What’s Happening in Sustainable Finance: Market Headwinds, GHG Targets in Sustainability-Linked Instruments, the Focus on Supply Chain, and More

Episode Summary 

Hosts 

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

In this episode, Nick and Aditi share recent developments in the global sustainable finance market. They touch on the cooling bond market and the shifting geographic split in green bond issuance, noting that EU dominance is waning as other jurisdictions close the gap. Nick gives his thoughts on the impact of the forthcoming EU green bond standard on what future bond frameworks will include, what will be reported, and the level of external review required.  

In her update on sustainability-linked loans and bonds, Aditi highlights a couple of transactions, notable for their use of gender-based KPIs aiming to increase the number of women in management positions. Finally, Nick applauds Sustainalytics’ Corporate Solutions business for providing the most second-party opinions in the first half of the year, as cited by Environmental Finance.  

Study of Greenhouse Gas Targets Used in Linked Finance   

Environmental Finance recently published a report analyzing the types of key performance indicators being used in sustainability-linked bonds and loans. Across sustainability-linked instruments, carbon and greenhouse gas emission reduction KPIs accounted for about 75% of KPIs used, with other environmental issues, such as water, making up 10%, social issues another 10% and less than 5% related to governance issues. This makes sense, given the quantitative nature of GHG and carbon emission metrics. The report also noted the emergence of KPIs tied to scope 3 emissions, which is a promising trend given the high impact of scope 3 emissions for some industries.  

Focus on Supply Chain Sustainability Improvements 

For organizations looking to support ESG and sustainability improvements in their supply chain, it’s important to understand suppliers’ needs and motivations. Some large players in food and agriculture are offering financial incentives to farmers to implement sustainable practices. Others are supporting programs to pilot and scale innovative sustainability solutions. Still others are working to advance social goals, such as furthering opportunities for minority and female entrepreneurs. Sustainalytics’ Corporate Solutions is working more and more with clients to support their evaluation of suppliers – from KPIs connected to suppliers to ESG assessments of their suppliers.     

Key Moments 

0:00:48	Market overview
0:02:01	Changing geographic in green bond market
0:02:25	Sustainalytics leads SPOs in H1 2022
0:02:55	Green/social split tranche instead of sustainability issuance
0:03:40	Nuclear back on the radar
0:04:33	Malaysia Islamic financing
0:04:45	EU Green Bond Standards coming soon
0:05:29	Guidance for finance sector decarbonization
0:06:05	Updated Climate Bonds Initiative methodology
0:06:41	Securitization and structured deals
0:06:45	Sustainable finance and supply chain
0:07:21	New NNIP social bond fund
0:07:39	More articles on biodiversity
0:08:00	KPIs used is sustainability-linked instruments
0:09:52	SLB and SLL overview
0:13:54	Audience questions
0:18:32	Green bonds overview
0:22:52	Green loans overview
0:24:28	Social bonds and loans overview
0:26:15	Labeled products overview
0:27:40	Transition bonds overview
0:28:25	Regulatory and country updates

 

List of Select Resources 

• Environmental Leader: Sustainable Finance Markets Cool After Record-Setting Year 
• Investment Executive: As markets wobble, sustainable finance suffers too 
• S&P Market Intelligence: Europe's dominance in green bond market fades amid record growth in China 
• Environmental Finance: Sustainalytics delivers most SPOs in first half of 2022 
• Asia One: New World Development offers world's first USD social and green dual tranche bond in public markets totalling USD700m 
• Bloomberg: Once-Unthinkable Nuclear Green Bonds Are Coming to Europe 
• Environmental Finance: Issuers opt for SLBs as EU tightens green bond rules, says BdF 
• Environmental Finance: Focus on banking transition plans as priority, IIGCC recommends 
• Environmental Finance: CBI tightens green bond criteria and readies social expansion 
• Green Biz: Supply chain emissions are top of mind for food and ag 
• Environmental Finance: Green securitisations 'under-utilised in Europe' 
• Funds Europe: NN IP launches SDG-focused social bond fund 
• Environmental Finance: Sustainability-linked Debt - Carbon Emissions KPIs 

 

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