What’s Happening in Sustainable Finance: The Nuance of ESG Ratings, the Impact of Climate Change on Sport, and “Code Red” for Humanity

Posted on October 13, 2021

 

 

 

 

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Episode Summary

Hosts

  • Nicholas Gandolfo, Director, Corporate Solutions
  • Marika Stocker, Senior Manager, Corporate Solutions

In this episode, Nick and Marika discuss recent developments in sustainable finance that have caught their eye. The diverse topics covered range from the growing momentum behind sustainability-linked bonds to the Tokyo Olympics’ focus on sustainability to the latest report from IPCC. They also note the continued growth of sustainable finance globally due to more issuers, markets, products, and diversification.

Climate Change Considerations for Global Sporting Events

With the summer Olympics behind us and the winter games only a few months away, Nick and Marika discuss the climate frameworks being developed by the International Olympic Committee and other global sporting organizations. These groups are considering the future impact of climate change on global sporting events and vice versa. The frameworks will address issues such as scope 3 emissions due to travel and transport and the effects of changing weather patterns on the locations for future events and athletes’ safety. 

The Nuanced and Multidimensional Nature of ESG Ratings

In response to a recent article criticizing the use of ESG scores in credit analysis, Nick touches on the nuances of ESG ratings and how they are used. He cites the multidimensional nature of ESG ratings, noting that some of Sustainalytics’ clients don’t use the top-level ESG Risk Rating score, but rather use aspects of the data to inform their models and investment approach.

Earth Overshoot Day and IPCC's "Code Red" for Humanity 

Two interesting and important sets of research are also highlighted. The first is Earth Overshoot Day, which fell on July 29 this year. This marks the date when the human population’s demand for ecological resources outstrips what the Earth can generate in that year. Unfortunately, the date continues to creep closer and closer to the start of the year.

The second is the Intergovernmental Panel on Climate Change’s (IPCC) sixth assessment report. Climate Change 2021: The Physical Science Basis analyzes global climate science research and warns that some of the key effects of climate change, such as rising sea levels, may be irreversible for thousands of years. This work on the current state of the global climate system and the effects of climate change will make for a sobering read ahead of the COP26 conference in Glasgow at the end of October. 

 

Key Moments

00:00:09 Introduction
00:01:18 Market overview
00:03:11 EMIA's enhanced principles for labeled bonds
00:03:58 IOC climate framework
00:05:23 Earth Overshoot Day
00:06:07 Blockchain and green finance
00:06:42 ESG score's place in credit ratings
00:07:49 IPCC climate report
00:09:25 Carbon offsets vs targets
00:11:06 Green bonds overview
00:16:21 Social and sustainability bonds overview
00:18:12 Green loans overview
00:19:49 SLB overview
00:23:23 Audience questions
00:27:27 SLL overview
00:31:29 Labelled products
00:32:33 Transition bonds overview
00:33:28 Regulatory developments

 

Links to Select Resources