Sustainability Newsletter Edition 13

A curving road through a forest

The information you need to make your sustainability ambitions a reality.

In this edition

  • China launches world’s largest carbon trading scheme
  • 2nd Annual CIBC Sustainability Conference: The Road to COP26
  • Podcast: Exploring voluntary carbon markets and the goals of Project Carbon

This has been a year of tipping points and transformation

The 2021 Sustainability Trends Report from Generation Investment Management, founded by Al Gore and David Blood, presents both an optimistic and cautious portrait of the state of sustainable finance. While three-quarters of the global economy is now covered by net-zero carbon goals and ESG-focused investments continue to rise, there are still gaps between distant climate goals and near-term needs and actions. Some key sector specific trends in the report include:

  • Finance has finally made net zero commitments in anticipation of COP26, the Net Zero Asset Managers initiative now covers US$43 trillion of assets under management
  • Natural solutions are gathering a lot of investor demand, with particular interest in alternative protein companies as there is a shift to plant-based diets
  • Radical change is needed in the energy sector and 2021 can prove to be a tipping point as investment in renewables is estimated to surpass upstream oil and gas investment
  • Health and wellbeing was brought to the forefront by the pandemic, and more action is being taken by companies, governments and individuals, stoking interest in new wellbeing products
  • Electric vehicles continue to experience exponential growth and it is estimated that large-scale adoption of zero-emissions vehicles could reduce deaths by tens of thousands a year from improved air quality
  • The circular economy is taking shape and according to one estimate, circular-economy businesses could cut emissions by 31%
 

China launches world’s largest carbon trading scheme

China recently launched the world’s largest emissions trading scheme, something originally pledged ahead of the 2015 signing of the Paris Agreement. In the first transaction on China’s exchange, a ton of carbon was priced at around US$8, compared to the US$59–$70 prices in the European system. However, in addition to low pricing, the scheme faces significant criticism, including concerns on data reliability, non-inclusion of major polluting industries such as steelmaking and petrochemicals, and laxity of fines for misstating data (maximum fine ~US$4,600).

China’s scheme is based on a cap-and-trade model, in which emitters — initially just coal- and gas-fired energy plants — are allocated a certain number of emissions allowances up to a set limit, or cap, and then either trade or buy allowances if they remain below or exceed this. China also issued free allowances to companies based on previous years’ performance. Compared to Canada, China has chosen to focus on reducing the intensity of emissions generation, rather than absolute emissions.

It is expected that there will be stricter caps in the future and that the reliability of reported data will increase as the program develops. China is currently the world’s the world’s largest emitter of greenhouse gases but has announced net zero by 2060 and peak emissions by 2030. It is anticipated that there will be stricter caps on total sector emissions in the future in order to help China achieve these goals. 

Read more

 

SBTi revises the max temperature target

The Science Based Targets initiative (SBTi) has announced that effective July 15, 2022 they will only accept targets aligned with its 1.5°C ambition and moving away from their previous well below 2.0°C benchmark. The new SBTi strategy is in response to the accelerating urgency needed to tackle climate change and provides businesses with a more robust target setting framework. Companies that previously had targets approved in 2020 or earlier will have until 2025 to update their targets. We expect the success of the SBTi to continue to drive decarbonization, currently 20% of the global economy is covered by science-based targets.

 

G20’s communique mentions carbon price for first time

Climate change issues were at the forefront of the G20 meetings in Italy as mentioned in a Communiqué from the G20 Finance Ministers and Central Bank Governors meeting. It is noted that climate change poses increasing physical and transition risk to macroeconomic outcomes and to broad financial stability. Interestingly, for the first time, the Group mentioned the use of carbon pricing mechanisms and incentives as one of the tools to help tackle climate related challenges. There was agreement that there needs to be broader international coordination on climate action to ensure a just transition to low-emission sustainable economies. It is evident, the group understands that more work needs to be done to tackle climate change issues.

 

EU group publishes proposed social, transition Taxonomy extensions

The EU’s Platform on Sustainable Finance recently published two draft proposals: one for an extension to the Green Taxonomy in order to identify transition activities, and the other for a Social Taxonomy.

A few key takeaways from the Green Taxonomy Extension proposal:

  • The EU Taxonomy is attempting to widen the classification beyond just “Green”. It will define activities which are viewed as causing “Significant Harm” and “Intermediate Performance” which by doing so will form the principles around transition based on where the activities lie on the GHG reduction curves (by sector) to meet the Paris Agreement. Any improvement between these categories can potentially be viewed as “transition”.
  • The taxonomy will also look to create a category of activities that have “No Significant impact” (i.e. businesses that do not significantly contribute to climate change objectives, but also do not do significant harm towards it). The intent is to capture all economic activities and to proactively show and support businesses that are not harmful.
  • The proposal moves away from a conventional Green/Brown activity classification to a more gradual traffic light system – Green, Amber and Red.

Please note that these are proposals which are still subject to feedback, and public comment period is open until the end of August 2021. The EU Commission intends to prepare a finalized report including the taxonomy extensions by the end of 2021.

 

Canada’s renovation wave to create up to 200,000 jobs

According to the Pembina Institute, a renovation wave of decarbonization retrofits across Canada could create up to 200,000 jobs over the next 20 years and generate more than $48 billion in economic development annually.

 

Are institutional investors required to pursue sustainability goals by law?

The global law firm, Freshfields, recently published a legal framework for impact report. The report commissioned by The Generation Foundation, the UN-supported Principles for Responsible Investment (PRI) and the UN Environment Programme Finance Initiative (UNEP FI), identifies opportunities for lawmakers to reform regulations to facilitate sustainable investing amongst institutional investors. The goal for institutional investors was normally to provide a financial return to stakeholders but in today’s world, where the world has broader environmental and societal goals, that may soon be changing – it may in fact be the law.

 

Sustainability across CIBC

At CIBC, we are committed to making sustainability a reality for our clients and the communities we serve. We have built a market-leading Renewables franchise to provide our clients with expert advice, capital and access to capital markets in this important sector. Whether through greening your balance sheet or providing sustainability advisory services, our objective is to help our clients become global leaders in environmental stewardship and sustainability.

Man looking out the window

 

Expanding CIBC’s ESG Research Capabilities

We are pleased to announce that Shaz Merwat has been appointed as Sustainability Analyst within CIBC’s Equity Research team. Shaz has been an instrumental member of CIBC’s Portfolio Strategy team, and has been focusing on ESG-related research for the past several years.

Shaz’s experience with portfolio strategy, energy research, and the creation of CIBC’s carbon tracker will further enhance CIBC’s ESG research offering and provide valuable insights to a variety of stakeholders.

 

CIBC Events

Upcoming event

2nd Annual CIBC Sustainability Conference: The Road to COP26

Tuesday, September 28, 2021

8:00 a.m. – 12:50 p.m. ET

Register Here

2nd Annual CIBC Sustainability Conference event poster: Tuesday, September 28, 2021

 

Publications

‘The Sustainability Agenda’ – Podcast Series

CIBC Capital Markets’ latest podcast series focusing on the evolving complexities of the sustainability landscape – with a view on addressing current issues in a concise format to help you navigate and take action.

Did you know?

A red vector drawing of a globeHydrogen is the most common and only neutron-less element in the universe, making up about 75% of the visible mass.

 

A red vector drawing of a pipeThere are 1.6 trillion tons of carbon dioxide present in the atmosphere; representing the stock of carbon equivalents we need to remove from the atmosphere.

 

CIBC Capital Markets Insight Portal

Your one-stop destination for thoughtful and timely insights on today’s most critical issues cibccm.com/en/insights

Stay informed. Follow CIBC Capital Markets on LinkedIn.

Roman Dubczak
Deputy Chair
Susan Rimmer
Managing Director And Head, Global Corporate & Investment Banking
Dominique Barker
Managing Director and Head, Sustainability Advisory
Siddharth Samarth
Managing Director, Sustainable Finance
Robert Todd
Managing Director, Energy, Infrastructure & Transition
Giorgia Anton
Managing Director and Head, Research
Gayatri Desai
Managing Director, Global Corporate Banking
Adam Janikowski
Executive Director Global Investment Banking

The CIBC logo and “CIBC Capital Markets” are trademarks of CIBC, used under license.

Your feedback matters to us!

Please fill out the form below to share your feedback to the CIBC Capital Markets Insights team.
If you would like to provide further details, please feel free to contact us.