What’s Happening in Sustainable Finance: Key EU Developments and the Untapped Market of Climate-Aligned Bonds

Episode Summary

Hosts:

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

 

In this episode, Aditi and Nick highlight sustainable finance market developments that happened over the summer. From growing adoption of sustainability-linked debt in the Asia-Pacific region, to the recently published Social Loan Principles, to the continued flurry of sovereign activity in the market, there is a lot to cover. Suggested reading from this episode includes the Energy Transition Commission’s report Bioresources within a Net-Zeto Emissions Economy: Making a Sustainable Approach Possible to learn more about key environmental considerations around biomass as a fuel source.  

The EU’s Sustainable Finance Train Keeps Rolling

The European Commission released its renewed sustainable finance strategy, an update to its 10-point action plan from 2018. The strategy covers several initiatives to address climate change and environmental challenges, while increasing investments. It sets out of actions, including broadening sustainable finance to include transition finance and developing international sustainable finance initiatives and standards, among others.

The European Commission also launched its voluntary European Green Bond Standard for corporations and sovereigns. The standard requires proceeds be used for investments that are 100 percent aligned with the EU’s taxonomy and that issuers undergo audits to ensure funds are allocated to the right projects. The European Commission also adopted the Delegated Act supplementing Article 8 of the Taxonomy Regulation. The Delegated Act specifies how large financial and non-financial companies should disclose on the share of their business, investments or lending activities aligned with the EU taxonomy. For full details, please visit the European Commission website.

Climate Aligned Bond Market Much Larger Than We Think

The Climate Bonds Initiative (CBI) published a few interesting reports over the summer including Climate Investment Opportunities: Climate-Aligned Bonds & Issuers 2020. The report presents research on unlabeled climate-aligned bonds (i.e., bonds not explicitly labeled as green by the issuer, but that finance climate-related activities or projects). CBI found 420 climate-aligned issuers from 45 countries with US$913.2 billion in climate-aligned bonds, highlighting sizable investment opportunities.

Key Moments

0:00:54	Market news
0:01:10	Market numbers
0:02:29	Continued uptake of social bonds
0:03:19	Updated EU sustainable finance strategy
0:03:46	EU Green Bond Standard
0:05:02	EU Green Deal
0:05:53	Bioresources report from the Energy Transition Commission
0:07:05	EU Green Bond Framework
0:07:52	Market expresses greenwashing concerns
0:08:15	Sukuk transactions and sustainable finance
0:08:26	Debate around nuclear continues
0:08:51	Concept of double materiality
0:09:30	Climate Bond Initiative resources
0:10:28	Green bonds overview
0:15:27	Social bonds and loans overview
0:17:52	Green loans overview
0:19:02	SLB overview
0:23:43	Audience questions
0:26:19	SLL overview
0:28:58	Labeled products overview
0:30:45	Transition bonds overview

 

Links to Select Resources:

• Bloomberg: ESG Bond Sales Spring to $1 Trillion as Investors Force Change
• European Commission: Renewed EU Sustainable Finance Strategy
• LMA/LSTA/APLMA: Social Loan Principles
• The Energy Transition Commission: Bioresources within a Net-Zeto Emissions Economy: Making a Sustainable Approach Possible
• Raconteur: Sustainability Metrics Matter: Good Intentions Are No Longer Enough
• World Nuclear News: MEPs Call on EC to Recognize Nuclear as Sustainable
• Climate Bonds Initiative:
  • Sustainable Debt: North America State of the Market 2021
  • Climate Investment Opportunities: Climate-Aligned Bonds & Issuers 2020
• Sustainalytics SPOs:
  • RBC Green Bond Framework Second-Party Opinion (2019)
  • Virgin Media O2 Green Bond Framework Second-Party Opinion (2021)
  • Kaiser Green Bond Framework Second-Party Opinion (2021)
  • Shui On Land Sustainability-Linked Bond Framework Second-Party Opinion (2021)
  • Seaspan Blue Transition Bond Framework Second-Party Opinion (2021)

More Episodes