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.
A new resolution to improve biodiversity in Europe was proposed by the European Parliament’s Committee on Environment, which includes binding environmental targets for 2030 and 2050. This includes: 30% of EU’s land and sea must be protected áreas; binding targets for urban biodiversity such as green roofs on new buildings; urgent action needed to stop population decline of bees and other pollinators.
MEPs regretted that the EU didn’t achieve its biodiversity targets for 2020 and stated that the new strategy must adequately address the five main drivers of transformation in nature: changes in land and sea use, direct exploitation of organisms, climate change, pollution, and invasive alien species. They are also asking for 20 KMEUR/y for action on biodiversity in Europe.
In addition, they demand the next United Nations conference in October 2021 creates a Paris Agreement that sets global biodiversity priorities for 2030 and beyond.
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.
The EU aggregated GAR stands at 7.9%, which identifies the institutions’ assets financing activities that are environmentally sustainable according to the EU taxonomy.
More disclosure on transition strategies and GHG emissions would be needed to allow banks and supervisors to assess climate risk more accurately. It is important banks to expand their data infrastructure to include clients’ information at activity level.
Regarding the EU taxonomy classification, banks are currently in different development phases to assess the greenness of their exposures. The two estimation techniques, banks’ bottom-up estimates and a top-down tool, are considered in the exercise and the report highlights the differences in outcomes.
The scenario analysis shows that the impact of climate-related risks across banks has different magnitudes and is concentrated in some particular sectors. The findings should be considered as starting point estimates for future work on climate risk.
The @IEA just released the world’s first comprehensive roadmap for the global energy sector to reach net-zero emissions by 2050. They say almost 50% of the emissions reductions needed in 2050 in the NZE depend on technologies that are at the prototype or demonstration stage. This share is even higher in sectors such as heavy industry and long‐distance transport. This is clearly ambitious, as most clean energy technologies that have not been demonstrated at scale today should reach markets by 2030 at the latest. Technologies at the demonstration stage, such as CCUS in cement production or low‐emissions ammonia‐fuelled ships, are brought into the market in the next three to four years. Hydrogen‐based steel production, direct air capture (DAC) and other technologies at the large prototype stage reach the market in about six years, while most technologies at small prototype stage – such as solid state refrigerant‐free cooling or solid state batteries – do so within the coming nine years. In the NZE, electrification, CCUS, hydrogen and sustainable bioenergy account for nearly half of the cumulative emissions reductions to 2050. Just three technologies are critical in enabling around 15% of the cumulative emissions reductions in the NZE between 2030 and 2050: advanced high‐energy density batteries, hydrogen electrolysers and DAC.
You can read the report “Net Zero by 2050: A Roadmap for the Global Energy Sector” here
Rating agencies disagree substantially about how they assess individual firms. Without agreement on what constitutes good ESG performance, market participants can be misled by these ratings.
The authors of this paper found ESG disagreement is most pronounced for firms with high levels of ESG disclosure, contrary to the argument that disclosure reduces disagreement. While thousands of companies now claim to integrate ESG issues in their business strategy and operations, it is not clear whether those claims are merely cheap talk.
Ratings could help investors and other stakeholders to choose companies that exhibit their preferred ESG outcomes. Having rating agencies focus on ESG outcomes could motivate companies to show real outcomes in their disclosures rather than highlighting the adoption of policies or initiatives that might not generate any real effects.
Lot of work still needs to be done to develop rules and norms that determine what characterises good ESG performance.
Christensen, Dane M. and Serafeim, George and Sikochi, Anywhere, Why is Corporate Virtue in the Eye of the Beholder? The Case of ESG Ratings (February 26, 2021). The Accounting Review. DOI: 10.2308/TAR-2019-0506
Hydrogen’s innovation in the EU framework of Energy and Climate: hydrogen holds the potential for helping Europe to reach its targets of a climate neutral 2050. The development of new clean tech industries can help Europe to bounce back even faster, while boosting its competitiveness.
Europe is looking at a power system that will be based on more than 80% renewables by 2050. Hydrogen has the potential to reach 13-14% of Europe energy mix by 2050. Today it only reaches just about 2%.
Europe also looks to hydrogen for its use in industry and areas of transport where emissions are difficult to abate and where electrification cannot be guaranteed. Today’s demonstration projects in steel making are very promising and should be scaled up rapidly.
EU industry holds a strong global position in hydrogen, it simply does not have the infrastructure at scale yet to improve on its goals. Thus, Hydrogen strategy puts forward ambitious targets to install 6 GW of electrolyser capacity by 2024 and 40 GW by 2030 producing up to 10 MTn of renewable hydrogen.
Even if the costs have already been reduced by 60% in the last ten years, it is required investments which is the biggest barrier to innovation. EU decreased its public investment in research and innovation by 13% over the last years.
For this reason, the 672.5 billion Recovery and Resilience Facility will channel 37% of its grants and loans to climate-related investment. Also, Horizon Europe has a budget of 95.5 BEUR, 35% of these funds will be dedicated to the green transition.
Energy infrastructures in Latin America deserve a particular study with regard to Public-Private Partnerships (PPPs). Its different regulatory frameworks and degrees of institutional and operational maturity, make them to have a unique map of risks, policies and best practices. My publication on “PPPs in the Energy Infrastructures: experiences in Latin America” thus is proposed. The demographic increase and the economic growth of the Latin America countries emphasize the need for large investments in infrastructure to reduce the gap, which are also linked to their plans for sustainable development, climate action and interconnection to the infrastructures of the region (for example, electrical networks, gas pipelines and gasification terminals), and the regional energy markets. It is expected that the Public-Private Partnerships can funnel these investments. To do this, governments must create an environment in which the private sector can grow, by developing transparent regulatory frameworks. These reforms should gain the confidence of investors in these countries, which now compete with the other countries in a globalized world, to attract Foreign Direct Investment (FDI) to their energy markets. All this leads to reforms in each country in order to establish a more attractive environment to do business. A new field of opportunities opens up, driven by the national and international expansion plans of the private sector, and the search for better returns by the large investment funds in a context of low interest rates. In this scenario, the International Financial Institutions (IFI) must continue supporting infrastructure development.
The 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 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 universal 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.”