Supervision of ESG risks for credit institutions and investment firms

The European Banking Authority (EBA) published yesterday a report which provides recommendations for institutions to incorporate ESG risks-related considerations in strategies and objectives, governance structures, and to manage these risks as drivers of financial risks in their risk appetite and internal capital allocation process. The EBA also recommends developing methodologies and approaches to test the long-term resilience of institutions against ESG factors and risks including the use of scenario analysis.

EBA sees a need applying at least a 10 years horizon to capture ESG related risks, proposing a phase-in approach. This Report should be considered in conjunction with the EBA and ESAs disclosure publications under the Capital Requirements Regulation (CRR), the Taxonomy Regulation and the Sustainable Finance Disclosure Regulation (SFDR). The EBA will publish Pillar 3 disclosure requirements on ESG risks, transition risks and physical risks, as defined in this Report, later this year.

The report will be taken into consideration in the context of the Renewed Sustainable Finance Strategy, the review of CRR/CRD, and an update of the SREP Guidelines to include ESG risks in the supervision of credit institutions.

More on https://bit.ly/35LC5wH

Countries’ map developing National Action Plans (NAPs) on Business and Human Rights

NAPs are policy documents in which a government articulates priorities and actions that it will adopt to support the implementation of international, regional, or national obligations and commitments with regard to a given policy area or topic.

The UN Working Group on human rights and transnational corporations and other business enterprises (UN Working Group), mandated by the Human Rights Council to promote the effective and comprehensive implementation of the UN Guiding Principles on Business and Human Rights (UNGPs), noted in its 2016 Guidance on business and human rights NAPs that they can be an important means to promote the implementation of the UNGPs.

More on: https://bit.ly/3vZiIuR

The EU Green Bond Standard (EU GBS

It will be logically voluntary. It will be ready to be used in 2022 and aims to set the global standard. Global ESG debt market tops 3 TUSD, with Europe taking a lead as nearly a quarter of its bond sales this year were related to social factors.

Sovereign issuers will be granted some flexibility to assess government spending programs based on their terms and conditions. The 27-member bloc itself is set to become one of the largest issuers, with 30% of its 800 BEUR pandemic recovery funding planned as green debt.

The ESMA will determine whether a bond is green or not, with external reviewers to be approved by the body. Issuers should disclose impact assessments at least once, as well as annual allocation reports for how the funds were used and they will be free to align their bonds alongside other standards.

EU GBS affords issuers an opportunity to launch taxonomy-aligned green bonds at a potentially lower cost of capital. For investors, the standard affords an opportunity to make investments in green bonds that are credible and easier to report on.

More on: https://bit.ly/3gBg7m2

Network for Greening the Financial System (NGFS) update of their economic scenarios

Reaching net zero by 2050 could lift growth and employment but would require an inflation-boosting $160 per tonne carbon price — or equivalent “shadow price” — by the end of the decade. This will push up inflation and also raise unemployment in some countries with energy-intensive industries.

Only a relatively quick and orderly transition to a low carbon economy would add to growth while a delayed transition or no action would cut deep into the economy.If these changes occur in an orderly fashion, the scenarios suggest that it could lead to some increase in global GDP, and lower unemployment relative to prior trends.If the transition fails, the scenarios suggest that up to 13% of global GDP would be at risk by the end of the century, even before accounting for the potential consequences of severe weather events.

Currently about a fifth of the world’s greenhouse gas emissions are covered by a carbon price.

More on: https://bit.ly/3ziT7j6

My study: The finance, sustainability and energy nexus

CapturaThe study highlights the importance of promoting and coordinating the collaboration of the different financial actors to address the priority sustainability challenges (sustainable finace). It analyses the different mechanisms that are facilitating the integration of climate change policies and emphasizes the interest of considering the financial sector, in the coordination of policies, such as the implementation of new Laws on Climate Change and Energy Transition.

The study analyses the different mechanisms that are facilitating the integration of sustainability policies in the financial sector driven by the  and the Sustainable Development Goals. The G20 and UNEP FI are driving the finance, sustainability and energy nexus through different initiatives which are covered in the work (e.g. TCFD, GFSG, CFSG, PRI, PSI, SSE, PIF). The analysis highlights the importance of other initiatives related to green and climate bonds (green finance), sustainable banking, standards, reporting, indexes, methodologies and sustainability associations.

The inclusion of green securities in the stock market would foster new possibilities for channelling investments, financing debt and opening the door to new sustainable business models nationally and regionally. The analysis highlights the importance of promoting and coordinating the collaboration of the different financial actors to address priority challenges such as climate change, through consulting and involving key actors such as banking regulators, stock exchanges, financial institutions, insurance companies, institutional investors, credit agencies, corporations and relevant ministries.

The complete Spanish version is accessible on http://bit.ly/2prIEBo
An executive summary in English is accessible on http://bit.ly/2pIEq5A

My book “Internationalization, Sustainable Development and Renewable Energy: Latin America”.

Featured

The book makes a multidisciplinary analysis (trade, electricity market, sustainable development, regulation, technology, market agents, investments and financing) of the renewable energy sector in Latin America.

The work starts with an introductory chapter presenting the need for internationalization of the renewable energy sector, which has a natural development market in Latin America. It then shows the needs, threats and opportunities of the Latin American Electricity Markets. It subsequently proceeds to analyse the sustainable development question in the energy sector, which allows us to enter into the issues associated with climate change and univWIP Cover Frontal Resized ENersal access to energy, focusing the analysis on Latin America. From here, the job carries out a critical study of the different renewable energy support mechanisms in the region. Afterwards, it studies the national R&D programs. The writing continues with the agents of the market and the roles and issues they find in their value chain within the region. From it, the book introduces the subject of investment, uncovering the ultimate problem, as well as the origin and destination of the investment flows that Latin America has received in renewable energy. Before finalizing, it analyses the financial instruments used for investment in renewable energy. Finally, the work ends with two real business cases of investment in power plants, which are financially modelled (Project Finance and Project Bonds). As a final conclusion, the writing highlights business opportunities, obstacles and solutions, all influencing the development of renewable energies in the region.

“The book is a vivid example of the great importance of the coordination among different sectors and areas (e.g. financial, monetary, fiscal, political, economic, business, technological, social, etc.), which have different cycles and operations, in order to face the major challenges of mankind today.”

Available now on Amazon here

Follow me on twitter: @MiguelChamochin

Climate change and hydropower generation: the Latin America case

According to news published by the World Meteorological Organization in February 2014, parts of the world have witnessed a series of extreme weather conditions in the first six weeks of 2014, continuing a pattern that was set in December 2013.

Much of the U.S. has experienced cold waves and major winter storms, whilst California remains gripped by drought. The United Kingdom has seen its wettest December-January period on record, with severe, widespread and prolonged flooding. A combination of strong winds, storms and high tides caused damage and flooding in other coastal areas of Europe. There has been unusually heavy snowfall in the Southern Alps. Monthly mean temperatures were extremely high from eastern Mongolia to eastern China. In the Southern hemisphere, Australia, Argentina and Brazil experienced extended heat waves.

Source: Japan Meteorological Agency Tokyo Climate Center

In Argentina, the period of unusual heat, which started in December 2013, continued through January and into February, especially in central and northern regions, with a number of local heat records being set. Parts of Brazil experienced the hottest January on record. An energy blackout early February affected six million people and hit eleven states of Brazil, six of which are scheduled to host the 2014 World Cup next June. Apparently a peak of demand caused by a heat wave had the grid down.

Continue reading

Climate Change Threatens Energy Sector

Transmission tower

Researchers have identified several extreme weather critical issues on energy sector, including disruptions on power-plant and fuel supplies, due to droughts and severe storms. Extreme climate causes major issues to the energy sector by:

  • Increasing air and water temperatures;
  • Decreasing water availability across regions and seasons; and
  • Increasing intensity and frequency of storm events, flooding and sea level rise.

Some adverse effects have been detected:

  • Severe losses on infrastructure: there are higher risks to energy infrastructure located along the coasts thanks to sea level rise, the increasing intensity of storms, Continue reading

Humans responsibility on climate change !!!

Climate Change 2013: The Physical Science Basis. IPCC Working Group, contribution to AR5, September 2013

Published every six years, the IPCC Assessment Reports are the most comprehensive international assessments on the state of climate science. Similar to prior studies, AR5 is the product of a consensus based process combining the most current scientific data with input from more than 800 climate scientists from dozens of countries.

The AR5 alerts on these key messages:

  • Humans are largely responsible for rising global temperatures: global surface air temperatures have risen more slowly in recent years, but warming in the oceans Continue reading