What’s Happening in Sustainable Finance: The Push for Climate-Related Disclosures, Assessing SPT Ambitiousness, and More

Hosts

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

In this episode, Nick and Marika share updates on the latest deals and transactions in the global green, social, sustainability and sustainability-linked (GSSS) debt market. The market shows no signs of slowing down as the numbers for the first half of 2021 surpass all of 2020. Some forecast that the total value of the global GSSS market for 2021 may reach US$1 trillion.

Nick also shares highlights from ICMA’s annual meeting and discusses the growing number of oil & gas companies delving into sustainable finance. Marika gives an overview of recent green bond activities. Responses to audience questions focus on the hot topic of sustainability-linked bonds. 

Leaders at the G7 summit were urged to follow the UK’s lead and make it mandatory for companies to report on their exposure to climate risks as part of a broader effort to decarbonize global investment portfolios. Currently, investors lack information on the climate-related risk linked to the companies they invest in. The Value Reporting Foundation has also come out with more guidance around corporate reporting. The International Financial Reporting Standards (IFRS) is also working on standards around sustainability reporting. 

More Oil & Gas Companies Wade into Sustainable Finance

As the global sustainable finance market continues to mature and evolve, companies from hard-to-abate sectors are testing the waters. With more oil & gas companies dipping their toes into the sustainable finance pool, we note a few important things for them to consider when looking at sustainability-linked debt:

1. The extent to which scope 3 is included (or not) in the company’s sustainability strategy and framework. This is of particular importance for companies operating in hard-to-abate sectors.
2. The extent to which offsets are included (or not) in the company strategy. In our view, they should be a minor part.
3. The extent of ongoing exploration and capital expenditures for the existing oil & gas businesses. If it’s significant with no indication of change, then it really doesn’t align with sustainability goals and targets.

Assessing the Ambitiousness of Sustainability-Linked Instruments 

In response to an audience question, Nick outlines Sustainalytics’ approach to assessing the ambitiousness of KPI and targets for sustainability-linked instruments. Companies should be evaluating against their past performance, against the performance of their peers and against science-based benchmarks. There are several resources in the market to help companies judge the ambition of their indicators/targets such as the Science-Based Target Initiative, Transition Pathway Initiative, ICMA’s Green Bond Principles and Social Bond Principles, among others. 

Key Moments

Links to Select Resources

• ICMA Resource Centre
• Nasdaq Green Designations
• Environmental Finance: Sustainability-Linked Debt in Eight Metrics
• ESG Investor: Financial System Must Play Dual Role on Biodiversity
• Climate Bonds Initiative (CBI) Webinars and Resources
• Slovenian Sovereign Sustainability Bond Framework Second-Party Opinion
• UBS Green Funding Framework Second-Party Opinion
• LimakPort SLB Framework Second-Party Opinion
• TELUS Sustainability-Linked Bond Framework Second-Party Opinion
• Worley Limited Sustainability-Linked Bond Framework Second-Party Opinion