What’s Happening in Sustainable Finance: Funding Emerging Markets’ Climate Adaption, Regulatory Focus on Scope 3 Emissions, and More

Episode Summary Hosts Nicholas Gandolfo, Director, Corporate Solutions Aditi Bhatia, Regional Sales Manager, Corporate Solutions In this episode, Nick and Aditi highlight developments in the sustainable finance markets as 2022 winds down. They note that global cumulative green bond issuance has surpassed the US$2 trillion threshold, marking another milestone for sustainable finance. They also discuss the diversification of key performance indicators used in sustainability-linked instruments, the growing opportunities for using sustainable finance as a tool to fund climate adaptation in emerging markets, and regulators’ increasing focus on reporting for scope 3 emissions. Finally, they respond to audience questions about impact investing and sleeper sustainability-linked loans. Cumulative Issuance of Climate-aligned Bonds Passes $2 Trillion Mark According to the Climate Bonds Initiative, to date over US$2 trillion in greens bonds have been issued globally, marking another major milestone in sustainable finance. Despite broader market conditions resulting in lower volumes year-over-year, use of proceed bonds, such as green bonds, are rebounding slightly.  Using Sustainable Finance to Support Funding in Emerging Markets  When thinking about how to ensure a just transition, a recurring question is, "How can market participants initiate more financing for adaptation, resilience, and development, to help countries who most vulnerable to climate change, but that are not major contributors to it?" One answer is sustainable finance. Sustainability-labeled debt can provide opportunities to drive and scale financial flows in emerging markets. Though issuing a green bond doesn’t eliminate the liquidity, currency or country risk facing some emerging market nations, hopefully more funds can be leveraged under the sustainable finance umbrella to drive additional financing and a just climate transition for these countries.   Growing Regulatory Focus on Scope 3 Reporting  Regulators globally continue to push for disclosure and reporting of scope 3 emissions. In October 2022, the International Sustainability Standards Board (ISSB) voted unanimously to require companies to disclose scope 1, scope 2 and scope 3 greenhouse gas emissions, and will develop relief provisions to help companies apply the scope 3 requirements.2 This follows the U.S. Securities and Exchange Commission’s proposal for climate disclosure published earlier this year which includes reporting on Scope 3 for large U.S. companies.   0:00:51  Market overview  0:01:24  Use of proceed rebound  0:02:15  CBI conference outcomes  0:03:22  Green bond issuances pass US$2 trillion globally  0:04:08  FCA report on fund labeling  0:04:58  CBI reports and consultations  0:05:36  Scope 3 reporting in the news  0:06:21  Sustainable finance for emerging markets  0:07:01  Funding instruments to support conservation - blended finance and debt to nature swaps  0:09:00  Green and social loans tied to banks SLL pools  0:09:46  SLB and SLL overview  0:14:04  Audience questions  0:19:47  Green bonds and loans overview  0:25:40  Social bonds and loans overview  0:29:05  Labeled products, transition bonds and regulatory updates  Links to Select Resources Environmental Finance – World Bank Warns of SLB Greenwashing Risk From 'Structural Loopholes' Environmental Finance – Climate Bonds Standard Extension to SLBs to 'Fire Integrity' Global Capital – French Agencies Struggle to Tighten Green Deals Environmental Finance – EM Financial Institution Green Bond Impact Reporting Study Published IISD - AfDB Report Assesses Feasibility of Debt-for-Nature Swaps in Africa Environmental Finance – Investors Calling on TNFD to Address Nature Restoration Environmental Finance – Inflation Reduction Act 'Could Transform Bond Market', Conference Hears Global Capital – Bonds Tied to Banks’ SLL Pools Could Spread in 2023 Global Capital – Dearth of Climate Adaptation Bonds Spurs Call for New Asset Class Delano – Green Bonds Issuers Adapt to EU Taxonomy: LuxSE Climate Bonds Initiative – 101 for Policymakers Climate Bonds Initiative Hydrogen Production Criteria Sustainalytics SPOs: Uruguay’s Sovereign Sustainability-Linked Bond Framework Second-Party Opinion CEMEX Sustainability-Linked Financing Framework Second-Party Opinion PT Semen Indonesia (Persero) Tbk Sustainability-Linked Finance Framework Second-Party Opinion Government of Chile Sustainability-Linked Bond Framework Second Party Opinion Japan Bank for International Cooperation Green Bond Second-Party Opinion IIFL Home Finance Limited Sustainable Finance Framework Second-Party Opinion Georgian Renewable Power Operations Green Bond Framework Second-Party Opinion Carmila Green Bond Framework Second-Party Opinion First Help Financial Social Bond Framework Second-Party Opinion    More Episodes

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