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What’s Happening in Sustainable Finance: On the Horizon for 2023, Reporting on Financed Emissions for Sovereign Debt, and More

Posted on February 28, 2023


 

 

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Episode Summary

Hosts

  • Nicholas Gandolfo, Vice President, Corporate Solutions
  • Sabrina Tang, Sales Associate, Corporate Solutions

In this episode, Nick and Sabrina reviewed what’s new in sustainable finance and shared some notable deals and transactions that have hit the market. They discussed the overall decline of global bond markets and expressed some optimism for the year to come, as sustainability is a central issue for investors, companies and governments and is still closely tied to capital markets. They also shared research on the carbon performance of food producers and a report on how to scale credible transition finance among countries in Southeast Asian. 

Sustainable Market Hopes for 2023 

If you’ve been following sustainable finance market activities, it’s no surprise that 2022 was not a great year overall. Markets were down in volume for the first time in 11 years. According to figures from Environmental Finance, total annual sustainable bond issuance fell 19%, from US$1.05 trillion in 2021 to US$845 billion in 2022. Social, sustainability and sustainability-linked bonds were hit hardest – down about 25% compared to 2021, while green bonds fared a bit better with a more modest 14% issuance decline. 

Despite the lower issuance volumes, there is hope for a rebound in 2023 as overall markets stabilize and issuers seek financing. This year may see use of proceed instruments like green bonds continue to gain ground compared to performance based, sustainability-linked bonds. We may also see more transition deals, social and biodiversity focused activity, as well as more complicated transactions going to market. It’s still early days, so let’s see how things develop. 

Updated Standard for Reporting Financed Emissions in Sovereign Debt 

If you’re a bank trying to figure out how to report on your financed emissions, be sure to read through Partnership for Carbon Reporting Financials’ (PCAF) recently updated standard. Global GHG Accounting and Reporting Standard for Financed Emissions addresses demands from financial institutions and provides a methodology to help investors in sovereign debt account and report greenhouse gas emissions. The methodology on sovereign debt includes bonds and loans of all maturities, however, only debt issued by the central bank on behalf of the sovereign would be covered. The methodology also requires reporting of scope 1, scope 2 and scope 3 emissions and recommends getting the information from countries’ reported data via the United Nations Framework Convention on Climate Change. 


Key Moments

0:01:16Market overview
0:03:24COP15 insights
0:04:22Australia sustainable finance taxonomy
0:05:04BNP Paribas social impact bond
0:05:16 TPI paper on food producers' carbon performance
0:06:53Updated PCAF standard
0:07:31Banks' transition planning under scrutiny from ECB
0:08:05Activity in carbon markets
0:08:45Austria launches green commercial paper program
0:09:14CBI paper on transition finance in ASEAN
0:10:17SLB and SLL overview
0:15:34Audience questions
0:21:00Green bonds overview
0:23:56Green loans overview
0:25:06Social bonds and loans overview
0:27:38Labeled products, transition bonds and regulatory updates

 

Links to Select Resources

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