Following a milestoneyear for the credit rating agency’s sustainable finance team, IFR has named S&P Global Ratings as its “ESG Opinion Provider of the Year”. The award recognises S&P Global Ratings’ extensive work in the environmental, social, and governance (ESG) space this year, from the launch of its ESG Evaluation in April, to its recent acquisition of the ESG ratings business from award-winning ESG specialist RobecoSAM.
“For accelerating the push to standardise disparate ESG information, identify risk, and ultimately link it to the cost of debt, S&P Global Ratings is IFR’s ‘ESG Opinion Provider of the Year’,” said the publication.
S&P Global Ratings scored Adani Green Energy Ltd. Restricted Group 2 (AGEL RG2)’s proposed US$362.5 million green bonds E1/90 under its Green Evaluation – the highest score on the Green Evaluation scale of E1-E4, comprising a Mitigation score of 90, a Transparency score of 89, and a Governance score of 93.
The bonds will be used to finance and refinance solar photovoltaic (PV) power plants and related transmission infrastructure in Karnataka and Rajasthan, India.
“AGEL RG2’s intention to use 100% of the proceeds for solar PV power projects is the main driver of the high score,” said Cheng Jia Ong, the primary analyst of the Green Evaluation.
Green bonds have proliferated since the first green debt instrument was introduced in 2007, with banks and corporate bond issuers leading the pack. However, project bond and emerging market issuers have been more hesitant.
Speaking on TXF Proximo’s podcast, “Transmissions”, Michael Wilkins, Global Head of Analytics and Research, Sustainable Finance, S&P Global Ratings, argues that this may not be the case for much longer.
“Because there is interest among investors to benchmark according to environmental contribution as well as credit quality, there may be opportunity for green project bonds in emerging markets to grow,” said Wilkins.
Meanwhile, he believes that green project bonds may well see a surge in market interest if the high level of environmental contribution that S&P Global Ratings generally sees from the asset class is made explicit in offering circulars.
According to S&P Global Ratings, the development of the EU’s proposed green finance taxonomy is one of the most important developments in the world of sustainable finance in recent years.
However, as with any major change, questions surrounding the implications for the capital markets abound. In an article for Responsible Investor, Michael Wilkins, Global Head of Analytics and Research, Sustainable Finance, S&P Global Ratings, considers the “pain points” that the taxonomy will have to overcome if it is to be successfully implemented and effectively drive capital towards sustainable objectives.
Namely, according to Wilkins, defining what can and cannot be defined as a sustainable economic activity should be the main focus of the taxonomy’s development, if it hopes to effectively engage the broader market.
In its second ever Green Evaluation carried out in India, S&P Global Ratings has assigned an overall score of E1/90 to Adani Green Energy Ltd. Restricted Group 2’s proposed US$362.5 million green bond issuance. The E1/90 score is the highest on the Green Evaluation scale of E1-E4, and comprises a Transparency score of 89, a Governance score of 90, and a Mitigation score of 90.
“Adani’s intention to use 100% of the proceeds for solar photovoltaic power projects is the main driver of the high score,” said Cheng Jia Ong, the primary analyst of the Green Evaluation.
While the first half of 2019 saw a somewhat lacklustre performance in the global green bond market, the latter stages of this year are bringing change – particularly for Latin America.
Writing for the World Bank’s blog, Bruno Bastit, Associate Director, Sustainable Finance, S&P Global Ratings, notes that following the issuance of two large green transactions totalling US$1.3 billion in the first quarter of this year, the region is seeing increased interest in financing projects and infrastructure via green-labelled debt instruments.
However, for green bonds to really take hold in Latin America, uptake needs to extend beyond the handful of countries, issuers and sectors spearheading issuances today, says Bastit.
The article was published on World Bank’s blog here, as well as its Spanish language blog, Voces, here.
S&P Global Ratings has assigned Bazalgette Tunnel Ltd’s £75 million fixed-rate senior secured green note issuance a score of E1/95 under its Green Evaluation, representing the highest score on the E1-E4 scale. Proceeds from the issuance will be used to design, build and maintain the Thames Tideway Tunnel in London.
Noemie de la Gorce, the primary analyst of the Green Evaluation, commented on the “positive environmental impact from the increase of available fresh water in the tidal Thames from wastewater treatment, as well as carbon savings.”
As the green finance market continues to expand, new sectors such as telecommunications have started to issue green bonds and capitalise on investor demand for sustainable financial instruments, according to a recent report by S&P Global Ratings.
Labeled green bond offerings to date include three significant issuances by telecom giants Telefonica, Verizon, and Vodafone. But some investors have expressed concern that green bonds issued by telecom companies fund projects that could be described as “business as usual” and that lack environmental “additionality”.
In the report, S&P attempts to gauge the environmental contribution of the bonds issued in the sector thus far, issuing these bonds a score based on public information using its Green Evaluation analytical approach.
The sustainable finance space, comprised of the green and sustainability-linked loan markets, is booming. Although the green loan market still dominates, sustainability-linked loans (SLLs) – which tie the pricing of a loan to an entity’s performance on environmental, social, and governance (ESG) criteria – are quickly catching up. Indeed, the SLL market grew nearly sevenfold to US$36.4 billion in 2018.
In a recent report, S&P Global Ratings considers the proliferation of the SLL market and the growing trend of linking ESG performance to loan margins to explicitly align pricing with achieving sustainability performance targets (SPTs), as well as the obstacles facing the SLL market; namely, transparency and disclosure.