What’s Happening in Sustainable Finance: Adopting the Climate Transition Finance Handbook, Recovery Through Sustainable Sovereign Debt and More

Episode Summary

Hosts

• Nicholas Gandolfo, Director, Corporate Solutions
• Aditi Bhatia, Regional Sales Manager, Corporate Solutions

 

In this episode, Nick and Aditi cover some of the recent developments in sustainable finance with market diversification being the common thread. Market volumes continue to increase showing positive year-over-year momentum. Contributing to that growth is new market entries from various sectors as well as a broader scope of activities and projects being funded. With this diversity comes greater scrutiny of the market, especially of issuers and borrowers, their projects and frameworks, as well as their lenders. In our opinion, such scrutiny and debate will ultimately lead to more robust and credible sustainable finance activities.  

Climate Transition’s Influence on Sustainable Finance 

Although not expressly transition, some sustainable financing frameworks and issuances are coming to market in alignment with ICMA’s Climate Transition Finance Handbook. Japan’s Financial Services Agency has also released its Basic guidelines on climate transition finance with the aim of encouraging the allocation of more funds to contribute to the country’s carbon neutrality goals. In response to a listener question, Nick notes the Handbook’s use in the sustainability-linked bond and loan frameworks of companies in hard-to-abate sectors.  

More Sovereigns Move Forward on Sustainable Debt

Sovereigns continue to issue sustainable bonds to support their economic recoveries. Issuances from Germany, the UK and Pakistan made headlines, as did announcements from Canada and Kenya. The principality of Andorra even got in on the action, issuing its first sustainability bond and raising EUR 500 million to finance biodiversity conservation, sustainable water management, employment generation and access to essential services, among other green and social projects.

Diversification's Positive Impact on the Market

Diversification within the global sustainable debt market continues and we see that as a good thing. The entry of market participants from various sectors and the financing of innovative green and social projects has led to greater debate and scrutiny of the market. Highlighted this month are transactions from companies in real estate, semiconductors, agriculture, rail, household goods, banks, technology, education and the mainstay, renewables. This diversification of sectors and types of projects financed is important for the continued evolution and improvement of the sustainable finance market. 

Key Moments

00:08	Introduction
00:46	Market news
01:14	Market volumes up
01:53	Shell landmark court verdict
02:42	Exxon shareholder activism
02:59	IEA “Net Zero by 2050” report
04:36	ICMA additional recommendations for building taxonomies
05:03	ICMA additional guidance for climate transition finance
05:49	Transition bonds in danger?
06:39	Challenges to SLBs
07:28	Update to Sustainability-Linked Loan Principles
08:24	Sustainable Trade Finance
09:12	Oil and gas and sustainability-linked frameworks
10:21	New Climate Bonds Initiative reports
10:44	Hong Kong Monetary Authority guidelines on sustainable finance subsidy program
11:26	Transactions overview
14:53	Social bonds overview
15:49	Green loans and bonds overview
16:24	Sustainability-linked bonds overview
19:42	Listener question
22:11	Sustainability-linked loans overview
24:19	Transition bonds overview
25:21	Labeled products overview
26:08	Regulatory update

 

Links to Select Resources

• IEA: Net Zero by 2050 report
• APLMA/LMA/LSTA: Sustainability-Linked Loan Principles May 2021
• Climate Bonds Initiative:
  • Sustainable Debt: Global State of the Market 2020
  • Post Issuance Reporting in the Green Bond Market 2021
  • Reports on ASEAN region
• Regulation Asia: HKMA Issues Guideline on Green & Sustainable Finance Grant Scheme
• Air Liquide Sustainable Finance Framework Second-Party Opinion
• Kellogg Sustainability Bond Framework Second-Party Opinion
• CaixaBank Sustainable Development Goals Framework Second-Party Opinion
• Weir Group PLC Sustainability-Linked Bond Second-Party Opinion
• Seaspan Sustainability-Linked Bond Second-Party Opinion
• Environmental Finance: Japan's FSA publishes bond & loan 'transition finance guidelines'
• Forbes India: Green bonds, sustainable bonds demand picks up in India in the pandemic era

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