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Sustainable Finance Kx "Inside Out" Podcast Episode 15
15 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 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 Host Details
00:00:10
tpreyser
Hello and welcome to the 15th edition, would you believe it or not, of the Sustainable Finance KXSF Inside Out Podcast. I hope you liked our music there because I've lost the original file and hopefully we'll have some funky tunes back at some stage. You're with me SF, who am I again? SF Guru, SF DJ is still sitting on a beach in Bali somewhere but we'll eventually get him back for his South African tones.
Mission and Online Presence
00:00:39
tpreyser
So, Sustainable Finance KX or Knowledge Exchange is a media and training initiative.
00:00:45
tpreyser
We strive to bring you the critical stories, events, major breakthroughs, and key concepts covering the happenings in the super fast evolving area of sustainable finance. We hope you like what you're listening to in our podcasts. Please check us out at www.sustainablefinancekx, that's one word dot.com, Twitter or X at Sust Finance KX, that's one word, or LinkedIn Sustainable Finance KX. You should be able to find us fairly easily on one of those systems and channels. So look, let's dive straight um um straight ah straight in.
Market Trends and Challenges
00:01:18
tpreyser
um A little bit of market updates in terms of volumes. Pretty much whatever you read will show that huge volume increases for the first quarter versus last year. And then by the time we've hit mid-year, about the same on track, with a bit more pressure on linked instruments and a bit more growth in user proceeds instruments. That's basically the story.
00:01:42
tpreyser
So let's keep that let's keep moving. Really connected to volume though, a couple of um couple of headlines, almost 30% of SLBs could miss their 2024 targets as the Anthropocene Finance Institute. So let's see some ways or in some way that may indicate a level of ambition. So maybe not not so bad after all, but but check. um ah Check that out. What do we got in here? Lots of political elections and things going on. um I wonder what that will mean for green deals, IRAs and other things.
Political and Regional Influences
00:02:16
tpreyser
let's um Let's see, but sustainability obviously a key talking point in multiple elections and Europe moving a little bit more to the right. Let's see what happens.
00:02:26
tpreyser
um Let's see what happens there. Conundrum of cubed scope for financials or f FIs, ongoing work to be done by FIs in terms of scope three is where all the actions at. Little bit more talk about that. Offset heavy ENI, one of the biggest world kind oil companies globally, SOB target one to watch for 2024. Again, just look out for a lot of the news on on linked, some good, some bad, mostly a little bit challenging from a green washing. um perspective. 60 of Asia Pacific investors ready to pay premium for high SG maturity targets according to KPMG. Don't know about that, but let's let's ah let's see. Leaders urge swift implementation of granular guarantees of origins in ah in Europe and I think that relates to things like um offsets and where those are being ah created. So let's see what happens. um
00:03:20
tpreyser
what happens there. Brazil aims to attract 20 billion of ESG projects using a new climate fund. Again, we're seeing a lot of blended finance climate funds or blended finance funds set up as a way to leverage more public money involving and layering risk, de-risking, and then adding private sector right over that. Let's see if that if that grows, but good to hear. Hong Kong firms with enhanced sustainability disclosures valued higher as SIFMA. I tend to agree. Nothing new there. um Triple renewables by 2023 requires a minimum huge growth of like 16 points. If we remember 16 percent a year, ah probably more. Remember, that was a big um takeaway from COP um last year. So let that means if you're banking.
00:04:07
tpreyser
doing sustainable deals in this area, RA is firmly here to stay. um An interesting article from Irena, that's the International Renewable Energy Association, I'm going to say, another of the UN um institutions, ah floating offshore wind outlook, na nascent global floating wind industry. um Let's see what happens there. global Decent global pipeline. I guess the idea is that wind ah is more windy at sea versus on land. that being able to move things around for seasonal adjustments and and otherwise, ah let's ah let's see how that goes. It's gaining particular interests owing both to the potential and open water access and the broader social acceptance of offshore wind given locations away from high demand coastal and onshore real estate.
Corporate and Policy Updates
00:04:57
tpreyser
Let's see how that goes. and The CBI um published an interesting
00:05:02
tpreyser
um an interesting article or research paper. And our friends, they're always put out good work. So if you're not looking at climate bonds initiative regularly, please do because they've got loads of um good stuff. So um what have we got here? um Net zero transition for corporates. um An interesting piece. That's why corporate bonds have launched navigating corporate transitions tool ah global green building Alliance transition built environment. A little bit were more work on um on the property side of things. And sorry, I forgot to mention, this is what climate bonds talked about in relation to London Climate Week, which was a few weeks ago. Partnerships in progress, CBI announced new partnerships that will help mobilize finance for action and drive towards impact essential projects with UNEP, PRI, all good organizations there. So really what they've said is London Climate Week discusses how our economies, companies and portfolios can transition to net zero for a greener, more sustainable world.
00:05:59
tpreyser
Climate bonds participated throughout the week to share investors insights and other things. um I like this quote from Sean Kidney, the CEO there. ah Taxonomy, sustainable finance are the building block of sustainable finance markets. They are essentially shopping lists for investments for a sustainable future. They provide simple guidance. um So check out your latest taxonomies around the place and have a look at the summary that climate bonds have provided to um there Moving along, and Climate Bond Institute also published a really interesting piece that I'm still absorbing on the new agriculture production criteria and that's got livestock in there. If you recall, CBI has had a agriculture sector specific guidance for some time and it was always a little bit confusing to the extent that livestock fitted into that and I believe it has and this just sharpens that up.
00:06:50
tpreyser
and So what have we got? Public consultation period for the new agricultural production crop and livestock criteria. um Significance to step in and ongoing efforts to adjust climate impacts from Agri. We know that 25% global GHGs and 8% of global GHGs are really from cows and things. so Lots to be done there. Expanded scope of agriculture criteria and also agriculture production criteria aims to expand its scope beyond green bonds to include certification of entities and sustainability link debt, which the CPI announced I think last year or the year before, more broadly across across different sectors, but we haven't seen much action on those. So let's see what happens.
00:07:29
tpreyser
Moving right along, Sam Altman has come out with a little bit of an article there on all support for some fusion power. Remember, we've got fission and fusion on the nuclear side of things. Let's see how that goes. Infrastructure for EVs heating up. That's great to see. Lots of articles about that, actually. Physical risks for banks and other institutions. We're so focused on decarbonization. That's one that we can't forgetting that feeds into adaptation as well, which is slowly getting a little bit more um a little bit more ah funding as we go. AI, can we ride out the huge increase in demand versus efficiency? Let's see about that. and The blue bond theme, first blue bond, blue bond, I should say, issued in Vietnam. um World's first ah fully um dedicated biodiversity bond by BVVA in Colombia, interesting there. So that's a couple of firsts. IKMA enabling new KPIs. I should say IKMA enabling SLLB sustainability linked loan bonds. We'll talk about those a little bit um a little bit later in the um in the podcast. So I think we even talked about that on the last... um the last podcast. um Probably people have seen a few articles about the potential transition loan principles being talked about by the LMA and the APLMA. Hopefully something out by the end of the year. That'll be groundbreaking and fantastic. So i look forward to seeing after seeing those.
Innovation and Technology
00:08:58
tpreyser
um What else have we got? Have we got smart tech grids? A little bit on the tech side. Hopefully see some more funding for those as that's a pretty interesting area in sustainable finance, climate, um
00:09:10
tpreyser
ah climate tech and particularly areas connected to such important and difficult to finance infrastructure like um like the grids, how can we get more from what we um what we already yeah and what we already have. 800 carbon removal startups being talked about and how many unicorns will come with that. We know we need to suck more carbon out of the air and other places so let's see how that Let's see how that goes. Flight turbulence in the news again getting worse because of climate change. I think I explained how it emptied my shorts on a few recent recent flights, but not sure if that was all due to climate change. ah Let us ah see. Greenium is in the news again. Apparently, LATAMISG Bondish was benefiting for some premium there. That's good to see that. It'll come and go, ah but you want to be looking at more strategic reasons when you're looking at labelling labeling debt.
00:10:01
tpreyser
um Some green leases, um MOL from Japan on some chemical tankers there, Aussie roadmap for sustainable finance coming out. um As we keep moving along, for those who haven't, one of the sources we really like here at Sustainable Finance KX is energytransitions.org or go energy slash energy dash trans.org. Lots of periodic papers come out and this one is for um ndc So I think in the ramp up to COP we're going to see a lot more NDCs and the push I think to make them more investable.
00:10:37
tpreyser
What are the commitments for country? What are the investments that need to be made? And really breaking those down from some sort of esoteric what on earth is this to this is what we need to do. This is what we need to fund. And I think that's good for sustainable finance because hopefully that supports and a lot of um moving money into the right things. And that shopping list approach that taxonomy has, why not have an NDC with a shopping list attached attached to it so we can all see what's going on, what can be financed and create some innovation around that. Higher ambition for governments and industries is needed to stimulate accelerated deployment of clean tech. Ambition will not only deliver progress, clear and detailed roadmaps, again, call it shopping lists for implementing accelerated climate action backed by strong action there, measurable comps, um granular targets, et cetera, et cetera. So do check um check that out. I don't think there's anything else major, but some really good info infographics there and I think
00:11:36
tpreyser
That really creates, as we know, the catalytic nature of governments issuing in sustainability format, stimulates a market, drives interest, increases awareness. And then if NDCs can become more usable and shopping list-based, we can really have a look and and innovate the financing to
Global Issuance and Financial Activities
00:11:55
tpreyser
deliver those. So let's see how that goes. Our jet PV at NAMM in the news again, so the Just Energy Transition Partnership, a coal new coal plant was going to be open, then it wasn't, then it was. Jet peace still topical. Let's see what happens there elections. We talked about in terms of um politics What else have we got here? um Adaptation I mentioned before finally getting a bit more traction
00:12:20
tpreyser
A lot of articles ongoing, it's almost never ending on transition plans. What you should have, what you shouldn't have. um S and&P coming out with the new shades of green for transition plan assessments. I think that's good. The more we can talk the same language, the more we can work out what good looks like. I think um training capacity for us to all assess that in a more uniform manner, I think is only good for transition ah finance. ah What else we got here? That's probably it for um for the news. A real um mixture of issues over the month. So let's move into looking at some transactions that have recently been done in the market. Turkish biscuit manufacturer Olca doing a 550 million um linked bond there focusing on emissions, I believe, and and other things. Inghams for chickens in Australia.
00:13:08
tpreyser
looking at water intensity, ah reducing waste to landfill intensity and some emissions targets there. Agia in Brazil and water and sewerage on SLB format. Enuguate, I have no idea how to say that in Guatemala, utilities focusing on GHGs, minespace REIT, I think we've talked about last month, scope 1, 2 and 3 percentage of green. buildings in their portfolio and some energy efficiency targets. The Spanish Ecolates Salud secures um nearly 300 million in sustainable link finance phrases on the property side for VIA on the auto side, A2A on the property side. Okorov talked about already CASIP doing a um sustainability link um linked bond or SLLB. We'll talk about that a little bit later. Branford on the bikes. I think some of these are
00:14:01
tpreyser
Finally gone from framework to to issuance. ah CVC Capital Partners, again, pretty active on the on the fund and the private equity side in terms of linked insurance. Aegis, Chuke Operations, LCR, Scandac Investor, so financials featuring heavily there. If we change gears and move to use of proceeds, a fair bit of action on the sovereign side, Hong Kong issuing again, Iceland again, Italy again, talk of Japan doing something else, whether that will be in transition format. Let's see, Chile, Dominican Republic, Panama, love that if you're a Van Halen fan.
00:14:38
tpreyser
and the song that is rather than the bonds but we love both. um City of Zurich on the municipal side. um Insurers were ah back a little bit too. Pacific Life and Acmea. Banks continue to be very solid um set of the market issuing. We've seen Banco de Bogota, Credit Agricole, BMP, China City, Warba, Vietnam, SEA Bank, Banco Coppra of Divos, I can't even say that, so I won't. um gennnyia in Then to move to renewables, Genia in Argentina, PG and&E utilities, Eberola, Redia, Energy button.
00:15:17
tpreyser
Mazda, again from the Middle East, very active there. And then on the property side, what if we got a group of Munro, Chingdao, Consolidation Development, Hobie in Singapore, and a few others like out like that. Let's just try and pick a few other ones here. um Swiss Prime side, Redia, True Burrow, Hanwha Aerospace, XSim Thailand in green format. So again, the banks, property, utilities, insurance, sovereigns,
00:15:51
tpreyser
Pretty healthy pipeline there. Pirelli, that was on the SLB side. I'm confusing myself up here. I shouldn't have mentioned that before. um International Public Finance, Teijo, urban construction investment. It's a little bit of that sort of construction type, municipal type in in China, issuing their Jingzhou municipal urban developments as well. CPO, this is pretty interesting, Maywa Oils, um Sustainability Links Finance Framework. Again, whoa, I've mentioned a few linked deals in the User Proceeds, deals so apologies for that. CPO refining, not quite CPO or or palm oil um growing, but interesting there.
00:16:31
tpreyser
SASB launches, sorry, s yeah, SASB on the steel side, launching an innovative green and sustainability finance ah framework. Some of that, you could really label this transition, but do check that out. Good to see. We've seen a lot of heavy hard to abate sector sort of still issuing in that green or stretch green space, and then an auto deal for Zunda around um clean transportation. So a pretty interesting set of deals across the market. If we now go to Murray, hello Murray, our bot, and have a look at what has been put forward, two things. um Why did IKMA bring out enabling guidance for bonds recently? Look, I think we've talked about that briefly on previous podcasts, but if you look at data, if you look at AI, if you look at all these things that are going to make a big difference to sustainability,
00:17:23
tpreyser
Why not? um The green bond market is essentially being built in a very CapEx asset heavy and a lot of these other companies should be able to play a role. But they're not asset heavy, they're tech heavy, they're data heavy, they're um new technology um sort of heavy. So I think really it comes it comes from that. And the more standard age standardization we have, and I think that's good, the more money we can get into those companies, they do have a big role to play, but we need to look at them differently. And and I think that's really why the the guidance was brought out brought out there.
00:17:59
tpreyser
and The next question from Murray, thank you Murray. um Do you think SLLBs will take off? So Sustainability Linked Loan Bonds will take off? Look, honestly, not really. um The concept has been around for probably three years now when Bank of China from Hong Kong did the first one linking to four or five loans. That was and an interesting one, let's say. I'll let the listeners make up their own mind about that. Do do check it out. And CASIP, as I mentioned before, doing a recent one. Look, I think it's an option. Whether you see that linked loans directed to some form of deposits or or bags of linked loans or groups of linked loans being linked back to a to a bond is a novel concept.
00:18:40
tpreyser
I still think they're fairly different buckets, the use of proceeds in the linked and and combining the two creates some confusion. But um yeah, I think we'll see them selectively done. And look, the more opportunities banks have to fund their sustainable finance activities, the better. So it certainly can't um can't hurt. Right, um before we finish up, products, programs. um Let's have a look at a normal segment there.
Specialized Bank Initiatives and Guidance
00:19:06
tpreyser
HSBC launches, climate-focused infrastructure finance unit. So interesting. Barclays have come out with a transition finance unit. All sorts of banks really beefing up their higher levels of specialization for different aspects of sustainable finance. And that's logical, given that sustainable finance has been around for a while now. Opportunities are more nuanced.
00:19:27
tpreyser
more granular and beefing up teams is ah is a natural reflection of that. Putting fund finance on a sustainable footing. um ICMA came out or was it APLMA with some guidance on that as I mentioned before. Still a pretty popular segment for um private equity and funds and there's some great science-based target guidance on that too to check that out. um Not easy but that guidance was was pretty yeah pretty useful. Trade, transactional banking we spoke about, I think the last podcast or the podcast before SockGen coming out with a pretty detailed, I call GTP, your global transaction banking.
00:20:04
tpreyser
and guidance there. um Sustainable trade. What was this one? m a Actually, what am I getting myself tangled here? ADB, the Asian Development Bank at IFC, actually came out a couple of months ago with a reference note to help financial institutions, manufacturers, producers and other stakeholders to better define sustainable trade and eligibility requirements for sustainable trade deals. So do check out that guidance. It's about four or five pages. I think it's pretty interesting. Most in that case was really on a use of proceeds basis connected to things like energy efficiency, renewables, ag research, sustainable trade. I guess you could say from my understanding is, you know, use proceeds. And if you want a quick rundown on that, I think it's good trade.
00:20:51
tpreyser
You know, has sustainability come to trade in a big way? Probably not. um I think there's significant upside on that to label, to tag, to track, sorry, to map. Why not? and Increased disclosure, increased traceability certainly can help. And it sort of it helps expand that net of and sustainable finance as we talked about um different programs um different programs and and and products and types of things before, um this is a good um a good thing to to happen.
Closing and Engagement
00:21:25
tpreyser
Anyway, as you can tell, i've had I've had a bit of a flu the last week, so hopefully my dulcet tones have maybe not been as excitable as usual, but that you still enjoyed the podcast. So look, that's all we've got time for again today. We hope you liked the podcast. We hope you got something out of it. The real idea of doing it is to stimulate some thoughts,
00:21:46
tpreyser
and some references so people can run and take those away to stimulate more deals. We want to see more transactions, more transactions means funding is moving, more money moving means projects happen, more projects happen means hopefully fingers crossed, everything else crossed, we move closer to net and that's zero. So as I mentioned at the start, check us out at Sust Finance KX, that's on X, that's the handle I think it's called, sustainablefinancekx.com on the net, on LinkedIn, Sustainable Finance KX. And that's all I've got time for. So I'm SF Guru, SF DJ, we're still trying to get him, getting back off that beach in sunny Bali. But until next time, I'm gonna try and play some music. It's still not the right tunes. Enjoy the drums and we'll see you or you'll hear from us next time.