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Sustainable Finance Kx "Inside Out" Podcast Episode 12
18 Plays1 year 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 museum or gallery that curates the finest paintings and sculptures) as we source only the best educational knowledge around Sustainable Finance worth sharing.
Recommended
Transcript
00:00:05
Speaker
Alright. Ooh.
Introduction to Episode 12
00:00:35
Speaker
Okay, hello, good afternoon, good evening, and welcome to episode 12 of our Sustainable Finance Inside Out podcast.
00:00:45
Speaker
This is SF DJ here today. SF Guru, I should call myself. SF DJ is still on holidays, so it will just be me for our 12th episode. We hope everyone's good and we hope that you enjoy our next installment. For those of you who are just tuning in, hello and welcome.
Purpose and Platforms
00:01:06
Speaker
Sustainable Finance KX or Knowledge Exchange is a media and training initiative. We strive to bring you the critical news stories, events, major breakthroughs and key concepts covering the happenings in the super fast evolving area of sustainable finance. Think of us as a curator.
00:01:26
Speaker
We're a bit tired of the usual fluffy pieces and wanted to present a unique take on the market and what's happening. We hope you find our podcast useful. You can also track us down on www.sustainablefinancekx, one word.com, Twitter or X at the handle at Sust Fin Nance KX or LinkedIn Sustainable Finance KX. And then also on your favorite podcast downloading platform.
00:01:55
Speaker
So without further ado, let us jump in to the key stories for over sort of April and a bit of May.
Sustainable Finance Trends
00:02:06
Speaker
A really good report was produced by SEB, S-E-B, they're a bank, I can't remember the full name, I think over in Sweden or the Nordics and they produce a really good bimonthly set of reports around the market and different themes.
00:02:23
Speaker
If we have a look at what's happening, there's still a little bit of pressure on SLLs, unfortunately continuing the sort of downward trend from last year. Some of that is cyclical. If we look at the, that was the main sort of standout from Q1, a bit of a shift back continuing to use the proceeds instruments, not too much happening on the labeled transition side of things. If we have a look back at
00:02:52
Speaker
The main sort of issue is a little bit of more of the same from 2023. Age is still a key market, really growing, but still most of the action happening in Europe. The North American market under a bit of pressure and from an issuance perspective, the supernaturals and the sovereigns are coming on pretty strong.
00:03:17
Speaker
Sustainable finance, a key theme, just transitions, starting to come out and be talked about in terms of transition plans and it will be interesting to see how that comes into the specific issuance of instruments in the market. As we mentioned before,
00:03:32
Speaker
transition bond issuance, really that label being dominated in Japan and pretty much all the labeled instruments here in Europe. We've seen before markets and gas sort of related companies, Cadence and Am. We've also seen a number of years ago, places like Marfig on the agri side of things and also gas related power assets in Hong Kong, but pretty much dominated at the moment. Hope that changes and I hope that grows.
00:04:02
Speaker
And we've talked about, I guess, in Q1, if we see, let's have a look. No, look more of the same. We've talked about that in our podcast. Moving right along. Greeniums, some people say, have sort of vanished. Mixed market conditions, I think we can say that we know it's more strategic.
00:04:21
Speaker
than transactional and greeniums have sort of disappeared a bit at the moment. Carbon emissions hit a record in 2023, even as renewable investments soared according to the IEA. That's not good news and more work to be done.
00:04:37
Speaker
England coal plant or New England coal plant marks a sign of an energy transition with I think it was the last coal asset in one of those markets to close which is good to see. A bit of pressure on temperature scores, a lot of providers trying to provide forecast temperature scores for global warming so do check more of those
00:05:00
Speaker
cases out. I think a bunch of women and grandmothers, I believe, have won a court case in Switzerland tackling the government through the courts as to not doing enough for climate change.
Net Zero Standards Update
00:05:15
Speaker
I think that's pretty significant and the risk of
00:05:17
Speaker
climate mitigation environment and mitigation is growing. So if companies don't want to do some of this related work and it's a sustainability, it might become a liability and we'd rather see companies treating it as a risk management issue, be an opportunity rather than just looking at it as a liability, which it seems will come.
00:05:42
Speaker
SPTI released an updated standard, if you like, for net zero. There's a bit of topical news about whether you can use carbon offsets to offset against some of your scope three. I think that's been sort of reissued. It's a bit unclear as to where that sits, but that's a topical area, those use of
00:06:05
Speaker
of offsets going forward. The issues and worries connected to SLBs continuing, the underinvestment in adaptation continuing, the debates around whether the SEC new disclosure rules went far enough, then were backed off, then got restated, continues, nuclear's back, biodiversity strong.
00:06:26
Speaker
transition as a theme needs to grow. We've seen Japanese banks or at least the G fans members are banks committing to grow transition finance. But as we've seen in the numbers, we're not quite seeing that in terms of labeling. What we have seen a bit is through
00:06:42
Speaker
I'd say heavy or hard to abate sectors issuing in green and really you could probably label them as transition. We've seen Alcoa, we've seen Dow Chemical, we've seen Lanterman and I think we've talked about that in our recent podcast but we'd like to see transition grow as an actual label in a bucket because we think that does represent a different opportunity and different funding elements for many corporates. The Biden government pretty progressive through its IRA have also introduced subsidies for SAF
00:07:12
Speaker
Sustainable aviation fuel, let's hear that,
Global Policies and Subsidies
00:07:16
Speaker
continues to grow. Maybe more markets like Singapore will mandate a specific use of that or a percentage use of that at a point in time. I think Singapore is mandating some use of SAF in all aircraft that touch the Singapore airport by 2026. Let's see how that goes.
00:07:35
Speaker
Well, what else have we got here in the news? Buildings, more efficient buildings, continues to be strong. CCUS and the Texas did a good piece progressing towards bankability. Mongolia rising, a number of banks have been pretty active in the markets.
00:07:51
Speaker
there. Hong Kong's come out with a taxonomy. Philippines has come out with a taxonomy. Indonesia's come out with a taxonomy. I'm probably forgetting some in regions so that taxomania is continuing. Singapore being a bit of a leader and pushing ahead with a lot of FinTech climate tech. Again, a good future read on what needs to be funded and needs to be blended and needs to be put into transition forms of financing going forward. So do check out anything connected to climate
00:08:20
Speaker
climate tech, significant risk transfers or sort of backstopping portfolios or guaranteeing portfolios and freeing up capital to do different more.
00:08:31
Speaker
sustainable activities or green activities continues to be a bit of a trend. We've seen the IFC do something with BNP in Poland. So that's pretty interesting. Some of those reverse sort of transactions there. TPT or the Transition Task Force, Planning Task Force have come out with some new guidelines on a sector basis in the UK for transition plans. Do check those out. SCB came out with a pretty good paper on adaptation and a bit of a
00:09:00
Speaker
diagram and schematic about how to look at that do check that do check that out what else have we got here geospatial mapping and data and satellites from google looking at methane and all all things data continues to be pretty topical heat pumps we know that the efficiency on those are super good for home things like home heating future of heat pumps in china the ia came out with a good report do check that out probably not financed enough in terms of trends and programs
00:09:27
Speaker
for green-related investment. AI will be very topical, the responsible use of that. There was also a really good paper put out from the Global Steering Group for impact investment talking about blended finance. Do check that out. It goes through all the de-risking methods from looking at currency risk and credit risk and liquidity risk to looking at things like insurance guarantees, hedging,
00:09:52
Speaker
Junior, first-class capital, securitization, results post financing, grants, technical assistance, all those sort
Financial Strategies for Transition
00:09:59
Speaker
of things. A pretty good, nice table and summary. So do check that out. Interesting piece on the JETPs or the Just Energy Transition Partnership from the Climate Policy Initiative. Do check that out.
00:10:12
Speaker
And hopefully Vietnam, like Indonesia, can keep wrestling with that as a concept and put some more funding and have that as a really good enabler and supporting function for its funding needs for transition. Wildfires pose hidden threat to mortgage lenders and investors adaptation case in point. What else have we got here?
00:10:34
Speaker
I've noticed an article about the wooden arches. Sounds a bit like McDonald's, but arches connected to the Olympics or the Paris Olympics which are coming up will be wooden arches. Interesting. I'm not sure what they really were before. Dubai, for those who go through that part of the Middle East, pretty bad flooding occurred, let's say, back end of April again. That's just case in point.
00:10:58
Speaker
of weather events coming that haven't happened. I've seen some in Queensland, 100 year floods happening three times out of five years. Again, this whole point of climate change adaptation, what can we do to get ahead of that remains topical.
00:11:14
Speaker
What else have we got here? Let's have a look. There's a pretty good article from the Energy Transition Commission or ETC on overcoming turbulence in the offshore wind sector. We know over 2 and 23 there's been lots of inflation, supply chain bottlenecks, higher interest rates, leading to rising costs, all sorts of things happening there.
00:11:41
Speaker
So, a couple of suggestions about how to get over that. So, if you're really into the offshore wind aspect of your financing and opportunities, do read that because I think it's a good summary there. An interesting piece I also saw that the Basel Commission is starting to look at climate risks in a much more detailed way and we call them the Magna Carta of banking supervision.
00:12:06
Speaker
So hold on to your hats for
Climate Risks in Banking
00:12:08
Speaker
that. I think it'll be a slow process, but let's see what pool or pools of capital are required to be tagged against more specific or in general macro sort of climate risking on portfolios going forward. Nature Action 100 came out with a company benchmark design. So check that out as biodiversity and benchmarking companies remains a key one. Their geopolitics impacting sustainability.
00:12:34
Speaker
Lots of growing articles around that kind of area. So just be aware of those things. Rules around what funds can call themselves connected to sustainability. Transition Pathway Initiative came out with an update on food producers and net zero. Again, Agri massively under-invested. Part of the problem, part of the solution. We all need to eat food security. We've got green, we've got social. F&B and Agri continues to be a topical area.
00:13:01
Speaker
do look through that. Hopefully we can all support more activity in that aspect of the market. European Commission urged to scale up biodiversity credit market again, tapping on that nature theme. Let's see how we're going to see that develop, GHG accounting and transition.
00:13:19
Speaker
Let's see how that goes. IKMA came out with some guidance on sustainable Sookooks. So do check that out, it's a good read. Annel, there's been a lot of reports about Annel missing its SLB targets, but I actually think that's a healthy side of the market. If everyone's slam dunked, I should say their targets, it possibly indicates some level or lower level of ambition. So read that with a grain of salt, an excellent company with very progressive plans and have issued in multiple
00:13:49
Speaker
Format, so you'll probably see some articles about that. All right moving on from the news in terms of linked link transactions here Kenya planning a Sovereign SLB, which is good to see back to Thailand or ASEAN region Thai Bev did a great South transaction They're looking at scope one and two emissions power consumption for renewables type targets Taiwan cement group pretty progressive over there in Taiwan and
00:14:15
Speaker
looking at scope one and two emissions and intensity reductions. And we know that for cement, scope one definitely is a key one. Waste management, interesting transaction in New Zealand, looking at GHG reduction targets. What else have we got here? Required tonnage of recovered materials as well, and also some interesting training and circular initiatives on that one.
00:14:38
Speaker
A bit of a mixture in terms of the other, again, a bit of a shrinking market, cyclical market. What else have we got here? We've seen a little bit.
00:14:45
Speaker
region in Hong Kong, CBD aviation on the leasing side, RDM group, I think on the health side, if I'm not wrong. What else have we got here? KF, sorry, not KFW, they're more on the use of proceeds side. So a little bit of activity still on the link, ARCA Continental, but just those main ones that I mentioned before.
00:15:10
Speaker
What else have we got here? Clarion housing, stone water, ISPT over in India. So, I should say Australia. So a couple of interesting ones there. Some property funds that I mentioned. Electrolux today, SLL on the electronic side. Nexa recursos minerales in Brazil, looking at obtaining a gold seal in the international GHG protocol reporting.
00:15:36
Speaker
and some other socio-environmental economic policies there. So do check that out. What else have we got here? Indorama, back to Thailand again on the chemical side, looking at scope one and two intensity targets and some PET input into recycling. Minor group, I think in Thailand as well, issued a sustainability linked framework or produced that. TDC in Denmark around data, scope one and two.
00:16:05
Speaker
and then an aspect of scope through reporting as well. So some pretty interesting deals there, again, pretty spread, bit of a shrinking market, a bit of a cyclical market, no major change in terms of KPIs, but often that sort of third KPI we're seeing as a qualitative type.
Green and Social Bonds Update
00:16:22
Speaker
type of target. So just be on the lookout for those and make sure they're well structured. If we zoom in to use the proceeds side, Australia where I'm from, we've seen the green bond marketing or premiums. Again, we've talked about the greenian before, but hopefully Australia will start pretty soon with its bond. Austria
00:16:41
Speaker
launched some interesting green money market instruments Rwanda can't even say that considering a sovereign SLB Saudi Arabian green finance framework also released Colombia social bond most sovereigns will do sort of green of sustainability or some SLB so interesting aspect there just a social one moving on to banks we've seen
00:17:07
Speaker
A bit of action in North America, LBBW, moving over to Europe, Bank of Cyprus, Rafa Senn, Council of Europe Development Bank, Supernatural, a massive deal there.
00:17:23
Speaker
financing institutions, all the banks, the NBFI is pretty active at the moment. I won't go through all of those, Scotiabank, Shuntar, AccessBank, and GolanBank, as I mentioned before, Mongolia, is a pretty active market at the moment. On the insurance side, we saw Sun Life issue. Municipals, we've also seen Commune and Bank, and I should say not municipals, but
00:17:52
Speaker
a agency issuing there. Petrobras debuted in green, I should say framework for green financing. We've seen Pertamina over in Indonesia from a oil and gas perspective do some use of proceeds, at least the framework. So a bit of a trend there. Some of these more difficult to abate sectors doing green use of proceeds, which you could argue whether they're transition or green, but more needs to be funded for a lot of those companies. On the mining side, Valio announced the green,
00:18:20
Speaker
green bond, again so difficult, challenging sectors, it's good to see. MOL inked another green loan. Angie in Chile on the renewable side. ABO on the wind side there. What else have we got here? Adani green. If we look at chemicals in India, Sri Ram, not the Sri Ram on the
00:18:48
Speaker
NBFI, but on the chemicals side, we've seen some paper and packaging Smurfit Kappa over in Ireland. So some pretty interesting use of proceeds there. Turk Telecom, Nanning Communications. If we then move along here, retail consumer Alapak on the bio fuel side, AppCorp, NYKS on the shipping, I think I've mentioned, oh no, I mentioned MOL, bit of a,
00:19:15
Speaker
a sectoral trend still going on there. Green ECAs, again, export credit agency transactions, pretty, pretty topical. So good to see, good to see some activity continuing, continuing there. Real estate on echo investments continued, credit familiars on the social bond, equitable bank, social bond, a bank over in Canada.
00:19:41
Speaker
Muthut, a microfinance institution over in India. Again, microsides against social and UNID agency over in France issuing a pretty significant bond as an agency on the social side as well. So pretty mixed.
00:19:58
Speaker
probably nothing overly dramatic apart from more sovereigns and more hard to abate sectors, sort of squeezing in use of proceeds, which you might say a transition into the green formats and banks really powering along on the other sort of usual suspects.
00:20:14
Speaker
So we've got some input from Murray, as we know, our robot who likes to ask us questions every month. And the first one is, what's all a hoo-ha about missing linked targets? As I mentioned at the start of the podcast on the annual side. Look, I don't think there should be a hoo-ha. I think that's a natural aspect of the market. When we have seen a lot of things grow and a lot of these instruments, the issuance thereof grow fast, I think that is fine.
00:20:42
Speaker
Sometimes if targets are missed, it's a good sign that there's actually some ambition there. Does that put people off or not?
00:20:49
Speaker
I would hope not. And I think it's always got to be a fair fight, so to speak, that if targets are missed, then they will grow. Then, sorry, then there'll be a penalty. There'll be a penalty there. So let's see. But I don't think it's a massive hoo-ha there. Green into transition. What's the story there? Again, I've sort of mentioned it a few times. I guess because there's no common transition
00:21:17
Speaker
principles in the market.
Green Labels and Hard-to-Abate Sectors
00:21:20
Speaker
A lot of the harder to abate sectors are sort of just going and aligning themselves to green. And again, whether that's right or wrong, the main thing is we're getting and moving capital to the sectors that are challenged and hard to abate. And that is a good thing. Then we can debate the intricacies. But I would personally like to see in us ourselves at SFKX more capital being raised to support the decarbonization of those hard to abate sectors, no matter what we call it.
00:21:49
Speaker
It's sort of behind the label, what's getting funded, how fast is it getting funded and how robust are those deals? All right, moving on, hopefully Murray enjoyed those responses. So keep the questions coming Murray.
00:22:03
Speaker
In terms of products and programs, again, probably more of the same. We're probably not seeing as innovative reach into different aspects of programs that we have maybe a couple of years ago. Some of these things are more standardized now.
00:22:19
Speaker
Link guarantees, we've seen SEB Bank with Sweco do something around that. Again, all the major main banking type of products have got aspects of green integrated into them. Now, on the agri side,
00:22:36
Speaker
The retail insight reported on Tesco and NatWest have got a sustainable finance scheme for farmers. Again, we talked about Agri before and how important that is. So that's great. Any of these buyer, supplier, supply chain type of programs that can work, I think are excellent to drive change.
00:22:55
Speaker
On a solar programming side, Banka Dukari introduced a green program for solar panels over in Egypt. So I guess probably the main thing with these programs is the geographic reach. Sort of more of the same from a programmatic perspective, but different markets having slightly different bends on these I think is great.
00:23:19
Speaker
And then
Closing Remarks
00:23:20
Speaker
the main one's there. So look, that was a pretty short and sweet update. We hope that everyone, and thank you for your listenership, if that's a real word, are enjoying our podcasts and our updates. So that's all that we've got time for today. We hope you like the podcast and do check us out, as I mentioned at the start of the episode, at SustfinKX, that's on Twitter or Xsustainablefinancekx.com on LinkedIn Sustainable Finance KX.
00:23:47
Speaker
and check us out and keep downloading us. This has been SF Guru. SF DJ, we hope he's back soon. See you next episode. Whoo. All right. Yeah. Green, green, green.