With ongoing advances in sustainability, the risk of being unable to monetise carbon assets grows by the day. A new book from Routledge, Stranded Assets and the Environment: Risk, Resilience and Opportunity, explores the ramifications of asset stranding across various sectors of the global economy.
Mike Wilkins, Head of Sustainable Finance at S&P Global Ratings, supplies chapter 8, drawing on research and real-world corporate case studies to focus on the credit implications of stranded assets.
The Nordics are known worldwide as pioneers in green finance. Since the very first green bond issuance in 2007, the market has expanded massively – close to US$300 billion of the instruments have been issued globally as of October 2017.
S&P Global Ratings published a report on how the Nordics will likely continue to blaze the trail for green bonds into 2018 and beyond. The lead analyst was Andrea Croner.
The report was covered by GreenBiz and Business Green.
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After a year of multiple extreme weather events around the world, there was growing sense of urgency for action at COP23, particularly from the small island states and developing countries looking to focus more attention on climate change adaptation.
As such, S&P Global Ratings’ produced a report “COP23: Two Degrees, With Separation” examining the nationally determined contributions (NDCs); America’s continued role in the fight against climate change; and the possibility for blended finance as a means to reach climate goals (i.e. the provision of both public and private funding from a range of different sources, including sovereign, development, and multilateral lenders as well as private entities).
The report’s key takeaways were covered by Sustainable City Network here.
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Speaking to Environmental Finance, S&P Global Ratings’ Michael Wilkins, Managing Director, Environmental & Climate Risk Research, appeals for greater attention to effective disclosure of green bond issuances to ensure that their environmental objectives are met.
A report by S&P Global Ratings has found that a lack of transparency and governance measures is significantly affecting the scores of self-labelled green bond issuances under S&P Global Ratings’ Green Evaluation. The Green Evaluation scores green bonds issued to finance carbon mitigation projects according to three criteria – mitigation, governance, and transparency – before aggregating them into an overall score, on a scale of E1 (highest) to E4 (lowest). After assessing 282 green bond issuances between January 2012 and July 2017, S&P Global Ratings found that the projects they evaluated tended to fall down at the point of effective disclosure through transparency and governance measures. This lack of effective disclosure, Michael notes, is even more apparent in the wider green bond market. Improving transparency and governance is crucial to ensuring that green bonds live up to the reason for their issuance – that is, making a positive contribution towards decarbonisation.
To read the full article, please click here.
Talking to Handelsbanken, Marcus Nystedt, Director, explains how he is increasingly aware of the growing attention to, and materiality of, environmental and climate risk for the creditworthiness of corporates and financial services. Moreover, having released a new Green Evaluation tool in the spring of 2017, Nystedt discusses its aggregate scoring mechanism and S&P’s increasing presence in the ESG (Environmental, Social, and Governance) space.
The article was published in the Handelsbanken Nordic Green Bond and Sustainable Finance Newsletter.
The City of Gothenburg received a score of ‘E2/67’ on S&P Global Ratings’ new Green Evaluation scale for its Swedish krona (SEK) 1 billion of green bonds due on 15th June, 2022. The bonds, issued on 15th June 2016, have been allocated to fund a number of eligible projects as part of the Swedish municipality’s wider environmental initiatives. The proceeds are targeted at financing projects in renewable energy, energy efficiency, public transportation, waste management, water treatment, and sustainable housing.
The transaction received a score of 67 out of 100 or E2 on S&P’s Green Evaluation scale of E1 (highest) to E4 (lowest). The overall score reflects an average score in Transaction Transparency (56) and a very strong score in Governance (94). The financing evaluated also achieved a strong overall Environmental Impact score because the proceeds will go to projects with high decarbonisation potential. All funds raised were allocated to environmentally friendly projects focusing on climate change and mitigation.
Following distribution by Moorgate, the Green Evaluation was covered by Energy Live News, British Utilities, FTSE Global Markets, and Environmental Finance.
S&P has released the December edition of IFR Outlook, the newsletter of key infrastructure and project finance-related research and rating news.
In the front-page feature, Michael Wilkins, head of environmental and climate risk research, assesses global trends in climate finance. Looking back at the year since the Paris Agreement, he explains that continued development of the global green bond market is needed to convert politics into action and secure a low-carbon future. Continuing the environmental theme, director Miroslav Petkov explains S&P’s methodology behind evaluations of infrastructure projects intended to adapt to the effects of climate change.
In the wake of the US election, director Michael Ferguson explores the likely credit impacts of a Trump administration on the country’s energy sector, assessing everything from renewables and ethanol to coal and fracking. Also in the energy sphere, credit analyst Vittoria Ferraris outlines the next steps for Germany’s second-largest utility, RWE and its subsidiary Innogy, following Europe’s largest initial public offering (IPO) since 2011. In another feature on utilities, director Pierre Georges weighs in on the pension benefit obligations of Europe’s top 20 companies.
In other news, S&P has revised its outlook on UK-based road operator Autolink Concessionaires to positive, rated Spanish Redexis Gas ‘BBB’ with a stable outlook, and assigned a ‘BB+’ corporate credit rating to Saudi Arabian utility company ACWA Power Management and Investments One Ltd, with a preliminary ‘BBB-’ rating to the company’s proposed senior secured bond issue.
To view these articles and more, please see the full version of the newsletter in PDF or e-book format
In a new report released at the 22nd annual UN Climate Change Summit (COP22) in Marrakesh, S&P Global Ratings reflects on the climate financing that has been achieved since the Paris Agreement in December 2015, and what more will be required to meet the Agreement’s aim of reducing global temperature rises.
The comprehensive report shows that green bonds have taken off within the past year. Municipal green bond issuance, for instance, is expected to expand by at least 50% in the US, where municipal governments are looking for ways to fund sustainable long-term environmental objectives. Global issuance has, in fact, grown by over 50% compared to 2015 totals.
S&P expects increased standardisation to spur green bond issuance yet further, as project types begin to diversify. Since green bond issuance has begun to diversify away from renewable energy – to include water, waste, and adaptation-focused bonds – there is increasing demand for introducing an assessment that successfully compares and evaluates different types green bonds and their environmental impact. For this reason, the report discusses the improvements made to S&P’s proposed Green Bond Evaluation tool, which is to be released in the early first quarter of 2017.
Additional aspects of the report include evaluations of aviation emissions, environmental policy-making, as well as corporate environmental, social, and governance assessment, among others.
News coverage of the report can be read at Environmental Finance, Blue & Green Tomorrow, Business Green, and Energy Live News.
In an interview for specialist financial magazine Global Capital, Michael Wilkins, head of environmental and climate risk research at S&P Global Ratings, explains that – in response to investor demand – S&P has proposed two new assessment tools for evaluating the environmental impact of a bond issued or a future project.
In the interview, Wilkins describes the new ‘Environmental, Social and Governance (ESG) Assessment’ that will rank issuers on a five point scale, according to their level of exposure to these associated risks. In addition, S&P’s ‘Green Bond Evaluation’ tool is designed to evaluate corporate green bond issuance in a more standardized and transparent way. Wilkins notes that these tools “reflect the demand we think exists for looking beyond credit risk, in the world of ESG and green finance”.
He argues that these factors are becoming a bigger and more common consideration for investors, which, for many, is viewed as crucial preparation for future changes in climate and environmental regulation.
The full article in which Mike Wilkins views are opined can be read here.
In a recent article for Environmental Finance, Michael Wilkins managing director and head of environmental & climate risk research at S&P Global Ratings, discusses why two new assessment tools will increase green bond issuance by bringing much needed transparency and standardisation to the market.
In his article, Wilkins explains that while investors are increasingly pursuing green financing tools the demand for green bonds currently outstrips supply. He explains that this imbalance is due to a lack of standardisation; which ultimately constrains green bond issuance to a limited amount of corporate issuers that can afford the associated costs of certifying green bonds. In addition, as yet, there is no official measure of a project bond’s level of ‘greenness’, making it very difficult to define.
For these reasons, S&P has released two new proposals for the assessment of a project’s impact on the environment. The Green Bond Evaluation Tool would measure the transparency, governance, mitigation and/or adaption of green bond proceeds, while the Environmental, Social, and Governance (ESG) assessment would evaluate a company’s natural and social environmental impact in order to identify potential risks and exposures. Neither assessments are credit ratings, yet they do aim to accommodate the increasing level of green bond demand in the financial markets.
The full article can be read online here.