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Sustainable Finance Kx "Inside Out" Podcast Episode 14
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.
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Transcript
Podcast Introduction and Host's Mishaps
00:00:08
tpreyser
Hello and welcome to Sustainable Finance Knowledge Exchange, or KX, Sustainable Finance Inside Out podcast. I managed to do two odd things today, miss a flight in some recording from Singapore, lovely Changi Airport, and also delete our audio file for the start of our podcast. I'm SF, who am I? SF DJ, SF Guru is still on holidays, but anyway, you're stuck with me and we've been a few, few I should say not minutes, but few weeks late getting this out, so let's dig straight um straight
Sustainable Finance KX Overview
00:00:45
tpreyser
in. um For those of you who don't know, a Sustainable Finance KX or Knowledge Exchange is a media and training initiative
00:00:51
tpreyser
We strive to bring you the critical stories, events, major breakthroughs and key concepts covering what's happening in the super fast evolving area of sustainable finance. If I speak any faster and don't take a breath, I could blow up before this podcast ends. We hope
Engagement and Community Outreach
00:01:05
tpreyser
you like it. Please check us out at www.sustainablefinancekx, that's one word, dot com, twitter or x at handle, at Sust Finance KX, one word, LinkedIn Sustainable Finance KX, and any other socials you can find us on that we may not even know about. so
00:01:24
tpreyser
um What's been happening in terms of news over the last ah few weeks, are pretty interesting a pretty interesting time.
SEB's Green Bond Report
00:01:31
tpreyser
For those who haven't caught up with the latest news in terms of volumes for sustainable finance, do check out the SEB green bond report from SEB bank or SEB bank in the Nordics, really good reports that come out every every couple of couple of months. And just to highlight a few a few things there, look, as we've mentioned on the podcast, um podcast really before, The main um pressure on the market is sustainability link bonds, probably down the most year on year to sort of the year to date, end of end of May, start of June. um Transition bonds only happening in Japan, link loans down about 40% year on year.
00:02:10
tpreyser
And then if you look at the increase, it's really only green bonds up about 10% or 15% with a little bit of softness too on the on the bonds for social and sustainability. So not great news, but look, if you sort of look at the, I think where we'll see the mid-year numbers, it's about the same overall volumes in turn of last year. The composition of that's moving towards more use of proceeds and more pressure. on the linked and again that's not a new narrative that was explained here on the uh... really on the podcast if you look at some of the countries i think it's it's interesting uh... you know asia pretty flat europe and nordic's up a little bit and middle east down uh... america down uh... lights and down and oceana down so i guess europe sort of propping up
00:02:57
tpreyser
I'm propping up the market there, but do check out that report and make sure that's on your radar. Really good, um really good stuff. There has been some reports about the surge of bonds in Q1. Yes, that is the case, but if you fast forward a couple of months to really mid-year, we're looking at sort of flat growth versus the ah the previous year. Couple of other reports about SLBs, market dynamics. We know they're under pressure for greenwashing type of concerns. SLBs falter amid credibility concerns. Issuance of debt linked to GOES climate promises has fallen, but GB market proves robust. That's really the storyline. Greenium's under pressure. To change channels a little bit or change gears, I should
Bloomberg's Net Zero Strategies
00:03:35
tpreyser
say. So the BNEF or Bloomberg, I can't remember what the rest stands for, um have come out with a new energy outlook 2024.
00:03:43
tpreyser
Do check that out. Some really good discussion graphs about where expenditures are going to go, how we're going to get to net zero. by using carbon removals, by using energy efficiency, clean power, electrification, then a bit of CCS, hydrogen bioenergy, um with the fossil fuels are coming ah coming down. Do check that out. It's all these type of reports. If you look at them, they really give you a menu or a blueprint to where money needs to be spent. Where money needs to be spent, it means there's financing to be done.
00:04:15
tpreyser
If there's financing to be done, a really good way, as we know, is to launch, execute, structure sustainable finance instruments to support ah to support those initiatives. There's all sorts of dynamics ah in um in that, but I'm not going to go into into that anymore. Switching gears again to the sort of the mix and the mixed news. I can hear the yeah escalator in the background here at the airport. So hopefully that's providing a bit of a yeah good vibe, so to speak, literally. I'm i'm almost ah feeling feeling the vibe through the electricity there. But look, SLL's articles about that.
00:04:54
tpreyser
Taxonomies more to come. and New Zealand's announced umnounce one, and and we're really going to, or work on one, and we're really going to see that. Andy Greenwashing has led to fewer blank green claims. Venture regulators saying, nature restoration law at risk. We'll see what happens. I think that's been passed in the EU, which means that'll trigger a lot of underlying regulatory support for biodiversity related credits, I think over time. If you stuff up some biodiversity, you better replace it. Not everyone's going to be able to do that, so why not purchase it by some sort of offset? Let's see how that develops.
Topics: Greenwashing, Gender Bonds, Vietnam's Energy
00:05:27
tpreyser
Orange bonds for gender, bit of talk about that. Catalytic transition funds from Brookfield and Alterra and the UAE, bit of talk about that. Nippon Life came up with a transition framework. um Check that out. Pretty stock standard transition type elements, but interesting.
00:05:44
tpreyser
All the same. Some interesting developments in Vietnam on their new virtual PPAs and other physical PPAs um indicating a bit a bit of movement on the regulatory side there. check Check that out. Plug power creating hydrogen in the US still under a bit of pressure. What else have we got here? Telstra from Australia, big telco there, ends use of carbon credits to focus on decar projects. Wonderful, see a bit more of ah of that. um Switching gears again. I love saying switching gears. If I say that any more time, we might not have any more gears to switch to. But anyway, um HSB came out with, I thought, one of the best reports that I've seen for a while. That's called repowering to accelerate the global energy um transition. And that's really about how do you take old coal-fired power plants and restructure them into more renewable energy. Not easy. Do you use the land? Do you dig deep and get some geothermal energy coming up? I guess it's about using the connection that those plants have to a grid and just changing the the input. So decommissioning, um you know, grids are lost, local employment's lost, all that all that sort of stuff. And then if you re-power, and again, the main sort of things put forward there, are let me just have a look at my,
00:06:58
tpreyser
um report here. What are we saying? um Again, geothermal was one of them. Nuclear was another. Co-powering, I should say co-firing on the general coal is another one. It'd be interesting to see if that takes off. As we know, those who follow the podcast and follow the markets closely in Asia, the whole issue of coal, coal buyouts, very, very difficult. So repurposing, that's another tangent. Let's see if it works. But we do know the world is not going to hit net zero if Asia doesn't hit net zero and Asia can't hit net zero if it doesn't solve its power issue and power is not going to hit net zero unless we solve a cold issue. So really important um issues, repowering, repurposing, um early buy outing. Let's see what happens. Let's see what happens. That happens there.
00:07:49
tpreyser
Bit more on adaptation, Bangkok wanting to push or Thailand up more, transition credits, and hopefully we're going to see more transition. Again, the debate still rages on how you incentivize banks to do more. A lot of people just measure finance the missions, but I think there's going to be some more metrics around that. We should be financing stuff that has a ability to, or the quantum that will be decarbonized over time. So you're always going to get spikes if you're financing hard to a bait. But what about looking at, well, you finance hard to abate, what's the potential to actually reduce that over time? So some pretty yeah interesting things. And Gfence did work on that a while ago, but I was just thinking about it today. um Just about to get on a flight.
Global Warming and Climate Change Concerns
00:08:31
tpreyser
And for those who are flying more, you will know that there's been more turbulence around. I hope that stops. So for heaven's sake, as long as we can we can turn back the clock on global warming, I'll be a more happy flyer, as many of us will. But it's getting real, right? That's when climate change and other things
00:08:46
tpreyser
If it's real, it's in our face, we need to change, we need to get better. um Money's got to flow and let's ah let's get on with the new sustainable finance where we ah where we can. What else we got here? A bit of action on the on the jet piece of Vietnam and Indonesia moving slowly there. Let's see what happened. ICMA came out with a pretty interesting piece on green enabling um or green enabling bonds, IT, t data, those sort of things. That'll be a bit of a ah bit of a um an underlying theme in the market, drugs for cows to curb CH4 emissions or methane. They're pretty interesting. ah Pretty interesting stuff. Australia publishing a new sustainable finance roadmap. Interesting there. So all sorts of bits and pieces. APLMA and LMA announcing they want to really work on some transition loan
World Bank's Just Transition Taxonomy
00:09:31
tpreyser
principles. They'll be a game changer for the market. So hang on your hats and let's see if that comes out. Something else that we've talked about on the podcast, but it's easy to think, what the heck does that actually mean?
00:09:41
tpreyser
is the whole concept of just transition. And just transition, and I'm speaking quite fast today, because A, this gate that I'm queuing up, that's going to fill up pretty soon. I don't want any more distractions today as it's been a bit of a blowout already. The World Bank, I'd say a month or two ago, came out with a just transition taxonomy. a mouthful to say. All sorts of um aspects of that, but these sort of things are landmark and that it gives us air cover. It gives us a reference. We can actually structure something, refer back, get it signed off by external parties when there's something there. So things like construction and civil engineering works on preparation for repurposing former
00:10:21
tpreyser
Coal mining, construction and renovation of existing buildings, electricity generation, electricity storage, production of heating, coal demolition, plans and assessments for environmental remediation, all this type of stuff about closing, changing, opening um is pretty it's pretty cool. I liked the headline, well, not so much liked it, but noticed that heat waves disproportionately affecting women's health. And I think brought up health climate, the nexus between that and the whole growth of areas around companies trying to solve that, I think is really going to boom. And let's see how that um how that goes. China opened the world's largest solar plant, goes online. Let's see how much it was there, 2.2 gigawatts. That's an absolute shed load, or 3.5, actually.
00:11:10
tpreyser
um Moving right along, I'm not going to say switching gears, but actually I just did. I should say switching Richard gears to get a bit more comedy value there. um Solutions to decarbonize heat in the steel industry. Again, for the nerds out there who are into transition finance, it's all about how we're shifting hard to abate sectors and what money is needed to do that. The Industry Alliance for Decarbonisation came out with a pretty awesome report around waste heat. Waste heat, using the heat in production, there's lots of thermal heat. um How can you reuse that to be more efficient, use less electricity, reduce your emissions, and all sorts of ways to do that. I thought that was a cool report with some good graphs.
Innovative Sustainable Finance Solutions
00:11:49
tpreyser
Do check that out.
00:11:50
tpreyser
Okay, so moving right along the link transactions, probably not quite as much in this month, but let's list a few. Natura, Brazil Cosmetics, interesting one there. Sabana Reid in Singapore did something a couple of years ago and have gone to market again in the link bond format. Bank of Ireland, launching sustainability loans. I don't know how that got in there, forget I said that. Tata Communications, 250 million SLL from foreign banks, presumably around scope one and two, little bit of data centers for um I can't even read my own writing there. um Catman, a pretty small sustainable link bond. Infra Wireless Italian. You speak Italian? and Not really actually, even though I do have an Italian surname, but that's ah not a story for another day in another podcast. our telco intra
00:12:39
tpreyser
I'm doing some linked up work there. Ferrio della Stato, I can't even say that, Stato Italiano, public transport. You probably hear the announcement behind just to add the bit more carnival atmosphere to the podcast. Post NL reduction of scope one and two. um and increase in some gender issues and management positions, an interesting one there. Good to see post offices getting amongst it. And then a mixture of transactions for Turner, Witulana, AVK, Capital Land, Sudafina, Karuna Networks. So again, your property, your infra, your data centers, your engineering so services, companies, all sorts across there. And another one,
00:13:24
tpreyser
Pia Lajalina. I have no idea how to say that healthcare in Finland and interestingly enough patient satisfaction, access to surgical treatment and employee satisfaction. So it's a pretty cool and interesting ones there than your stock standard emissions targets. So do check those out for some of those service industries. All right, better take a breath and back ah into it. Do text me and write into our socials. I don't know what movie I am going to watch on the plane as I hopefully A, get on it and B, proceed to enjoy my time on this additional flight. Always good playing double ah double flight fares. All right.
00:14:03
tpreyser
Use of proceeds here, what have we got? um Brazil looks to sell grain, Cambodia a little bit more action, not at the sovereign level, but others, they're pretty small market. Dominican Republic issuing, or at least getting more framework. um Some municipalities in um Sweden, Linkoping. Serbia active there, Australia active. um Some other names I can't even say. A couple of ECAs, EDC in Canada. um Yes, they did a couple of things. and a couple of things there. What else we've got? Generali on the insurance link side doing some things and then a whole bunch of banks. So banks have been very active I'd say over the last 12 months. Spare bank, Development Bank of Japan, Bank of
00:14:45
tpreyser
um Kuwait, AIIB, Commune Invest, Ventus, all of those, check them out. A couple of things on the Philippines side, um CREC there, um EDF back in Europe, so the utilities continue to remain strong. Anil, AES, DLFS, MBK, all those sort of companies, a little bit on the the ways to to energy. I did notice a pretty pretty cool one for Heidelberg cement. Again, we're seeing this, I'd call it stretch green in the market, whereby um instead of labeling transition, because that sort of kind of exists and kind of doesn't. It's very hard for external providers to sign off on something that doesn't exist as a formal label with a common one version of the truth, so to speak, or principles that that essentially govern
00:15:36
tpreyser
um govern that. But if you have a look, so Heidelberg Cement did some pretty cool stuff. um Grey Cement Clinker, where specifics are lower than 0.722 tonnes of CO2 per tonne of Grey Clinker Cement. So again, looking at things that support particular decarbonisation pathway and if you're below that accounts, if you haven't got a plant that doesn't meet that, you're not eligible. upgrading facilities. So that there's some real key key thresholds um that are used and putting in things to meet those thresholds. I think that's good. Another one almost exactly the same in terms of stretch green. Emirates Global Aluminium um introduces green finance framework. Again, could be transition, but how do you do that at the moment in the absence of any principles? Again, similar type thing is what we saw
00:16:23
tpreyser
on the Heidelberg cement coming up on a use of proceeds approach, confirm that the rest of the primary aluminium will have a carbon intensity of 6.21 tonnes per CO2E per tonne of um aluminium in line with the 2026 transition pathway initiative below 2 degrees scenario trajectory. So again, looking at using some scrap looking at doing some upgrades, but having that threshold, if you've got a whole bunch of plants, if you're doing CapEx to get you to that threshold, I think that works. If you don't, you're sort of out of the picture. Some PPA work there, low carbon energy, those sorts i um those sorts of um things.
00:17:02
tpreyser
ah KPN on the IP, i IT t it t side, Cromwell property, IRPC on the telco, And then mixed bag, I'll just read out, you know, annual use of proceeds, Massachusetts Water Proceeds, Ice Bank, Freddie Mac, KB Capital, Pre-Ab Finness, IRDB, Air Liquid, all sorts there. Air Liquid have gone to market before with a couple of transition type items, so do check that out a little while ago. Data centers, BDG, Thames Water on the water side, Social, Sriram, who've issued a number of times for SME Micro over in India, Morocco OCP Group,
00:17:37
tpreyser
Gotta love you Moroccan food and bonds. um Yeah, so pretty yeah pretty interesting. Couple of quick questions from Murray. Murray, thanks for um sending in your questions. When will you see the link market improve? I don't know. I think we're gonna see a whole concoction of things. The markets, you know is the market a bit all over the place at the moment? Sometimes it's cyclical on the loan side. Sometimes it's cyclical on the bond side. More's gonna go to use the proceeds for a while, but I think sort of flip back and and hopefully we'll see transition used. So I'll answer that with a question mark. What are we expecting to see for blended finance going forward? Again, blended finance is, you can call it the four P's, public, private, philanthropic and partnerships. It's really stitching, linking money together to get money to move to where it's not going. So we're de-risking of using some public funds, crowding in, so impact, crowding in, addressing a market issue and getting on with it and get money flowing to to where we need it. um Basically, that's what blended finance is. What we're going to see more is scale.
00:18:37
tpreyser
Many governments around the world are keen to support it, to use their fiscal resources more responsibly, um stretch a dollar, get five in from the private sector, use one public. um everyone's Everyone's happy, so to speak. So I think we're going to see more funds. Africa, Latin than Asia, the biggest sort of markets. We're going to see more participants. We're going to see more tools. We're going to see more innovative deals and really more um participants coming in to try and mitigate country risk, technology risk, economic risk as it applies to getting money to really address the overall climate finance gap, which we know we need to start filling that gap. Why do we need to fill the gap? Because that's what we need to get to net zero over route over time. For those folks out there in transaction banking,
00:19:22
tpreyser
The cool thing that I saw that I haven't seen for a while or pretty detailed and well done was SockGen came out with ah a GTB or transaction banking um framework which sort of is a use of proceeds approach to um some trade transactions and also some deposit transactions. Looking at pure play companies is one aspect of that and then looking at tracking um and mapping those to specific projects which are which are sort of eligible. Do have a read through that, hard to summarize in a very quick um in a very quick podcast but i did um I did enjoy the read and look overall I think it's a good way of putting down deposits, transactions, factoring and and different aspects and really you're either a pure play where all of that's flexible or you've got an eligible project where you've tagged your flows specifically connected to that as per year your frameworks are well done. well down There's a couple of good diagrams
00:20:19
tpreyser
um Some cool stuff we saw on some FinTech um classification work getting done. UOB Singapore launched some SME focused sustainability link finance programs to check that out. Some heat pump subsidies in the UK. So under sort of programs and products, I guess your GTB or your global transaction banking, cash management, factoring, forfeiting trade, then you've got some you know FinTech work which is I should say Green FinTech, which is going to come more. You've got some linked facilities with SMEs and then some heat pump subsidies there. So look, as um as we get another ah announcement for another flight, that's all we've got time for today. We've been a bit late with this podcast. I hope you enjoyed it. a Bit of a carnival atmosphere here, my end. But look, that's all we've got time for. We hope you like the podcast. Check us out at handle on X at Sust Finance KX One Word.
00:21:14
tpreyser
on the internet www.sustainablefinancekx.com on LinkedIn, Sustainable Finance KX and the other socials we mentioned before. I'm SF Guru and until next time, stay cool, yeehaw, and we'll catch you very soon with another exciting episode, hopefully recorded from my bedroom rather than a freaking airport. Good luck with your Sustainable Finance and catch you soon.