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Sustainable Finance Kx "Inside Out" Podcast Episode 17
18 Plays11 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
00:00:11
tpreyser
Hello, good afternoon, good evening, good morning, and any other salutation you prefer. This is SF Guru at Sustainable Finance KX with would you believe it or not episode 17 of the Sustainable Finance Inside Out podcast.
00:00:30
tpreyser
We hope you're ready for another enthralling episode. Unfortunately, we still haven't been able to get SF DJ off that beach in Bali. So maybe he will be back by popular demand in our next episode. So for those who don't know much about us, Sustainable Finance KX or short for knowledge exchange is a media and training initiative.
00:00:54
tpreyser
We strive to bring you the critical news stories, events, major breakthroughs and key concepts covering the happenings in this super fast evolving area of sustainable finance. We hope you like the podcast and as always just a quick shout out to our socials w www.sustainablefinancekx that's one word dot com, twitter or x at sustfinance that's one word kx LinkedIn Sustainable Finance, KX. I think that's about it. You should be able to find us on those. So without any further ado, let's dig into the market news and volumes. We hope you like the new music. We've actually lost the file to our initial disco beats. Hopefully we will find that as well as SF DJ on the beach in Bali, but let's start let's see.
00:01:39
tpreyser
So let's start straight in a little bit of market market color for those who don't know SEB Bank In the Nordics. I can't remember what specific country come out with about a paper every two or three months about ah market volumes and also and Different thematical news SEB the green bond. It's an excellent report their latest report shows in terms of market volumes um Look, I think the latest numbers show will be on a record year, but it's really been a year of probably three or four halves, if that makes sense. Catching up from December last year, January and February were huge. March, April, May was sort of soft. Then the market sort of has come back a bit. So it's really up and down playing cat cat and mouse um as there's volatility in the broader the broader markets. Green bonds, a use of proceeds, social and sustainability still dominate.
00:02:37
tpreyser
link bonds, link loans, transaction, sorry, transition, I should pronounce properly, have really been hit the most. And that's really the story. When do we want to use quarters, whether we want to use year on years, whether we want to use week on weeks, whatever it is, that's the broad brush um story if you um if you like. Age is pretty much line ball. Europe continues to power ahead. Nordic's a bit down, Middle East down. America surprisingly knocked down as much year on year as you would think to sort of the end of end of end of July. They're probably the key things. I know we tend to not go into huge specific numbers here, but I'd rather talk in broad brush strokes. And that's the more important thing, whether it's 2%, 4%, 5%. It doesn't really matter. It's more the directional news.
00:03:28
tpreyser
um and um and overall, but do check out that um that report. We also at the same time had the CBI come out with their report for the first half 2024. Again, not to delve into the exact um percents, but again, similar themes. Green up.
00:03:45
tpreyser
social down sustainability up, ah SLBs, um down off ah off a pretty low base getting hammered in recent and recent times. But look overall, when you add everything up this year, it still should be pretty good and and almost at record record levels. Again, four or five halves if you keep breaking the year into two months, one month, three months catching ups. Hard to sort of discern any structural changes there. I hope the transition label really comes on but that broad brush is really what we are what we are seeing. Now to the broader news. Sustainability link bond sync to record low in August, no great surprise there. um Energy tri-lemurs, coal exits getting discussed in Poland so maybe not only Asia will see more discussions about exits of coal although we do note the recent announcement from the UK government
00:04:39
tpreyser
they've retired their last remaining coal fired power plant. So pretty interesting. There are a few other countries um catching up and and more markets that need more power a bit more difficult to to do that. Saf, Saf, Saf continuing to come ah to come out. I noted one interesting article related to sleek fuel saving airplanes coated with synthetic shark skin.
00:05:04
tpreyser
I play for the Singapore Sharks here in Singapore in NAFL so I love them anything shark related but a shark skin covered aeroplane I would like to see that but similar to ships I guess the trim and drag making sure you're cruising through the water um easily um save some fuel I guess aerodynamics uh works the same the same thing Saf Saf Saf I mentioned uh I mentioned before I read a report on hydrogen value change the good read check that out the tortoise and the hare it's a long race for h2 economy sounds like a bit of a ah rock ballad there from the Texas again really good research like SEB do make sure you're uh benchmarking or bookmarking I should say
00:05:48
tpreyser
uh i should say those um taxonomies guidance indian market still uh still going on blue bonds still a theme taxonomies in au still a theme uh spti came out with a little bit of uh peace on the building sector continuing to do work on oil and gas tpi net zero standard for oil and gas assessments do check that out It's very sobering reading. I'm not going to repeat here, but but not enough getting done broadly speaking, although pockets of of of progress. And I think the report on the banking sector from TPI, the Transition Pathway Initiative, has just been launched. So ah check that out. But again, pretty sober reading when you look at a ah broader industry dynamic for those reports. But very well very well done. Paris Olympics, a long way off now, modest showcase of wood architecture. Wood, wood, wood. Wouldn't we wood?
00:06:39
tpreyser
It's gotta be a joke in there somewhere, but I can't think of one on the spot. As a replacement to cement and other things, still gonna be pretty niche. Insurance, physical risk. I think physical risk, ah Hurricane Milton's just been on the last couple of weeks as we're recording this, sort of catching up on our podcast sequence. Physical risk is really gonna come back and really gonna be part of that transition debate rather than just decarbonization. I think that's a good thing.
00:07:07
tpreyser
Oh, what else we got here? Insurance again, adaptation. the The same chestnuts keep coming up and coming up. And it's good that they keep coming up because it means we're not getting enough focus on them. Transition plans. um I think we all need to increase our fluency in the language of transition plans. I think the sense of the news is We need them, there's more references, and more will be mandated in different pockets of the globe. Canada coming out and making some of those mandatory, at least in terms of FCD, f c TFCD, um and Australia as well for bigger companies, even going into some some bigger private private companies.
00:07:48
tpreyser
What have we got here? ICMA recent guidance in June. I like the report that Sustainable Fitch did. Green enabling projects. Enabling is more supporting. The further you are from the green finished product, the more debatable that impact is. If it's specified specific one use, I guess you can label that green. But when you start to get into something that has multi uses,
00:08:15
tpreyser
It's maybe that will chime into the role in transition finance and sustainable debt with some of these companies, maybe more broader activities they do a mining company if they mine something that is a key metal this really use you really just looking at the incremental environmental benefits of some of the mining practices they have rather than the whole operation, but let's see. Enabling, I think, is more about data and more into that raw materials with dedicated use, but let's see. A couple of things to read from that. We expect the inclusion of green enabling projects as eligible activities on green bonds. That's from Sustainable Fish.
00:08:52
tpreyser
Fitch, not fish, thinking of sharks. Still, ICMA's guidance reconciles these projects contribution to green activities by considering environmental impact by lifecycle emission spaces. So I think the key thing on that is have evidence, have a lifecycle and where you can contribute very clearly and in a non-debatable way, I think we'll see more.
00:09:12
tpreyser
enabling activities going forward, which is good physical risks, adaptation risk resilience, CBI has come out with a taxonomy and I do check it out. um And just ah a quick plug. So I think we mentioned this on the podcast a few months ago, but I was discussing it with my team um earlier this week.
00:09:31
tpreyser
The World Bank has a really good just transition taxonomy. CBI now has a proposed resilience taxonomy. So more of these key issues in the market, there's things to back that up to go from a what the heck does that mean to a what can we finance and we want to get shopping lists. Shopping lists are great because then we know what to finance and we're all about moving capital, sustainable finance, kind KX, the more money that moves to the right things, the quicker we get to net zero and hopefully bring everyone along for the ride as well.
00:10:03
tpreyser
Pretty interesting article I saw too on Agri PV. You think what on earth is that? I guess PV solar panels take up a lot of room, a lot of land and growing crops around that. Under that I think is a pretty interesting, interesting idea. So it's something in land use we're going to see a lot more dynamics connected to renewable energy going, ah going forward, which I guess is why floating wind, floating solar are so, so popular.
00:10:32
tpreyser
What have we got here? Green securitization to boost lending. Let's see what happens there. IEEFA came out with a fantastic report comparing Asian taxonomies, about six or seven there. Do check that out if you operate in Asia and want to get a broad brush blend about what they're anchored to and the fundamental differences. It's not a bad read. um One thing that I wanted to call out too, we would normally do this in the transaction section of our podcast, but I really, really like this from Tanaka Behar, a national utility company in Malaysia.
00:11:03
tpreyser
came out with a transition framework. Now I think that outside of Japan is one of the first in Asia. I really liked it because it had, you know, your stock standard green categories, but it also had different types of retrofits on some of the coal plants and some of the other activities that are really anchored in more transition.
00:11:20
tpreyser
using that word a lot today anchor it's my new favorite favorite word i do like the word champagne as well and sharks as you know um but look do do check that out it's it's a really good framework it's a really strong narrative um and is groundbreaking in many ways and i do hope that many many many more companies follow that lead for asia and get out in front and we start testing the boundaries of what transition should cover and what can be financed Something we missed probably last episode of the podcast was the Draghi report. He sounds like a character of the James Bond movie Ivan Draghi, but i guess um I guess it's not. Draghi, I think he was a previous Italian Prime Minister at some stage, came out and was tasked with doing a report on EU competitiveness and basically concluded that they need a new industrial policy and climate, environment,
00:12:13
tpreyser
and competitiveness connected to that is really key. Japan's done a good job on this with its GX strategy and I think more companies are going to start to really mix climate ambitions and constraints into their industrial policy because that's going to move markets and policy such an important thing in terms of steering economies. New York Climate Week has been and gone, maybe next year, sustainable finance or sustainable Linus KX would be there. A couple of key themes, geopolitics, AI, physical risk, voluntary carbon markets, and involving the private sector more in funding to hit net zero. I didn't really notice anything earth-shattering around from that. Core themes, good themes, we'll see if they're built on, expanded more in COP, which is coming up. Some other news, common ground taxonomy, again, getting discussed for Europe and um China as a reference.
00:13:06
tpreyser
good Hong Kong tops Asia in green bonds that's nice ah what else have we got here greener some bit of action on the shipping companies IMO coming out with more aggressive targets too I think recently an interesting article on echo news about second-party opinions a greenwash safeguard or just for show I'll let everyone make up their own mind about that. A pretty broad necessary evil and spectrum on the board in that. CBI to launch corporate transition plan assessments. I've seen a lot of this S&P, MSCI, ING, or not ING, Blue Nomi I think, or maybe it is ING as well, a whole range of of tools being used to come out to assess a company's transition based on scenarios, looking at governance, alignment of CAPEX, but based in their sector and working out whether someone's going to hit a 1.5 or 10.5 degree scenario, whatever it may be. What else have we got? Transition guidelines we've talked about. Water, water, water.
00:14:14
tpreyser
It's just going to keep coming at it in one of those SEB reports I mentioned. Really, really good paragraphs on um water there. um Transition Pathway Initiative, I think I briefly, briefly mentioned that. Do check it out. A bunch of indicators around short, medium, long-term targets.
00:14:33
tpreyser
some sub indicators there on upstream targets, neutralizing measures, strategies, CAPEX alignment, and it's not it's not great. So we'll leave people to to draw their own conclusions from that. Nuclear well and truly back on the sustainability menu. I'd love to see more innovation in that. Let's see how that goes.
00:14:54
tpreyser
um geopolitics again let's see what happens in the upcoming election possibly the next podcast we do the US elections would have been run and won and let's see what happens ah let's see what happens there jumping a little bit ahead again the Nordics um D and&B bank came out with a transition loan framework so more banks have these now DBS Maybank Barclays, SMBC, DNB. There's probably a couple more that I haven't haven't thought about, but more banks coming out in terms of defining transition for them.
00:15:32
tpreyser
the approach pretty standard sort of thing some good flow chart sorry standard chart it has a good a good reference to that um as as well and D&B the latest to come out with some market references some flow charts and the transition user proceeds approach so do check uh do check that out gas gas gas again a bit of a flashpoint we mentioned the Australian taxonomy before gas is just going to still be in that debatable should we shouldn't we how should we and it's going to be very local context based I think all right moving along to linked um transactions uh Rabbo and HSBC supporting Musim Mass a big um parmour producer within SLL interestingly enough not criticized in the market from a sectorial point of view and I think that's good parmour probably gets
00:16:18
tpreyser
some pretty anti sentiments pretty easily but it has got a lot of skeletons from previous years so at least that sector seemingly becoming more sustainable and that's good at least sustainable finance is an option to to showcase what's happening there. um Titan group in our financial services, some some linked instruments there. Switch um on the electronic side. Bono Ventura on the metal side, which is great. Ctrim on the software side. Brisa Concesio Rodiviera, Transport Infrastructure. I have no idea what countries that one's from. Ultratech, cement side in India. And then a few other ones, shipping and maritime. Cadalaire, Musimas we talked about on the palm oil side. Jo's work.
00:17:04
tpreyser
industrial machinery, integrated wind solutions for renewable energy in Norway, FinGrid, MCS, Coca-Cola in Mongolia. I think it was so good to see Mongolia coming in and out of the market. Some recent use of proceeds activity there are now linked.
00:17:19
tpreyser
a Linked to Instrument Sato Corporation, um ah MACRO, Linked Bonds will not provide best benefit for Sri Lanka. An interesting article there, I just thought I'd throw that in. So, SLBs getting discussed in terms of some sovereigns, do they work? Do they not work? Let let us see an STT in ah in Singapore on the Telco side, um mainly centered around emissions there.
00:17:43
tpreyser
All right, changing gears to use of proceeds. um As usual, we start with the sovereigns. And as we always say, you know, the main the main anchors in the market, again, using my favorite word of the week anchor is sovereigns, banks,
00:18:01
tpreyser
utilities, renewables, property, and then we've probably got 70% to 80% of the market. um ah Egypt thinking about going again in Sukuk, Swiss Confederation thinking about doing something. ah Green US Treasuries, goodness gracious, let's see if that ever happens. A couple of municipals in the US and also China issuing. On the bank side, KFW, IFC, EM Bank. What else have we got here? PKO. We probably won't go into those in another, BOC, Guangtai, a whole range, utility side, Hojo-1, Matrix Energy, energy chili, REC, Power China, poll energy.
00:18:45
tpreyser
So your your stock standard on that, on the property side, KDX, URW, Zark, Westbrook, Amvest. On the rail side, MTRC. I can't remember what country that is in. um Consumer Products, Raylow Group Limited, Subaru on the auto side, Biofuels Raisin in Brazil.
00:19:04
tpreyser
Check that out, a pretty comprehensive approach to to biofuels and what they're doing there. Equinex on the data center side, a really good candidate for green use of proceeds. Shroerus Corporation of the Mining and Metals in Australia. Stegner-Fasch-Stikertur, real estate, Norska Skog on the paper side. So again,
00:19:26
tpreyser
Plenty of reassurance coming back to market and I think there's been some interesting articles recently too about the wall of refinancing needed for sustainable instruments over time so some good dynamics to support the Support the market. What else have we got just as we finish off a bit of a mix bag here South Australian government Sustainability by National Australia Bank green bond United Mexican States sovereign bond IRDB the banking side, European Union, European Investment Bank, MUFG, Scottish and Southern Electric Networks, Republic of Philippines. So really good smattering across a bunch of sectors there. But as we mentioned in the opening news sequence, Tanaka Burr had clearly the standout in terms of something innovative and new.
00:20:13
tpreyser
And that is really a nice segue into asking Murray our favourite bot. He's been a barley for a trip too and he's just botted back or bolted back. It's a bit of a tongue twist to see if you can say that. When will we see Transition Label use more? I'm actually not going to answer this because I've answered it over the years in various podcasts. This is the year, this is the year, and it never seems to be the year, but I think I'll answer it in terms of... There's never been as many references, roadmaps, taxonomies, specific guidance on transition planning that we can reference. And it has to mean that more companies like Tanaka Behar, like companies in Japan and like others are taking a use of proceeds to say, all right, this is our narrative, this is our strategy, and this is what we're spending our money on. so
00:21:05
tpreyser
It's a bit of an indirect answer, but there's never been more reference points and more support for companies wanting to do that. And particularly in the hard to abate sectors where a lot of heavy duty stuff is made, particularly India and China, I hope there's some yeah some really good movement there. All right, last section before we finish up, products, programs. CIMB Singapore launches simple accessible sustainability financing program for SMEs. That's good. HSBC to discount lending for sustainable farming practice. So again, we've seen some You know, even as they're in the yeah UK working with suppliers, we've seen sustainable trade finance come out a bit more. We've seen SME ideas come out a bit more and and and even some deposit type ideas. So anyway, that is all we have time for today. I, as well, am missing sf SF Guru. Sorry, that's me, SF DJ.
00:22:01
tpreyser
And look, that's all we've got time for. We hope you like our podcast and check us out, as we said, and still remaining our socials at SustfinanceKX, that's on Twitter or X, whatever the heck that's called now, sustainablefinancekx1word.com on LinkedIn, Sustainable Finance KX. Those are all our handles or otherwise. So that's it for another episode of SFKX Inside Out Podcast hosted by myself, SF Guru.
00:22:28
tpreyser
Until next time, I'm going to get the music going. We look forward to seeing, or should say, speaking to all our listeners again, and we hope you continue to tune in, and we rapidly close in on our 20th episode. Take care, and let's do more sustainable finance. Woo. Yeah. That is music. Oh, yeah.