What’s Happening in Sustainable Finance: ESG Market Continues Rapid Growth, Climate Risks Top WEF List, and More

Episode Summary

Hosts

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

In this episode, hosts Nick and Aditi discuss notable trends and deals in sustainable finance – from rapid market growth, to increasing diversification of products, new taxonomies, sovereign green bonds and sustainability-linked bonds, impact accounting and reporting, and much more. Nick also tackles audience questions, offering some valuable insight on group frameworks and Sustainalytics’ approach to supporting transition finance.

Rapid Growth in Sustainable Finance

2021 saw incredible growth in sustainable finance and ESG assets under management (AUM) are projected to reach US$50 trillion by 2025 and make up one-third of global AUM. Sustainable bonds already made up 10% of global debt issued in 2021, with US$1 trillion issued for the first time and a 40% increase over 2020. And 2022 is showing no signs of slowing down, with a hot start to the year and good momentum looking forward.

World Economic Fund Risk Report 2022

Of the WEF’s top ten global risks by severity, five are environmental issues and the top three directly relate to climate change. View the report here. Maybe it’s no surprise that this theme is carried forward from the previous risk report, but it highlights the continued importance of funding for projects that address climate risk.

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Key Moments

Market news
02:17	Hot start to the year: looking for $1tn ESG investment in 2022
03:31	Big year for taxonomies? ASEAN, Korea, Indonesia, plus EU changes
03:58	WEF Risk Report: top risks climate-related
05:10	ESG risk ratings scrutiny – usefulness and robustness
05:45	Fashion industry financing decarbonization and scope 3 emissions
06:20	Impact accounting
07:15	Nuclear & Gas and the EU Taxonomy
07:52	John Holland Sustainability Linked Bank Guarantee (Australia)
08:32	COVID recovery and Build Back Better
09:02	CBI report: Thailand infrastructure
09:25	World Bank report: sovereign SLB KPIs
09:51	IEA report: digitization as enabler for transition
10:20	Environmental Finance report: Green Bond Impact Reporting
Green bonds overview
11:25	Sovereigns: Egypt, Cyprus, Qatar, Denmark, Uruguay
12:00	Banks
13:40	Lots of activity and diversification in India
14:50	Social bonds to fund affordable housing, microfinance, employment
Green loans overview
16:15	Renewables
16:40	Property
17:05	Industrial machinery: sustainable water management
SLB overview
18:10	Coal terminals: scope 3 emissions and transition plans
19:02	Construction: reducing scope 1 and 2 carbon emissions
19:38	Private equity: coverage approach, science-based targets
20:40	Telecom: scope 1, 2 and 3 reductions
22:55	Chemicals: scope 1 and 2, recycling, SBT, Transition Pathway Initiative, IEA
Listener questions
24:20	Q: Can a group framework cover all the entities in the group?
26:13	Q: How does Sustainalytics sign off on transition and what’s our approach?
SLLs
29:15	Sector activity: shipping, pulp and paper, finance, property, retail, telecom, rail, IT, manufacturing, chemicals, construction, and more
Labeled products overview
32:30	Saudi Arabia: green deposits
32:40	Insurance connected to climate
32:58	Trade finance and solar loans
Transition finance overview
33:28	Hydrogen, mining, oil companies, McKinsey report, Japan
34:50	Countries and regulations

Links to Select Resources

• Banking Exchange: Global ESG Assets to Hit $50 Trillion by 2025
• Asian Investor: Sustainable Finance Bonds Make Up 10% Of Global Debt Issued in 2021
• World Economic Fund: Global Risks Report 2022
• Morningstar: ESG Ratings Are Bottom-Line Focused, but Have Broader Impacts
• Environmental Finance: 'Impact Accounting' Bodies Launch Survey Of Existing Approaches
• Climate Bonds Initiative: Keeping the Momentum: China Introduces Innovative Labels Into Domestic Market
• Environmental Finance: Impact report quality deters green bond fund investors
• Bloomberg: Global Issuers Land in Canada as Nation’s Banks Fund Abroad
• Sustainalytics SPOs:
  • Danske Bank Group Green Bond Framework
  • Banco do Brasil Sustainable Finance Framework
  • FONPLATA Sustainable Debt Framework
  • Northland Power Green Financing Framework
  • Sumitomo Mitsui Banking Corporation's Green Bond Framework
  • ICG Sustainability-Linked Bond Framework
  • Cellnex Sustainability-Linked Financing Framework
  • Coca-Cola İçecek A.Ş. Sustainability-Linked Bond Framework
  • The Central America Bottling Corporation Sustainability-Linked Financing Framework