ESG in Conversation

ESG in Conversation | What Does It Take To Be a Sustainability Leader in 2023 and Beyond?

In this episode of ESG in Conversation, we’re exploring the question: what does it take to be a sustainability leader in 2023 and beyond? You’ll hear from Joseph Hill, London Techstars alumn and CEO of Zephframe, about the sustainability challenges facing start-ups. You’ll also hear from Eileen Buckley, VP of Corporate Responsibility at Stryker, about the importance of integrating sustainability across an organization. Gabriel Presler, Global Head for Enterprise Sustainability at Morningstar, also joins in to discuss the role investors play in sustainability leadership.

ESG In Conversation | How Do Businesses, Governments and Investors Fit Into the Circular Economy?

Host:

• Curtis File, Editorial Manager, ESG and Sustainable Finance

Featuring:

• Juliette Goulet, Project Manager, Ellen MacArthur Foundation
• Wayne Hubbard, CEO, ReLondon
• Joris Laseur, Associate Director, Stewardship, Morningstar Sustainalytics
• Jonathan Kellar, Manager, Stewardship, Morningstar Sustainalytics

As global leaders gain a more nuanced understanding of climate change, they are looking at the circular economy as a potential solution to mitigate their impact. In a circular economy, organizations aim to prevent waste throughout the value chain instead of relying solely on recycling. This approach involves sharing, leasing, reusing, repairing, and recycling materials and products for as long as possible. Proponents say the approach comes with huge potential upside. The Ellen MacArthur Foundation, for example, projects that a circular economy could reduce greenhouse gas emissions by 25%, create 700,000 jobs, and save $200 billion per year by 2040. But the path to achieving those goals is far from clear, and it will require an all-hands-on-deck effort.

In this episode of ESG in Conversation, we’re exploring the question: how do businesses, governments and investors fit into the circular economy? You’ll hear from Juliette Goulet, a seasoned sustainability practitioner from the Ellen MacArthur Foundation, about the challenges of implementing a circular economy. You’ll also hear from Wayne Hubbard, CEO of ReLondon, about putting the circular economy into practice in London, England. Joris Laseur and Jonathan Kellar from Morningstar Sustainaltyics’ stewardship team also join to discuss the role investors play in helping businesses reduce their waste and implement circular business practices.

What’s Happening in Sustainable Finance: Green Bond Standards on the Horizon and Much More

Episode Summary

Hosts

• Nicholas Gandolfo, Vice President, Corporate Solutions
• Aditi Bhatia, Senior Regional Manager, Corporate Solutions

What Will the EU Green Bond Standard Mean for the Market? 

With the European Union’s Green Bond Standard set to come into effect sometime next year, we look at what it could mean for the global sustainable finance market more broadly. Although the highly anticipated framework is expected to be the gold standard for what we see in the market going forward, there are ongoing concerns about its usability. Some market participants are worried about the potential difficulty in meeting all the requirements of the Green Bond Standard and whether the standard is too prescriptive in its requirements to set up a framework.  

Sustainable Finance Meets AI  

The sustainable debt market continues to see innovations in the types of projects being funded. One example is the use of green bonds to raise money for artificial intelligence (AI) projects related to green or social initiatives. The green bond issuance highlighted in this episode will finance AI projects related to improving the environmental performance of buildings through data analytics and energy management software. Using AI to support corporate sustainability improvements is not new, but funding such projects using sustainable debt instruments could be the next wave. 

Changes Coming to the Podcast!

Our sustainable finance insights show will be taking a break for the summer. We’ll be back this fall with some exciting changes to bring you more ESG, sustainable finance and responsible investing insights. In the meantime, please subscribe to ESG in Conversation on your favorite podcast platform and enjoy new episodes each month! 

Key Moments

0:00:49	Market overview
0:01:36	CBI Q1 highlights report
0:03:04	LMA sustainability linked loan drafting model
0:03:28	Sustainable bond market risks
0:04:44	Gender-focused social bonds
0:05:37	Transition plan guidelines
0:05:58	Debt for nature swaps
0:06:23	IRENA report on the cost of energy transition
0:07:00	New CBI reports
0:07:42	SLB and SLL overview
0:11:35	Audience questions
0:16:08	Green bonds and loans overview
0:19:25	Labeled products, transition bonds and regulatory updates

 

Links to Select Resources

• Climate Bonds Initiative – Sustainable Debt Market Summary Q1 2023 
• Environmental Finance – LMA Publishes ‘Vital’ Sustainability-Linked Loan Drafting Model 
• Morningstar Sustainalytics – Anticipating the Inevitable: What to Expect from the European Green Bonds Regulation  
• Responsible Investor – Details Emerge on EU Green Bond Standard as Concerns About Uptake Remain 
• Environmental Finance – Sustainable Bond Market Risks Fragmentation Amid ‘Regulatory Overload’ 
• BusinessWorld – No Plans for Follow-Up Offer of Catastrophe Bonds – De Leon 
• WION – Bhutan Takes Steps to Set Up Green Cryptocurrency Mining Operation: Report 
• Environmental Finance – ‘Huge Opportunities’ for Gender-Focused Corporate Sustainable Bond Growth 
• Environmental Finance – GSAM: 36% of European Investors Ready to Invest in Social Bonds 
• Forbes – Companies Going Green Should Add Finance To Sustainability Strategies 
• Eco-Business – The Next Wave of Greenwashing: Offsets, Competitor Claims and ‘Transition-Washing’ 
• Environmental Finance – Banks Call on EU to Provide Transition Plan Guidelines 
• Environmental Finance – Credit Suisse Arranges $1.6bn Debt-for-Nature Conversion With Ecuador 
• IRENA – Low-Cost Finance for the Energy Transition 
• Climate Bonds Initiative Reports 
  • Concrete Policies to Underpin the Cement Transition 
  • ASEAN Sustainable Finance State of the Market 2022 
  • Property Certification Opportunities in Tokyo 
  • Sneak Peek: The CBI’s Resilience Taxonomy Blueprint 
• Sustainalytics Second-Party Opinions 
  • TDC NET Sustainability-Linked Finance Framework Second Party Opinion 
  • UMH Properties Inc. Sustainable Finance Framework Second-Party Opinion 
  • Grupo Bimbo Sustainable Financing Framework Second-Party Opinion 

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What’s Happening in Sustainable Finance: GSSS Market Rebounds, Sovereign Sustainable Debt, and Much More

Episode Summary

Hosts:

• Sabrina Tang Sales Associate, Sustainable Finance Solutions
• Nicholas Gandolfo, Vice President, Corporate Solutions

 

Is the Sustainable Finance Market Rebounding in 2023?

In this month’s episode, Nick and Sabrina dig into the sustainable finance market’s rebound in Q1. Despite the market pressures caused by inflation and the banking shake-ups at UBS and Credit Suisse, sustainable finance activity saw an upward trend in the first part of the year. Although Nick and Sabrina stop short of making any predictions about where volumes will land by the end of the year, they do note some interesting dynamics in the market: green use of proceed bonds remain strong, social and sustainability focused bonds are down slightly, and sustainability-linked finance appears to be gaining some ground again despite continued market scrutiny.

Scrutiny Continues for Sustainability-Linked Bonds

Despite the rebound in sustainability-linked bond (SLB) activity in Q1 this year, concerns remain about this sustainable debt instrument. Several recent articles and reports discuss the credibility of SLB targets, whether coupon rates offer enough of a penalty if targets are missed, and whether the performance targets and indicators have an impact on sustainability.

There’s also some media coverage on SLB issuers missing their stated sustainability performance targets. Although not ideal, missed targets among SLB issuers could be viewed as a sign of their rather than an indication of something being fundamentally wrong. For issuers considering sustainability-linked debt instruments and seeking additional guidance, check out the latest market references from Climate Bonds Initiatives (CBI).

The Sustainable Sovereign Debt Club Continues to Grow

CBI’s 2022 market summary highlights the growth of sovereign bond issuances. This is great to see because sustainable debt from sovereigns catalyzed the market in many cases. Sabrina highlights the recent activity from Turkey, Austria, Italy, and Cyprus as well as the sovereign green bond program being considered by the Australian government. In addition to more countries seeing the opportunities in sustainable debt instruments, regulators across a growing number of jurisdictions are ramping up sustainable finance activities in their countries. Developments are ongoing in India, Indonesia, Malaysia, Sri Lanka, Japan, and Vietnam to name just a few.

 

Key Moments

0:00:59	Market overview
0:02:07	Q1 market overview
0:03:25	CBI 2022 state of the market report
0:05:22	Continuing SLB scrutiny
0:06:46	Climate transition plan transparency
0:08:34	More updates to the EU taxonomy
0:09:34	Additional articles and reports to read (see links below)
0:11:34	SLB and SLL overview
0:14:15	Audience questions
0:18:14	Green bonds overview
0:21:13	Green loans overview
0:22:30	Social bonds and loans overview
0:23:25	Labeled products, transition bonds and regulatory updates

 

 

Links to Select Resources

• Climate Bonds Initiative – Green and Other Labelled Bonds Fought Inflation to Amass USD858.bn Volume in 2022
• Climate Bonds Initiative – Sustainable Debt: Global State of the Market 2022
• Environmental Finance - ‘It’s time to stop step-up-only sustainability-linked bonds’
• Environmental Finance – Union Investment: SLBs Can Have Impact
• Environmental Finance – CBI Launch Sustainability-Linked Bond Certification Scheme
• Energy Monitor – Are We About to See a Surge in Sovereign Sustainability-Linked Bonds?
• Environmental Finance – Sustainability-Linked Targets Could Add ‘Discipline’ in Green Bond Markets
• Retail Banker International – CaixaBank Rolls Out Metaverse Initiative to Promote Sustainability
• Responsible Investor – Market Hails ‘Surprisingly Helpful’ SFDR Clarifications from European Commission
• GreenBiz – Should Sustainability Teams Report Directly to the CEO?
• Climate Action 100+ - Climate Action 100+ Releases the Latest Evolution of the Net Zero Company Benchmark
• Financial Times – New Standards Keep the Greenwash off Green Bonds
• The Strait Times – Companies Risk Penalties as Asia and Australia Target Greenwashing
• Environmental Finance – ‘Greenwashing is rife’ in Green Bonds, Says EU’s Tang
• IPCC – AR6 Synthesis Report: Climate Change 2023
• Environmental Finance – Nature-Related Sovereign Issuances Set to Grow, Insight Predicts
• Climate Bonds Initiative – Sustainability-Linked Debt Instrument Certification
• Sustainalytics Second-Party Opinions
  • Hera Group’s Green Financing Framework Second-Party Opinion
  • Council of Europe Development Bank Social Inclusion Bond Framework Second-Party Opinion

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ESG In Conversation | How Can Investors Address Biodiversity Loss?

Host:

• Curtis File, Editorial Manager, ESG and Sustainable Finance

Featuring:

• Sune Andersen, Manager, Stewardship
• Simon Butler, Associate Professor, University of East Anglia
• Gayaneh Shahbazian, ESG Research Manager, Biodiversity

The statistics are concerning. The International Union for the Conservation of Nature (IUCN) estimates that up to 28% of all species are at risk of extinction. Given these alarming figures, it is crucial for investors to take action and ensure their investments do not further harm our vulnerable ecosystems.

Join us on the latest episode of ESG in Conversation, where we delve into the critical question: how can investors effectively address biodiversity loss? Gain valuable insights from Dr. Simon Butler, an esteemed professor specializing in acoustic ecology, whose work underscores the urgent need to tackle biodiversity issues. Additionally, hear from Morningstar Sustainaltyics' stewardship and ESG research teams, providing valuable perspectives on investor engagement on biodiversity loss and the challenges faced by corporations in disclosing nature-related risks.

 

 

 

What’s Happening in Sustainable Finance: A Flurry of Updates in Regulations, Taxonomies, Frameworks, and Much More

Episode Summary 

Hosts: 

• Nishant Bhagchandani, Sales Manager, Sustainable Finance Solutions 
• Nicholas Gandolfo, Vice President, Corporate Solutions  

 

Regulation, Guidance and Taxonomy Updates Keep Market Participants on Their Toes  

In this episode, Nick and Nishant discuss the flurry of updates in the sustainable finance regulation and guidance space. The European Union has reached a long-awaited deal on the first set of comprehensive rules for issuing green bonds. Although voluntary, the EU Green Bond Standards will help investors identify high-quality green bonds and may set a precedent for other jurisdictions.  

The Green Loan Principles, Social Loan Principles, and Sustainability-Linked Loan Principles were also recently updated to align more closely to current market practice and provide additional guidance to borrowers (e.g., recommendations that borrowers obtain an independent external review of their green, social and sustainability-linked loan processes). Other updates include recommendations for the sustainable finance taxonomies being developed in Australia and Canada, as well as the new draft version of the Taskforce for Nature-related Financial Disclosures (TNFD) framework.        

What the Final TNFD Framework Could Mean for Sustainable Finance  

With the release of the fourth beta framework from the TNFD, market participants eagerly await the final version, due to be published this fall. This latest beta release includes a full draft reporting framework and a set of disclosure metrics, along with assessment metrics to be used by companies. The disclosure metrics will also include some core measures which are applicable to all sectors. The final framework will help to standardize the sustainability metrics companies report on, making them usable in sustainability-linked instruments and speeding up the framework’s adoption.  

 

Key Moments 

0:00:59	Market overview
0:02:32	Market forecast
0:03:22	SVB failure and climate tech
0:04:05	Morningstar Sustainalytics launches Low Carbon Transition Ratings
0:04:37	Relinking in sustainable finance
0:05:11	TNFD release beta version 4 of framework
0:05:56	Insights from Kanga News Sustainable Debt Conference
0:06:30	Taxonomy developments in Australia and Canada
0:07:24	Agreement of EU Green Bond Standards
0:08:33	High Seas Treaty will boost blue bond issuance
0:08:45	SLBs as a hedge against sustainability policies
0:09:00	Transition finance standards
0:09:12	Updated principles for green, social and sustainability-linked loans
0:10:58	SLB and SLL overview
0:13:48	Audience questions
0:17:43	Green bonds overview
0:20:56	Social bonds and loans overview
0:22:40	Labeled products, transition bonds and regulatory updates

 

 

Links to Select Resources 

• JD Supra – Asian ESG Debt Markets Take a Breath After Record Run 
• Bloomberg – Green Bonds Turbo Charge ESG Debt Sales to Busiest February Ever 

• ESG Clarity – Natixis Q&A: ‘Liquidity Will Be Driven by ESG Transparency and Clarity’ 
• Environmental Finance – Credit Suisse: Another Headwind for 'Green' AT1 Bonds  
• Morningstar Sustainalytics Launches its Low Carbon Transition Ratings 
• Bank of China Ltd Announcement – Sustainability Re-Linked Notes Coupon Adjustment: Annual Coupon Adjustment of Sustainability Re-Linked Notes 
• Environmental Finance – Forthcoming TNFD Metrics Would Work in Sustainability-Linked Instruments 

• Environmental Finance – Traffic-Light System Recommended for Australia's Taxonomy  
• Environmental Finance – EU Green Bond Standard: Provisional Deal on Landmark Regulation Agreed  
• ESG Clarity – High Seas Treaty Will Boost Interest, Access and Issuance of Blue Bonds 
• Climate Bonds Initiative – India’s Debut in the Sovereign Green Bond Market: First Deal Landed a Greenium! 
• IRENA – Investments in Renewables Reached Record High, But Need Massive Increase and More Equitable Distribution 

• International Energy Agency – Global CO2 Emissions Rose Less Than Initially Feared in 2022 as Clean Energy Growth Offset Much of the Impact of Greater Coal and Oil Use 
• Climate Bonds Initiative – Climate Bonds Standard Expands With New Agri-Food Transitions Criteria: Commodity and Supply Chain TWGs And IWGs Now Onboarding 

 

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ESG In Conversation | How Are Sustainability Professionals Really Putting ESG into Practice?

With all the noise about ESG in the news, it can be hard to discern what is really going on. We know that the increased demand for companies to address ESG issues has meant that organizations have had to make significant changes to how they work. But when it comes to addressing, managing and reporting on ESG issues, what’s really going on behind corporate doors?  

In this episode of ESG in Conversation, we explore that question by examining how the roles of CSR and sustainability professionals are evolving to address material ESG issues. You’ll hear about the results of the Morningstar Sustainalytics Corporate ESG Survey, with insights about the challenges, concerns, and evolving roles of CSR and sustainability professionals around the world. 

View the show notes in full detail at the Sustainalytics Resource Centre. 

 

Read the full Morningstar Sustainalytics Corporate ESG Survey Report 2022  

Download the report to learn about the ESG challenges companies face around the world and the resources CSR and sustainability professionals are using to meet them, key steps to ESG maturity, where companies are focusing their ESG investments, and how companies are using their ESG ratings and scores. 

What’s Happening in Sustainable Finance: Innovative Finance Instruments Breaking Ground, Use of Proceed Bonds Back in Vogue, and More

Episode Summary 

Hosts: 

• Winnie Chung, Senior Associate, Corporate Solutions 
• Nicholas Gandolfo, Vice President, Corporate Solutions  

Growing Innovation with Sustainable Finance Instruments 

In this episode, Nick and Winnie chat about the latest news and transactions in the sustainable finance space. With a focus on innovation, they discuss the new ways in which issuers are leveraging sustainable finance instruments to fund their green and social projects. For instance, the World Bank’s recent bond issuance will forgo investor coupon payments, instead using the funds to finance a project manufacturing water purifiers in Vietnam. Using purifiers will replace biomass burning (traditionally used to boil water to make it safe to drink), resulting in lower carbon emissions. The carbon emissions saved will be turned into carbon credits and sold to fund a coupon payment to bond investors. Nick also notes innovation picking up in the areas of blue bonds and the maritime economy as well as biodiversity-focused finance activities.   

Investors Swing Back to Use of Proceed Instruments 

Winnie and Nick also touch on the growing ambivalence towards sustainability-linked instruments. In 2022, sustainability-linked bonds and loans seemed to lose some of their appeal as scrutiny of targets and performance indicators intensified and accusations of greenwashing arose. Adding to the discontent – slipping targets. Analysis from Barclays finds that nine out of 12 SLBs with target measurement dates in 2023 are off track to hit those targets. Consequently, we’re seeing a swing back toward traditional use of proceed instruments. This is particularly true within the green bond market which took less of a hit compared to other types of labelled bonds in 2022. With more green bond disclosure guidance and regulations expected from more jurisdictions, such as India, Bolivia, EU and Latin America, investors will likely continue to seek security in the more structured green bond market.  

Key Moments

0:02:20	Market overview
0:02:37	Expected market rebound
0:03:15	Innovative structure from World Bank
0:04:03	Swing back to use of proceeds?
0:04:23	Innovative structure from ENEL
0:05:10	Blue and biodiversity activity
0:05:31	Continued scrutiny of SLLs and SLBs
0:06:40	ASEAN developments
0:07:34	New CBI reports
0:08:04	SLB and SLL overview
0:11:52	Green bonds overview
0:17:35	Green loans overview
0:17:57	Audience questions
0:21:05	Social bonds and loans overview
0:22:03	Labeled products, transition bonds and regulatory updates

 

Links to Select Resources

• Bloomberg – ESG Bond Sales Hit 12-Month High; Debut Deals Pile Up 
• Environmental Finance – Sustainable Bonds Insights 2023 Published
• Environmental Finance – World Bank Issues ‘Unique’ Carbon Credit-Linked Bond
• Environmental Finance – IFC adds ‘Blue’, Biodiversity Projects to Green Bond Framework
• UN Environment Programme – Countries Search for Financing to Counter Biodiversity Crisis 
• Responsible Investor – SLB Issuers ‘Likely to Miss Majority of 2022 and 2023 Targets’
• Environmental Finance – SLB Issuers ‘Lose Their Halo,’ says HSBC
• LSTA – Drafting Guidance for Sustainability-Linked Loans (Feb 17, 2023)
• Environmental Finance – Philippines Opens Consultation on Sustainability-Linked Bonds Standards
• Financial Times – Sustainability Bond Market Stumbles as Investors Get Picky
• CarbonCredits.com – JBS “Green Bonds” and GHG Emissions Under Investigation 
• Bloomberg – Barclays Sees Real Greenwashing Risk in ESG Debt-Swap Market
• Climate Bonds Initiative – Sustainable Agriculture Brief
• Climate Bonds Initiative – Scaling Credible Transition Finance – ASEAN Edition
• Capital Monitor – Why Japan Embraces Transition Bonds 
• Business Standard – SEBI Asks Issuers for Additional Disclosure in Guidelines on Green Bonds
• ESG Clarity – Mandatory Climate Finance Disclosure ‘Evens Playing Field’ for Australia
• Sustainalytics SPOs:
  • Nokia Sustainable Finance Framework Second Party Opinion
  • State Bank of India ESG Financing Framework Second-Party Opinion
  • Hertz Green Finance Framework Second-Party Opinion 

 

More Episodes

 

What’s Happening in Sustainable Finance: On the Horizon for 2023, Reporting on Financed Emissions for Sovereign Debt, and More

Episode Summary

Hosts

• Nicholas Gandolfo, Vice President, Corporate Solutions
• Sabrina Tang, Sales Associate, Corporate Solutions

In this episode, Nick and Sabrina reviewed what’s new in sustainable finance and shared some notable deals and transactions that have hit the market. They discussed the overall decline of global bond markets and expressed some optimism for the year to come, as sustainability is a central issue for investors, companies and governments and is still closely tied to capital markets. They also shared research on the carbon performance of food producers and a report on how to scale credible transition finance among countries in Southeast Asian. 

Sustainable Market Hopes for 2023 

If you’ve been following sustainable finance market activities, it’s no surprise that 2022 was not a great year overall. Markets were down in volume for the first time in 11 years. According to figures from Environmental Finance, total annual sustainable bond issuance fell 19%, from US$1.05 trillion in 2021 to US$845 billion in 2022. Social, sustainability and sustainability-linked bonds were hit hardest – down about 25% compared to 2021, while green bonds fared a bit better with a more modest 14% issuance decline. 

Despite the lower issuance volumes, there is hope for a rebound in 2023 as overall markets stabilize and issuers seek financing. This year may see use of proceed instruments like green bonds continue to gain ground compared to performance based, sustainability-linked bonds. We may also see more transition deals, social and biodiversity focused activity, as well as more complicated transactions going to market. It’s still early days, so let’s see how things develop. 

Updated Standard for Reporting Financed Emissions in Sovereign Debt 

If you’re a bank trying to figure out how to report on your financed emissions, be sure to read through Partnership for Carbon Reporting Financials’ (PCAF) recently updated standard. Global GHG Accounting and Reporting Standard for Financed Emissions addresses demands from financial institutions and provides a methodology to help investors in sovereign debt account and report greenhouse gas emissions. The methodology on sovereign debt includes bonds and loans of all maturities, however, only debt issued by the central bank on behalf of the sovereign would be covered. The methodology also requires reporting of scope 1, scope 2 and scope 3 emissions and recommends getting the information from countries’ reported data via the United Nations Framework Convention on Climate Change.

Key Moments

0:01:16	Market overview
0:03:24	COP15 insights
0:04:22	Australia sustainable finance taxonomy
0:05:04	BNP Paribas social impact bond
0:05:16	TPI paper on food producers' carbon performance
0:06:53	Updated PCAF standard
0:07:31	Banks' transition planning under scrutiny from ECB
0:08:05	Activity in carbon markets
0:08:45	Austria launches green commercial paper program
0:09:14	CBI paper on transition finance in ASEAN
0:10:17	SLB and SLL overview
0:15:34	Audience questions
0:21:00	Green bonds overview
0:23:56	Green loans overview
0:25:06	Social bonds and loans overview
0:27:38	Labeled products, transition bonds and regulatory updates

 

Links to Select Resources

• Environmental Finance – Annual Sustainable Bond Issuance Falls for First Time Since 2011
• Bloomberg.com – Global Debt Market Lost at Least $75 Billion of Business in 2022
• Reuters – ESG Watch: Despite Setbacks, Green Finance Ends 2022 in Good Health
• Global Capital – High Hopes for Corporate Issuance in 2023
• Environmental Finance – COP15 Agreement 'Significant,' but Credit Impact Depends on Implementation
• Environmental Finance – Climate Change Litigation: 11 Key Cases for Insurers to Watch
• Australian Sustainable Finance Institute – Taxonomy Project
• Global Capital – Saving Biodiversity: The Next Mountain for Capital Markets
• Transition Pathways Initiative – TPI Carbon Performance Assessment of Food Producers: Discussion Paper
• Environmental Finance – PCAF Sovereign Debt Methodology Plugs Gap in Emissions Accounting, Says Allianz
• European Central Bank – Supervisory Priorities and Risk Assessment for 2023-2025
• Environmental Finance – Carbon Markets Can Help Provide Nature-based Solutions
• The Hindu Business Line – Sovereign Green Bonds Will Act as Benchmark for Private ESG-linked Debt: RBI’s Rao
• Global Capital – Austria to Launch Green Commercial Paper in 2023
• Climate Bonds Initiative – Scaling Credible Transition Finance – ASEAN Edition
• Sustainalytics SPOs:
  • UNIQA Green Bond Impact Report
  • Mosaic Solar Green Use of Proceeds Securitized Bond (2022-3)

What’s Happening in Sustainable Finance: Climate on the International Agenda, New Instruments to Support Emerging Markets, and Much More

Episode Summary

Hosts

• Nicholas Gandolfo, Vice President, Corporate Solutions
• Aditi Bhatia, Senior Regional Sales Manager, Corporate Solutions

In this episode, our hosts Nick and Aditi discuss the recently held COP27 and COP15 conferences and what their outcomes could mean for green and social financing globally. They also touch on the concept of blended finance and how that might be used to support climate adaptation in emerging markets. Increasing activity among sovereigns is also discussed, as countries come to market more frequently with sustainable debt. Lastly, Nick and Aditi share a rundown of other notable sustainable finance transactions. 

Climate High on the International Agenda 

Given the current climate crisis, expectations were high for COP27. From an environmental standpoint, the final agreement was seen as a disappointment by some observers. However, the conference closed with a ground-breaking agreement to set up a loss and damages fund, which aims to provide financial assistance to countries vulnerable to, or impacted by, the effects of climate change.

COP15, the United Nations Biodiversity Conference, also concluded late last year with a landmark agreement that includes measures to halt and reverse nature loss – such as putting 30% of the planet and 30% of degraded ecosystems under protection by 2030. The plan also includes a target of mobilizing at least US$200 billion per year from public and private sources for biodiversity-related funding.

Finally, the G20 conference in Bali also turned its attention to issues around climate change, low-carbon transition, and climate adaptation. 

Innovative Solutions to Fund Sustainable Development 

With an estimated US$9.2 trillion needed to meet global climate and environmental goals,¹ private and public sectors are looking for more ways to funnel money to finance mitigation and conservation efforts. To address this need, market participants are discussing innovative solutions like blended finance, which is the strategic use of development finance (such as public or philanthropic capital) and private investment capital to fund sustainable development projects in developing countries.² 

A new crop of instruments is also emerging to offer potential solutions. This includes instruments like debt-for-nature swaps, a financial mechanism that allows portions of a developing country’s foreign debt to be forgiven, in exchange for commitments of investment in biodiversity conservation and environmental policy measures.³ We anticipate seeing more variety in the types of instruments being developed to support conservation and climate adaptation in countries most vulnerable to climate change. 

Check Out Our Special Episode on Sustainable Finance in the Metals and Mining Sector 

In case you missed it, we recently took a deep dive into the sustainable and transition finance opportunities within the metals, mining and commodities sector. Our panel discussed key considerations for banks, issuers and investors interested in using sustainable finance instruments to help fund improvements across the sector and mitigate potential risks. The sector is incredibly important because of its crucial role in the global transition to a low-carbon economy. However, these companies face numerous environmental and social challenges, which if not managed effectively could negatively impact their access to capital. Listen here: Sustainable Finance Insights: Special Episode on Sustainable Finance in the Metals, Mining and Commodities Sector

 

Key Moments

0:00:51	Market overview
0:01:38	COP27 insights
0:03:48	G20 Summit
0:04:35	COP 15 insights
0:05:00	State of the bond market and outlook for 2023
0:05:56	Sovereigns’ ambitions in sustainable finance
0:06:33	Social taxonomy update
0:06:52	Green bond tokenization
0:07:12	Emergence of blended finance
0:08:02	More activity in transition finance market
0:08:19	Market scrutiny of SLBs
0:10:08	ICMA paper on sustainable repos
0:10:34	Food security as social use of proceeds
0:10:54	More activity around carbon markets globally
0:11:15	PCAF publishes second version of Global GHG Account and Reporting Standard
0:11:48	CBI principles for transitioning agriculture sector
0:12:23	SLB and SLL overview
0:17:39	Audience questions
0:23:26	Green bonds overview
0:26:51	Green loans overview
0:28:50	Social bonds and loans overview
0:31:04	Labeled products, transition bonds and regulatory updates

 

Links to Select Resources

• IFLR - COP15: Financial Firms Look to Scale Up Nature Finance
• Bloomberg - Global ESG Bond Issuance Headed for First Full-Year Decline Ever
• GlobalCapital – Record Volumes Spark January Debate in FIG Market
• Responsible Investor – World Bank: Only 31 Southeast Asian Companies Have Issued Sustainable Debt Since 2017
• OMFIF – Sovereigns Need to Show More Ambition With ESG Bond Frameworks
• GlobalCapital – ESAs Call for Evidence of Greenwashing
• Open Access Government – Social Taxonomy: A Step Towards Social Sustainability
• Environmental Finance – Banks Urged to Rework Financing Instruments for Climate Adaptation
• Blockchain News – HK to Issue Tokenized Green Bond, Open Market for Virtual Assets ETFs Trading
• China Dialogue – China’s Central Bank to Focus on Transition Finance
• The Manila Times – ASEAN Launches Sustainable and Responsible Fund Standards
• Bloomberg Law – ESG-Linked Bonds Seen Stalling on Greenwash and Legal Fears
• Environmental Finance – Snam’s Return to Transition Bonds ‘A Big Sign’ SLBs are Under Pressure
• GlobalCapital – Crunch Time Coming for SLBs as First Step-Ups Appear
• The Business Times – ESG is Taking Over the Loan Market
• Environmental Finance – ICMA Principles Could be Adapted for ‘Sustainable Repos’
• Climate Home News – John Kerry: Carbon Offsets Can Help Wean Developing Countries Off Coal
• World Economic Forum – Climate Adaptation: The $2 Trillion Market the Private Sector Cannot Ignore
• Responsible Investor – Scope 3 Emissions Key to Financial Sector Net Zero Plans, says GFANZ
• Climate Bonds Initiative – Principles and Hallmarks for Transitioning Agri-Food Systems: Opportunities, Pathways and Actions
• Sustainalytics SPOs:
  • AIB Green Bond Framework Second-Party Opinion
  • Storebrand Green Bond Framework
  • Volkswagen Aktiengesellschaft Green Finance Framework Second-Party Opinion
  • City of Atlanta Social Bond Framework Second-Party Opinion
  • CABEI Green and Blue Bond Framework Second-Party Opinion
  • VPBank Social Finance Framework Second-Party Opinion

 

^Sources

^{1Roston, E. 2022. “McKinsey Pegs the Price Tag for a Livable Climate at $9.2 Trillion a Year.” Bloomberg. January 25, 2022. https://www.bloomberg.com/news/articles/2022-01-25/mckinsey-pegs-price-tag-of-livable-climate-at-9-2-trillion-a-year}

^{2 See OECD: https://www.oecd.org/development/financing-sustainable-development/blended-finance-principles/ and Bank of America: https://about.bankofamerica.com/en/making-an-impact/blended-finance}

^{3 See Earth.org: https://earth.org/debt-for-nature-swaps/}