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Sustainable Finance Kx "Inside Out" Podcast Episode 20
15 Plays8 months ago
Sustainable Finance Knowledge eXchange
We strive to bring you the critical news, events, major breakthroughs and key concepts covering the happenings in this super fast, evolving area of global finance – how the world funds the transition to Net Zero.
Think of us as a curator or sorts (much like a gallery that curates the finest paintings and sculptures) as we source only the best educational knowledge around Sustainable Finance worth sharing.
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Transcript
Introduction and Episode Overview
00:00:06
SFKx DJ
All right.
00:00:12
SFKx DJ
Hello and welcome to Sustainable Finance KX or Knowledge Exchange Sustainable Finance Inside Out podcast. My name is SF Guru and I will be your host again for today. Would you believe that we are already into 2025 and up to episode 20. So hello and welcome.
00:00:32
SFKx DJ
As you probably know, Sustainable Finance inside our podcast is a attempt to bring you the critical news stories, events, major breakthroughs and key concepts covering the happenings of the super fast and evolving area of sustainable finance. We hope you like that podcast. If you're tuning in, it's probably a good indication that you do. If you're new, download some previous episodes and we hope you can that get stuck in and enjoy, ah treat your ears.
00:01:00
SFKx DJ
um Check us out on Twitter or x at Sust Finance KX. That's one word or LinkedIn where most of our social work is done and our handle there or our LinkedIn path if you'd like is Sustainable Finance KX and you should be able to check us out there. So look without any further ado SF Guru or I should say SF DJ is a Goodness knows where.
Philosophy of Sustainability and ESG
00:01:24
SFKx DJ
I think he's ironing his underpants again after after Christmas. But let's let's see. So look, a little bit different. I just want to start a little bit more on a philosophical note to our first episode in 2025. And it's sort of addressing, I've got a bit of an inspiration from this from, I must credit, David Carlin.
00:01:44
SFKx DJ
David Carlin, a great ah person to follow on LinkedIn, lots of good sustainability and climate related news. And he put up a post a few days ago, he has a great newsletter, I recommend you subscribe to that talking about is ESG dead. So I'm just going to paraphrase and read a few things for that, because I think it really captures the mood and the the tug of war we're going to see around sustainability, hence the financing thereof.
00:02:10
SFKx DJ
over the course of the year. So it's about is ESG dead? Is sustainability dying? And I'll just, again, paraphrase and and also read parts. As we start 2025, the US, no great surprises were drawn from Paris again. We're also seeing key financial institutions go out of the Net Zero Banking Alliance or NZBA. This has all happened surprisingly, well, maybe not surprisingly, but look, it's happened against the backdrop of record global temperatures and massive fires.
00:02:39
SFKx DJ
So I think, and I love the sentiment from David, is that sustainability is not dying.
Economic Shift in Sustainability
00:02:44
SFKx DJ
It's evolving. And I think what we're going to see this this year is how sustainability will progress, will mature, will reshape. I also think sometimes it's like, is it forwards, backwards, inside, out? I think it's going to be a little more of the forward and the insider and the inside out. and And I'll tell you why.
00:03:02
SFKx DJ
So I think we're headed to a period of of after rapid rapid fire, rapid growth. um So maturation, um it would be more embedded as BAU and more economically driven. We know that transition and transition spending, it's not a matter of of when it's if and and a lot of those models and expenditures are constrained by um by profitability. So not easy related related work.
00:03:28
SFKx DJ
um David comments that in 2025 we're seeing three key shifts with big implications. First one, a move away from high-profile public commitments towards quieter results focus action. I think that's so the more aggressive folks out there don't see the people who are making big um statements as a target um on their head. So I think that's a little bit strategic. People will get on with it and still do things.
00:03:51
SFKx DJ
The integration of sustainability in the core businesses, that's been going on for some time. um And a stronger, I really like this focus on sustainability, a driver of economic opportunity and value. And I think, look, it's been obvious that it is and it has, but I think now the focus more really shifting from marketing and announcements, not to say that that's dominated too much. And that's all good stuff.
00:04:14
SFKx DJ
But backing it up now um with with results and value, I think is extremely important. And this is an evolving process. But I really like that um sentiment. themmon We're in a rapidly evolving and changing world. And I think that's the baseline of the the mood around sustainability this year. Again, for me,
00:04:34
SFKx DJ
forward, backwards, inside out, or all three happening at the same time, let's see, and maybe we keep coming back to that sentiment at the start of every of every podcast. All right, without any further ado, let's jump into the news part.
Record Temperatures and Market Updates
00:04:47
SFKx DJ
Hottest temperature on record, first nine months, I think it was about 1.5 degrees, global temperatures it showed, and say no more, we know that's ah that's not good news. um Look, the the Sustainable finance is really on the bond front, record levels up about 8%. A tale of probably four or five halves or four or five or even six sort of periods over the yeah over the year. We'll talk more about that once um once more numbers um come out. But look, sustain sustainability linked um instruments are still getting a hammered, but everything else, green is doing well, social a little bit light, sustainability um up somewhat. No great insights versus what we talked about before.
00:05:30
SFKx DJ
It is the month or the time of the year when we talk about outlooks and what's going to happen. Again, we just talked about sort of the baseline mood for this year, but I'll just quote and reference some outlines that I've seen of this year that I liked. MUFG had a few key ones. Returns, less policy, driving performance, scaling green technologies, efficiency and adaptation, AI, um and more regs.
00:05:57
SFKx DJ
Again, um forward, backwards, inside, out at the same time. S and&P, um key themes, policy, energy transition, physical climate risk, climate finance, carbon markets, sustainability reporting, AI, just transition, supply chains and nature. Probably the last three years, same, same. A few odds and sides, the World Economic Forum,
00:06:15
SFKx DJ
i liked ah They've come out with a few articles, Nature and Financing and the big ones and PCAF released a really good, I think we might have mentioned this in the last podcast um consultation mid-December about avoided emissions, about connecting and attributing emissions that are focused around specific UOPs and emissions expected emissions reduction. So I think there's going to be more action around those for banks. that The day of just reporting for banks, finance the missions, and only that. I think it's too one-dimensional. So let's see how that a um evolves.
00:06:49
SFKx DJ
Allianz came out with some stuff. Back to basics and navigate challenges. US outlook for 2025. Hope for the best, prepare for the worst. Navigating rapidly, evolving market regulations, reg supply chain, AI, ah record hot temperatures. We talked about that, a burden or raft of most of the European regs coming into force, and a lot of companies at Pan continental anyway. So that'll that'll make its way back to the US. Sustainable Fitch had some cool stuff in there inside. Sustainable Finance Market maturing and broadening and trend. Sustainable Fitch at N5 for 24 and this continues. I think that's a really um key theme there. More labels. Emissions have, I don't know whether they've peaked, but more diversification going on ah in the market, a bit more on adaptation, a bit more under the EU green bond green bond standard.
00:07:39
SFKx DJ
um and let's see what happens. Let's see what happens there. CBI mentioned ah sort of a top five for 25. Again, we love the work that CBI does and and do look at that very
Regulations and Political Implications
00:07:51
SFKx DJ
periodically. Number one, transition planning will highlight the magnitude of expenditure required to reach net zero. Number two, new governments bolster national ambitions. ah Taxonomy's definitions and interoperability, we'll see more of that. Adaptation and resilience, insurance companies will step in, maybe, maybe not.
00:08:08
SFKx DJ
um So some pretty cool themes. I wouldn't say anything drastically different to before. I'd say it's sort of more of the same, but much more nuanced. A little bit like blended finance, one of my favorite topics. There's been a lot spoken about the what. Now it has to move into the how and be much more nuanced, much more specific. And I think that's what we're going to see is that the underlying under the softer belly to to some of these issues.
00:08:30
SFKx DJ
um ed's fba um banks continuing to leave It's a bit of an odd type situation there, but again, what people say and what they do, we're just in that we're just in that world and it's the politicization of of ESG and what companies, how they're going to react to that. Let's um let's see BlackRock even quit a net zero alliance for asset managers. Again, what people say and what they do, I think that's the lens to um to take and and just sort of see the context around it.
00:08:56
SFKx DJ
Umm, what else? Call the man who set the plateau through the 2027, let's see, EV adoption up and down, although Trump's come out and and sort of said there's no major targets in the US now, let's see how that goes. Loads on disclosures, omnibus regulations in the EU, Canadian sustainable standards, given three year relief on scope three, scrambled regulations, China's doing, so it's it's all it's all happening and we don't want to dominate with that rather um dry subject apart from it's on disclosure, disclosures. and Trump, Trump, Trump, US politics is really not much else to say and I'd rather just go back to the baseline of of where we are and where we stand and what we're looking at for 2025.
00:09:41
SFKx DJ
um Solar powered surveillance technologies help protect the Amazon, good stuff there, more hydrogen coming up, EU rule changes, transition plans. We talked about ESG our fatigue on some of the ETFs and markets. Yeah, maybe, maybe not. What else we got here? SLL still struggling, SLB still struggling.
00:10:03
SFKx DJ
um debt to nature swap. There was one for to conserve the Amazon. I think we'll see more of these sort of innovations um over um over the year and and more developments around carbon markets and transition um carbon carbon credits and debt to equity shops and project bonds and all sorts of and all sorts of um all sorts of things.
00:10:25
SFKx DJ
There was one thing that I hadn't actually heard before that came out of the Fitch market to update for this year, and it's called, or quote, the task force on inequality and social-related financial disclosures.
Financial Disclosures and Frameworks
00:10:37
SFKx DJ
I can't even say it. TISFD. It's a global initiative to develop recommendations and guidances for business and financial institutions to understand and report on impacts of entity risk and opportunities related to people. All super good stuff. So we'll have the TNFD, TCFD, and I think this, that social part.
00:10:53
SFKx DJ
sort of underpins everything, right? It's a bit like nature's a subsidiary, the economy is a subsidiary of nature, while people, you know, have to dominate ah climate and and nature and the interactions thereof. So super cool stuff there. e EU green bond regulation coming out, more formalized, let's see. Nature, nature, nature. Scenarios improving. um Difficult to fight with other ESG issues. Investors must start asking um smart questions. Transition benchmarks.
00:11:24
SFKx DJ
A little bit on that EU taxonomies. India requires its own taxonomies. Again, regional differences in um in those. um Transition finance some frameworks. Again, Mandiri, Barclay, Standard Chart, RBS.
00:11:38
SFKx DJ
um uh DMV all things in the public domain continue to have some pretty good approaches there buy a few can buy a few can deliver ghd reductions but future on uptake and supply DMV good report on that LNG powers uh ahead there's just going to be lots of lots of LNG is a transition fuel LNG is no good LNG is okay
Investment and Partnership Strategies
00:12:04
SFKx DJ
articles. We're gonna see over the course of the year So just get ready for those family officers interested to impacts at the boom um The global impact investment network comments and said that so that the convergence of blended finance and that as a structuring approach to drag in these different actors We'll see how that we'll see how that goes and
00:12:25
SFKx DJ
um ah Talking of Blended Finance, Apollo and Standard Chart have linked up for a US 3 billion energy transition partnership and I think we're going to see banks do more fund type of activity. So hold on your hats for that. um Speaking of that, SockGen and EIB team up to unlock billions to finance clean energy development. So again, lots of different ways banks can disperse or banks can disperse funds and size can be an issue. Doing that through a fund is a different approach. We'll probably see more.
00:12:53
SFKx DJ
um Google agreed for the world's biggest buyer chart again buyer chart sort of like charcoal on steroids as it sucks in a lot of CO2 which is good to see. um Microsoft's been pretty aggressive too and I think those are important though tech companies have a lot of money if they can put it to work they can create markets which is good. um Another article from a CBI or Climate Bond Initiatives the Japan GX um strategy and a little bit of pulling apart that and what sort of opportunities there are. Japan's come out with a new updated power plant as well. So do check that out. So pretty interesting news and start to the year. Also, if I forgot to mention, SPTI has called for an updated its oil and gas um chemicals and power um sector pieces is there. So do check those out as key market market references. All right, I better take a breath. Let's go into linked instruments. What have we seen?
00:13:45
SFKx DJ
um I've seen a few things from waste management solutions, a motor engine in Africa on building and construction, CLI, um or Sabood Landmasters over in the property side of the Philippines, Carrefour, an SLB on supermarket side, Funo SLB on the property side, um Property Elder Vietnam, Usend Logistics, good to see a little bit more happening in Vietnam, Oryx on the JREIT side,
00:14:16
SFKx DJ
um a linked loan there, and SFL on marine transport, a linked item there.
Global Financing Actions
00:14:22
SFKx DJ
So property, bit of a rain, couple of new geographies, um nothing earth shattering there over sort of the end of the year. Let's move to use the proceeds. We'll always start with sovereigns, Paraguay,
00:14:33
SFKx DJ
China planning to do something this year. Let's see how that goes. A little bit of action in China on the Muni side. Li Shui, ETDZ Industrial Development Group, Kwejo, SEDA and Capital. um Then you've got some other banks. ah IFC, Nationale Fida Chiaria, HD Bank, Nord Bank, Nafin, Mandiri, over in Indonesia, IS Bank in Turkey. um Stanley,
00:15:00
SFKx DJ
e Bank, cards of rule, and Spain, parent group, um never never ending. So banks and FIs, that's good to see because that ricochets and multiplies right throughout um the ah kind of the economy. And those institutions have pretty diversified diversified um frameworks and a diversified customer base. So that brings sustainable financing in more ways to the masses through the FIs disbursement channels, rather than just one company, one one activity.
00:15:29
SFKx DJ
What else have we got? Morgan Stanley insurance issued transmission. There's a little bit of action and we know there ain't gonna be a transition without transmission. So maybe we'll see a little bit more on that this year. I mean, I even noted a big article on cross-border electricity flows, transmission, setting that up. It's difficult, um but let's see how that develops this year. Trans, mi zora alliance de energy electica. Oh my God, that is a shocking pronunciation, but there you go.
00:15:57
SFKx DJ
Norsca Hydro, good stuff there in the Nordics, Connecticut Housing on the social side, Swiss Vants, Property Housing side, a little bit of Blue Bond for a DP World over in Dubai, Chemicals, Excellia in Serbia, Trinidad and Tobago, mortgage crop on the social side, and T. Tulare and SA, I guess it sounds French, um on the social side as well.
00:16:22
SFKx DJ
pretty much dominated by banks, I'd say towards the end of the year, and then your usual suspects around your utilities, around your property, and then a few others coming in there, blue labels, chemicals, a little bit of mining, and a mixture of others. But it's good to see such ah strong diversification of banks.
Future of Sustainability and Farewell
00:16:44
SFKx DJ
All right, let's move in to our questions from Murray. Play the guitar, Murray. I'm channeling a bit of a Wiggles song there that I can't get out of my um out of my head. But anyway, Murray is our question bot and he is raised. What would be the biggest changes we will see to sustainability this year? I guess, look, pretty much just a repeat of what I said at the start of the podcast. I think we're going through a rapid period of consolidation and evolution.
00:17:10
SFKx DJ
And if sustainability has been more about setting the dials, telling people about setting the aisles and tiles, setting targets, embarking on those, you know, we've really started getting a much more nuanced world and a deeper world and a performance-based world.
00:17:27
SFKx DJ
and Hopefully, ESG is a bit of a tricky one to really define and and state. It can be easy to pick on in some ways, but I think this is the year where sustainability demonstrates much more um much more value, but people just go about that a different way and let the letter the results do the talking. I think that's really the the biggest change we're going to see.
00:17:50
SFKx DJ
this year. But as I mentioned before, I think we're going to see some, we're going to see more blue, we're going to see more social, we're going to see more EUGBS shenanigans go on and see who can or can't comply with that. We're going to see more taxonomies, we're going to see more nature, and we're going to see more banks do things around funds, as we saw SCB and SockGen.
00:18:12
SFKx DJ
and We're going to see more, hopefully, um adaptation, but there's going to be interesting things. As I say, carbon credits, debt for nature swaps, project bonds, securitization, all sorts of stuff that, you know, mainstream can be shaken up a little bit to keep innovating. I think it's important we innovate on the way to net zero. How can we finance it? How can we do risk? How can we get on with it um within the narratives that I've mentioned mentioned before?
00:18:38
SFKx DJ
um All right, in terms of products and what's this section called again? Products and programs haven't really noted anything towards the end of the year and the start of of January. So nothing really to um nothing really to report um that's been really to report there.
00:18:55
SFKx DJ
um So really that brings us to a a pretty short and sharp um start to the year and really it's about that sentiment and baseline of where we are and you know the markets have been as they are. We'll pull those apart in terms of annual performance a little bit more as we go through the year and maybe it's worth following a through of those you know key themes that are going to dominate and let's see where sustainability can really show its value over um this year and much more dollars and and cents and um There's stuff going on, whether it's talked about or not. So all good stuff.
00:19:28
SFKx DJ
So look, that's all we got time for. We hope you like the podcast. Check us out at Sust Finance KX One Word on Twitter or X, SustainableFinanceKX.com. We actually might be offline for a little while. So actually jump back to LinkedIn, Sustainable Finance KX. You can see a whole bunch of stuff there. And anyway, SFGJ says hello. I hope he's finished hiding his underpants. I'm SF Guru. Until next time, we'll catch you for episode 21.
00:19:58
SFKx DJ
Happy New Year, and also it's just been Chinese New Year. So Xing Nian Kuai La Gong Si Fa Chai, have a fantastic calendar and year of the wooden wooden snake, nice and environmentally, hopefully well sourced wood there. And until next time, over and out. Woo hoo. Yeah. Wow, wow.