. Clean energy transition plans begin with digitalizing the organization’s guarded subject matter expertise, stellar decision policies and data granularity. Advanced analytics will assist in precise and timely management of clean-energy asset components and variables over the short-, medium- and long-term. Decisions on how to decarbonize over the next few decades will be highly focused on integrated processes and automation of decentralized operations, as well as upkeeping business savviness to predict disruptions before they occur.
Why is it important for organizations to start planning their investments now for the long-term?
Organizations need to be prepared to manage risk by making long-term investment decisions. Planning an investment strategy based on different scenarios is critical for the sustainable success of an organization, especially with evolving markets and regulations fluctuating day-to-day. Business leaders need to be ready to adapt to the latest in digital transformation trends and energy transition. Organizations need to have contingency plans, as we have learned from the Covid-19 pandemic.
Digital transformation is underway in every industry, and the impact on organizations will vary, depending on the industry and their financial, physical and digital contexts. Decisions for asset investment in your clean energy transition should evolve with great agility along with unprecedented contingencies that will surprisingly occur as we transition toward net-zero initiatives by 2050.
How do you predict sustainability will play a role in how all organizations will operate in the near future?
Organizations of all sizes urgently need to consider digital, physical and financial sustainability today to successfully cater to the environmental sustainability goals of the next few decades. They should be re-thinking and realigning budget planning, finances and operations decisions. Leaders should be already continuously tracking new developments in technology and be up to date on the latest energy policies and regulatory frameworks.
In fact, the International Energy Agency recently reported that the clean energy transition is happening too slowly, and investment in renewable energy needs to triple by 2030 to combat climate change and keep volatile energy markets under control. New policies and procedures will soon be put into place—if not in place already—for corporations, cities and communities to meet these goals. This means day-to-day decisions will be impacted and planning for this shift will be essential to organizational success.
How can financial leaders best navigate the growing risks of changing energy markets and regulatory shifts to prepare for a clean energy transition in the coming years?
The best thing financial leaders can do to be prepared for the clean energy transition is to start prepping now and make long-term asset investments with this shift in mind. Target your focus on acquiring the right talent and using the right technologies to make timely decisions that will enable you to handle any situation that poses a risk—such as changing energy markets and regulations. This will help financial leaders optimize their financial budgets while also adhering to government guidelines or compliance requirements.
As the artificial intelligence market matures, we find ourselves progressively adopting more innovative, AI-driven algorithms to support decision-making. Taking advantage of these tools and resources will give organizations an edge toward becoming forward-thinking and innovative as it relates to sustainability and clean energy. Ensure that you are optimizing the company’s investment strategy by making short-, medium-, and long-term investments based on the different scenarios of changing energy markets to help determine how your business should operate in the next five, 10 or 40 years.