TaskForce: Four key areas related to climate change and financial disclosures

Financial Stability Board and its working group, the Task Force, has published its recommendations for companies related to climate change and financial disclosures. This working group was established in December 2015  to set a voluntary, consistent disclosure for companies.

The 32 industry members of the Task Force, who are drawn from a wide range of industries and countries from around the globe, finalised the recommendations after extensive public engagement and consultation, including public consultation on a draft of the recommendations in December 2016.

The TCFD developed four recommendations on climate-related financial disclosures that are applicable to organisations across sectors and jurisdictions. The recommendations are structured around four thematic areas:

  • Governance: The organisation’s governance around climate-related risks and opportunities
  • Strategy: The actual and potential impacts of climate-related risks and opportunities on the organisation’s businesses, strategy, and financial planning
  • Risk Management: The processes used by the organisation to identify, assess and manage climate-related risks
  • Metrics and Targets: The metrics and targets used to assess and manage relevant climate-related risks and opportunities

In a joint statement, the TaskForce leaders say: “We encourage other business leaders to join us in this united effort to improve disclosure across sectors and regions. The Task Force’s recommendations will catalyze more consistent, comparable, and reliable disclosure of climate-related information that will facilitate more informed business and investment decision-making. These disclosures are an important step forward in enabling market forces to drive efficient allocation of capital and support a smooth transition to a low-carbon economy.” This private-sector TaskForce was chaired by Michael R. Bloomberg.

The signatories include for example companies like Aviva, Bank of America, Barclays, BNP Paribas, Borsa Italiana, London Stock Exchange, Calpers, Citigroup, Deloitte, EY, KPMG, PWC, ING Group, Moody´s, S&P and UBS Group.

The recommendations are backed by over 100 companies with market capitalisations of over 3,3 trillion US dollars and financial firms responsible for assets of more than 24 trillion US dollars.

The Financial Stability Board promotes international financial stability; it does so by coordinating national financial authorities and international standard-setting bodies as they work toward developing strong regulatory, supervisory and other financial sector policies.

Business Finance

BoE: Climate change and the systemic risk

IMG_0869The Bank of England (BoE) has published (16th June) its updated analysis of the climate change and systemic risk. According to the bank´s bulletin the central bank is focusing on the physical and transition risk sides of the climate change. This means for example that the central bank is entering more deeper co-operation with insurance companies and also reviewing climate-related risks in the UK banking sector.

The central bank is supporting the market transition to low-carbon economy with different co-operations in global and local markets. The bank is saying that a successful transition to a lower cardon future will require the engagement of wide range of actors, including central banks and financial regulatos.

According to the study, the next fifteen years will be critical while the global economy is undertaking a deep structural transformation. This would mean that around 90 trillion US dollars will be likely to be invested in infrastructure in the world´s urban, land use and energy systems until 2030. This estimate is based on Global Commission on the Economy and Climate organization.

But also the International Energy Agency (IEA) has estimated that 26 trillion US dollars of additional investments is needed in renewables and energy efficiency between 2015 and 2040 to achieve the 2* Celcius Paris climate agreeement target.

Green Finance barriers

Green Finance and Green Bonds are seen as new financial tools to help the transition to low carbon economy.  According to the Bank of England, there are still some barriers to be solved in order to scale up the green finance.

One obstacle is  the lack of integration of environmental impact in the investment process, which will lead to sub-optimal allocation of capital. The others include for example maturity mismatch between short-term and long-term needs, lack of clarity of green definitions, lack of relevant disclosure information of environmental issues and the level of understanding of the financial implications of environmental risks.

According to the BoE, G20 leaders and TaskForce will discuss Climate Change issues and this low-carbon transition in their meeting in Hamburg, July 7.-8. 2017.

Business Finance

IFC and Amundi to launch Green Bond Fund of 2 billion dollars

International Finance Corporation, IFC, and Amundi (AMUN:FP), a leading European Asset Manager, have agreed to create the largest green-bond fund dedicated to emerging markets. It is a $2 billion initiative that aims to deepen local capital markets and expand financing for climate investments.

IFC will invest up to $325 million in the new Green Cornerstone Bond Fund, which will buy green bonds issued by banks in Africa, Asia, the Middle East, Latin America, Eastern Europe, and Central Asia.

Amundi will raise the rest of the $2 billion from institutional investors worldwide and will provide its services in managing emerging-market debt. The fund aims to be fully invested in green bonds within seven years.

IFC and Amundi expect the new fund to encourage more local financial institutions to issue green bonds by increasing global demand and building local markets. Together, through a donor-funded investment support facility led by IFC, they will work with local financial institutions to strengthen their capacity to issue green bonds, providing training and sharing international best practices with them.

– This green-bond fund will lower the risk for the private sector and attract new investors, essentially creating a market where there was none,” said IFC CEO Philippe Le Houérou. 

– This innovative partnership with IFC is a major achievement for Amundi. This project highlights the strong capabilities in green financial innovation of Credit Agricole Group. I consider this project as a game changer: it is both an investment opportunity for institutional investors and it will have an impact on society by accelerating the shift of emerging markets toward a green economy, said Xavier Musca, Chairman of Amundi.

 

The Bank Group (the World Bank and IFC) is a major issuer of green bonds. So far, the World Bank has issued $8.5 billion in green bonds in 18 currencies. IFC has issued $5.8 billion in 12 currencies.

Finance

Green Bonds volume up 75 % in Q1 2017

Green Bonds issuance was up 75 % during the first Q this year compared to year earlier. The rating agency Moody´s said that the issuance was totally 29,5 billion dollars during that time and one of the biggest issuers was France with the sovereign green bond.

The financing was mostly for renewable energy and energy efficiency during the first months of this year. The estimate for the whole year 2017 is the same, 120 billion dollars.

The global Green Bonds markets are expected to have more growth from Singapore, while the country´s Central Bank has launched a Green Bond Grant Scheme during this spring. This allows qualifying issuers to offset the expences of external review for Green Bonds. According to the Scheme, the offset is up to 66.000 euros per issuance.

 

Finance

SwissRE: Geopolitical risk is changing

According to SwissRe (SREN) Chairman Walter B. Kielholz, the European geopolitical risk is changing with Brexit, referendums, Trum-Jump in the US and digitalization. – We have seen different geopolitical risks in the markets and we are focusing more on risk management, he said in the Swedish Swiss Chamber of Commerce event in Zurich last week.

He said that the insurance company is making competitive edge from talent, data, client relationships and climate change.

SwissRe is listed in Zurich and it is the second largest reinsurane companies in the word. The company reported 3 billion dollars net income in the first ninth month this year, compared to 3,7 billion dollars a year earlier.  Earnings per share were 9,15 dollars compared to 10,69 dollars. The company has also announced the largest natural disaster insurance programmes in China.

Business Finance

EIB issued a new 500 million euros Green Bond

The European Investment Bank (EIB), the development institution owned by the EU Member States, rated Aaa/AAA/AAA (Moody’s / Standard and Poor’s / Fitch), issued a new EUR 500m Climate Awareness Bond (CAB) or so called Green Bond in late September.

With this new transaction, EIB continues to spur the sustainable growth of the Green Bond market, by giving long-term investors the opportunity to own a 21-year Green Bond in EUR for the first time. Today’s CAB 37 is the fourth benchmark on EIB’s EUR Green Bond curve, a meaningful complement to its existing 3-, 7- and 10-year reference lines.

The 21-year issue carries an annual coupon of 0.5%, and has been priced in line with the outstanding EIB ECoop curve at a reoffer yield of mid swaps -10bp, equivalent to 38.9 bps over the 4% Bund Jan-37.

EIB continues to benefit from a strong European following in the CAB programme with 25% from Germany, 21% from France and 18% from Netherlands.

EIB’s total Green Bond issuance amounts to  15 billion euros across 11 currencies of which 7.6 billion euros denominated in EUR.

Finance

Green Bond from the Bank of China – financing environmental projects

The Bank of China has issued 3 billion dollars multicurrency Green Bond after drawing orders worth of 7,8 billion dollars. The projects will be in renewable energy, pollution prevention and control, clean transport and sustainable water management, the bank said.

The loan is in euros, US dollars and yuan. The credit rating agency Fitch has confirmed that the Bank of China is getting A-rating for its Green Bonds.

 

Finance