Green bond issuance surges in 2020
A late-2020 surge in underwriting was only the start of a coming wave of financial market activity in green bonds, asset managers, risk analysts and sustainability specialists all told Argus.
After a deep trough in activity in early 2020, green bond issuance in September spiked to $62bn and maintained strong volume through the end of last year, so that total green bond issuance ended 2020 13pc higher than 2019. The $305.3bn in green bonds issued in 2020 drove total issuance of green bonds since 2007 through the cumulative $1 trillion level, data from Bloomberg BNEF showed.
Accounting for green bonds as a separate class from sustainable bonds, climate-specific bonds or other broad environmental, social and governance investment products remains challenging, and different totals will come from different methods, a panel at the Reuters NEXT conference noted on 11 January. The BNEF numbers rely on use-of-proceeds definitions from the International Capital Markets Association and the Loan Markets Association.
Standards for green bonds are cohering among private firms, industry bodies and international organizations. The impending merger of the Sustainability Accounting Standards Board and the International Integrated Reporting Council, announced in November 2020, is aimed at simplifying the evaluation of green bonds and other sustainable investing products. At the same time, former Bank of England governor Mark Carney is leading an international effort to create standards that can underpin trading of greenhouse gas emissions and related financial products ahead of the COP26 climate conference planned for November.
As those definitions are standardized, growth in the issuance of green and transition economy bonds will be "huge," according to Climate Bonds Initiative chief executive Sean Kidney.
Independent review practices developed in order to price early World Bank green bond issuance have already spread so that 80-90pc of green bonds are now independently reviewed, Kidney said at the NEXT conference, allowing issuance to grow even as broader industry standards remain unsettled.
The market for green bonds could encompass a significant part of the estimated $1 trillion/yr required in capital to fund renewable and clean energy sources if current 2050 emissions goals hold, head of Commodity Research Nick Stansbury at asset manager Legal & General Investment Management said. The more clear pricing on carbon becomes, the more companies can "start getting capital markets moving properly," Stansbury said at the NEXT conference.
While the appetite for green bonds is significant and growing among buyers of risk, the absence of a large secondary or tertiary trading market remains a headwind for financial market participants, Katherine Spector of ProSpector Energy Advisors told Argus.
Holders of green bonds need pricing from those markets to benchmark and model their own performance, she noted, and, in the absence of a widely accepted carbon price, building that more liquid green bond market remains challenging.
"An active and liquid secondary market would then support exchange traded funds and other investment products available to a larger class of investors," Spector said. "That creates a feedback loop, prompting more demand in the primary market."
The prospects for a national US carbon price, much less a single global price, remain elusive. But regulators at federal and state agencies have begun to issue guidance that proposes pricing approaches and market participants told Argus they are looking at ways to use those models in internal pricing that could enable expanded green bond transactions and issuance.
Additionally, the start president-elect Joe Biden's administration could quickly trigger a flow of new transaction data that could underpin growing issuance of green bonds. As much as $40bn in existing loan authorizations has been held at the Department of Energy for renewable and low-carbon energy projects, and bankers involved in those projects say they expect release of that federal funding within days of the new administration beginning. The Biden administration has committed to a much larger cross-government approach to clean energy infrastructure backed by significant new spending, but the fate and timing of those broader plans remains unclear for now.
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Canada furthers investment in GHG reductions
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Scotland abandons 2030 climate target to focus on 2045
Scotland abandons 2030 climate target to focus on 2045
Edinburgh, 18 April (Argus) — The Scottish government is abandoning its 2030 target to reduce greenhouse gas (GHG) emissions after the UK's Climate Change Committee (CCC) said last month Scotland would not be able to meet it, but reiterated "unwavering commitment" to its 2045 net zero goal. Scotland had an ambitious interim target to reduce GHG emissions by 75pc by 2030 from a 1990 baseline and its legally binding 2045 net zero goal date is ahead of the rest of the UK. The CCC said in March that the nation was unlikely to meet its 2030 climate goals as "continued delays" in plans and policies mean the required actions to hit targets are now "beyond what is credible". And today, Scotland's cabinet secretary for net zero Mairi McAllan said that the government "accepts the CCC's recent re-articulations" that the "2030 target is out of reach". "We must now act to chart a course to 2045 at a pace and scale that is feasible, fair and just." She said that the government will bring forward "expediting legislation" to remove the 2030 target, calling it "a minor legislative change". McAllan said climate actions are backtracking at the UK level and blamed "severe budget restrictions" by the UK government and the "constrains of devolution". Scotland is a member nation of the UK, and the Scottish parliament has some devolved powers. But energy, for example, remains a reserved matter in the UK, and decisions — including licensing, regulation and policy — are taken by the UK parliament. She said that Scotland was trying to achieve societal and economic transformation with "one hand tied behind our back". Scotland's first minister Humza Yousaf said there was no intention to "roll back" on the target to achieve net zero emissions by 2045, saying that Scotland has made faster progress than any other nation in the UK during 2019-21, but that 2030 was a "stretched" target. McAllan said annual reporting on progress will be kept but by introducing a target approach based on "five-yearly carbon budgets" — a cap on the amount of GHG emitted over a five-year period — in a similar way to the rest of the UK. Scotland missed its annual emissions-reduction target in 2021, for the eighth time in the last 12 years. The CCC's interim chair Piers Forster said today that the removal of the 2030 target was "deeply disappointing". "We are reassured that the net zero target remains in place but interim targets and plans to deliver against them are what makes any net zero commitment credible," he said. McAllan announced a series of measures that the government wants to introduce, including reducing methane emissions in farming, a Scotland-wide integrated transport ticketing system, and the quadrupling of electric car charging points. But it is unclear what will happen to Scotland's delayed climate strategy, which was due at the end of 2023. By Caroline Varin Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Germany delays HVO and B10 sales at fuel stations
Germany delays HVO and B10 sales at fuel stations
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