The information you need to make your sustainability ambitions a reality

In this edition

• Carbon Capture – An Export Opportunity for Canada
• U.S. Securities and Exchange Commission Recommends Climate Change Disclosures
• Launch of Framework to Assess Credibility of Transition Plans
• Podcast: The Road to COP26

CIBC introduces new Sustainability Issuance Framework – Adds circularity as green eligible category

CIBC has launched its new Sustainability Issuance Framework (the “Framework”) to support its future green, social, and sustainability issuances. The Framework represents an update and replacement to the Bank’s previous Green and Women in Leadership Bond Frameworks and underscores CIBC’s commitment towards developing solutions for a sustainable economy.

A first in the Canadian market, the new Framework encompasses several innovative and market-leading elements including:

• A wide range of products including but not limited to bonds, notes, certificates, commercial paper, deposits, GICs, and market-linked GICs.
• Circularity as a green eligible category, emphasizing the Bank’s support for a circular economy and value retention through reuse and recycling.

Under the Framework, CIBC commits to an annual use of proceeds and impact reporting, with the allocation of proceeds to be done on a portfolio basis against all outstanding issuances.

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Project Carbon completes first pilot voluntary carbon trade

Project Carbon announced the completion of its inaugural pilot trade between the Nature Conservancy of Canada, a leading national land conservation organization, and United Kingdom-based NatWest Group. The legally binding sale included voluntary carbon credits issued by Verra, which manages the leading global program for the certification of GHG emission reduction projects. Project Carbon aims to support a thriving global market for voluntary carbon credits with clear and consistent pricing and standards, providing a valuable pathway for clients in their efforts to achieve their net zero targets and sustainability ambitions. Launched in July, the voluntary carbon platform is an international joint effort with CIBC, Itaú Unibanco, National Australia Bank and NatWest Group.

The pilot trade follows CIBC’s recent endorsement of the recommendations by the Taskforce on Scaling Voluntary Carbon Markets. Recently, CIBC also announced its ambition to achieve net zero greenhouse gas emissions associated with operational and financing activities by 2050, and a significant increase in its commitment to mobilizing sustainable finance to a target of $300 billion by 2030.

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Carbon capture – An export opportunity for Canada

The International Energy Agency identified carbon management as one of the five pillars in a comprehensive decarbonization strategy. Fortunately, some Canadian companies have already established themselves as global leaders in the carbon capture industry.

According to the Public Policy Forum, Canada has the opportunity to take a lead position in carbon removal and is naturally positioned to do so. Aside from Canada’s growing innovative technology companies, the country has the ingredients to win the global carbon management market, including pore space, expertise, land, permitting, motivation, regulation, public familiarity and suitable energy resources.

With carbon capture still in its infancy, public policy support is important to help scale growth. An example of a beneficial policy – carbon pricing – gives companies the incentive to develop and invest in carbon capture. Having the right mix of policies will enable carbon management to fulfil its potential, reduce emissions, and lead to stronger economic growth.

An obstacle that arises is that carbon capture is currently not looked at as an investment opportunity with future revenue streams. In order to channel private capital into carbon management, Canada should find a way to demonstrate that these investment opportunities are attractive.

Heading into COP26 with relevant data

Climate TRACE – a global coalition that monitors anthropogenic GHG emissions – analyzed 59 trillion bytes of GHG emission data using satellites, sensors and additional sources between 2015 – 2020 across 10 sectors and 38 subsectors around the world. Some key industry specific trends in the report include:

• 13.2 billion tons of CO₂e emissions between 2015 – 2020 from steel production globally. A reminder that global annual emissions are in the order of 52 billion tons.
• 11 billion tons of CO₂e emissions between 2015 – 2020 from shipping and aviation, with increases of 10% per year between 2018-2020.
• From oil and gas production and refining, 1 billion tons of CO₂e emissions have gone uncounted by the world’s top countries that submit regular inventories and an additional 1 billion tons of CO₂e have gone uncounted by countries that aren’t required to submit regular inventories.

With renewed independent and verifiable data on anthropogenic GHG emissions, world leaders are better informed to lead climate negotiations at COP26.

The absence of climate risks in financial reporting

The Carbon Tracker Initiative issued a report which studied whether companies incorporated material climate-related matters in their 2020 financial reporting by analyzing 107 publicly traded carbon-intensive companies (primarily in the Climate Action 100+) and their auditors. A few findings from the study include:

• Over 70% of companies failed to include material climate-related risks.
• 80% of auditors showed no evidence of assessing material climate-related financial risks.
• 75% of companies failed to disclose climate-related quantitative assumptions and estimates, and 0% of companies had Paris-aligned assumptions and estimates.

Despite net zero commitments and increased financial risks due to the climate crisis, there is a lack of transparency leaving investors challenged to make investment, engagement and voting decisions. The Carbon Tracker Initiative outlines how investors, auditors, regulators, and companies can do their part to improve the transparency and quality of climate-related disclosures in financial reporting.

U.S. Securities and Exchange Commission recommends climate change disclosures

The U.S. Securities and Exchange Commission has stated that going forward, it may require disclosures related to climate change risks, impacts, and opportunities. These requirements are to provide consistent, comparable and reliable information on climate-related matters. Here is a link to a sample letter that the Division of Corporation Finance may issue regarding a company’s climate-related disclosure.

London aims to be the world’s global centre of green finance

In November 2020, Prime Minister Boris Johnson announced plans to make the United Kingdom a green financial hub. In June 2021, the UK published the Green Financing Framework which introduced the UK’s first sovereign Green Gilt and National Savings & Investments (NS&I) Green Saving Bonds to further enforce their commitment to financing a green economy. Cornwall Insight and TLT examined various stakeholder views – including CIBC’s Gayatri Desai and Robert Todd – on the UK’s prospects of cementing its role as a global center of green finance, and the associated policy and regulation. This report does a good job describing the necessary steps going forward to accelerate growth of green financial products in the UK in order to achieve a net zero economy by 2050. 

‘Greeniums’ continue in bond market

The Climate Bonds Conference21 – an event aimed to mobilize capital for climate action through discussions with policy experts, industry leaders and regulators – was held from September 6-10, 2021, with a theme focused on the narrow window of opportunity to reach the Paris Agreement’s 2030 decarbonization targets.

Some key takeaways from the conference include:

• The green labelled market stood at US$228 billion in H1 2021, more than double the volume in H1 2020 of US$92 billion.
• The Green bond ‘greenium’ can be seen globally, but is particularly strong for US dollar-dominated debt due to the continued shortage of supply.
• Green bond issuers gain a pricing advantage but issuing green bonds also has the advantage of demonstrating important strategic measures that signals transition plans to the market.

Launch of framework to assess credibility of transition plans

Last year, the Climate Bonds Initiative, in partnership with Credit Suisse, issued a paper to mobilize capital towards entities and activities that will lead to a Paris Agreement-aligned economy. The purpose of the paper was to define a transition label to avoid greenwashing and to develop a robust framework to identify credible Paris-aligned transitions. This year, the Climate Bonds Initiative released a second paper with the purpose of assessing the credibility of a business’ decarbonization transition. To determine what a credible transition plan is, the Climate Bonds Initiative proposed: 1) the requisite ambition of a company’s greenhouse gas targets; 2) demonstration of the company’s willingness and ability to deliver on those targets. They also addressed the following hallmarks: 

• Paris-aligned targets
• Robust plans
• Implementation action
• Internal monitoring
• External reporting

These hallmarks are the key elements for certification assessments in sectors that are categorized as transitioning.

Climate Week NYC – Getting it done

Climate Week NYC was held in September 2021 and brought international leaders from government, businesses and civil societies to accelerate climate action ahead of COP26. “Getting it Done” was the theme of the summit, and appropriately so as the United Nation’s Secretary-General recently declared the IPCC Sixth Assessment Report as a “code red for humanity” as the 1.5°C target is rapidly deflating. The theme promotes the idea that now is the time to invest in climate solutions, and put forth bolder reduction targets before we hit a point of no return.

Time is running out – Cutting anthropogenic GHG emissions

The World Meteorological Organization in partnership with the United Nations Secretary-General and other global organizations recently released a report on the latest climate science updates. The report shows how we are “off schedule” to meet the Paris Agreement targets with anthropogenic GHGs changing our atmosphere, global climate, sea level and coasts as well as increasing the effects of heatwaves, wildfires and air pollution. Major updates noted in the report:

• The global average surface temperature from 2017-2021 is estimated to be 1.06 -1.26°C above pre-industrial levels (the warmest on record).
• In 2020 – five years after the Paris Agreement – the emissions gap is larger than ever with global CO2e emissions needing to be 15 billion metric tons lower than current Nationally Determined Contributions (NDCs) to reach the 2°C target, and 32 billion metric tons lower for the 1.5°C target.
• Rising temperatures are linked to over 103 billion potential work hours lost globally in 2019 compared with those lost in 2000 due to heat-related work impairment and mortalities.

In order to reach the Paris Agreement emission targets, countries and corporations have to urgently implement two steps: The first is that net zero commitments need to be reflected in near-term polices, more ambitious NDCs, and immediate and large scale reduction in GHG emissions to reach our 2030 goals. The second, to develop Paris-aligned long term strategies. If not, the target of 1.5°C will be nearly impossible to reach with catastrophic consequences for every single person on earth.

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.

CIBC events

Past event

2nd Annual CIBC Sustainability Conference: The Road to COP26
Tuesday, September 28, 2021

Catch the replay here

Podcasts

‘The Sustainability Agenda’ – Podcast Series

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

Did you know?

Since 1900, global sea levels have risen by 21 centimeters, primarily owing to climate change. If greenhouse gases remain at today’s high rates (RCP8.5), global sea levels will be expected to rise by 0.6 – 1.1 meters (1 to 3 feet) by 2100.

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