The information you need to make your sustainability ambitions a reality
In this edition
- Canada launches its emissions reduction plan
- A “Paris Accord” to end plastic pollution by 2024
- Indigenous Economic Reconciliation
- Podcast: The circular economy and plastics value chain
- Sustainability deal announcements
SEC lays out Climate Disclosure Rules – Issuers should pay attention
The Securities and Exchange Commission (SEC) has proposed rules that will require publicly traded companies to provide disclosure of their greenhouse gas emissions and climate-related risks – both physical and transition.
Some rules in SEC’s proposed amendments include:
- A requirement by companies to include certain climate-related information in filed financial statements and periodic reports (not just their sustainability and corporate social responsibility reports)
- Scope 1 and 2 GHG emissions are to be disclosed separately, and to have reasonable assurance by 2026 for large, accelerated filers, and 2027 for accelerated filers
- Scope 3 emissions will be required to be disclosed if material or if the GHG emissions target that includes Scope 3 emissions has been set
It is also noted that if a company has set out a target such as ‘net-zero by 2050’ or an interim target for example, it will have to lay out its actual plan to achieve that target.
Canada outlines plan to reach 2030 emissions targets
The Government of Canada released its 2030 Emissions Reduction Plan to outline a pathway for Canada to achieve its official targets to cut emissions by 40% below 2005 levels by 2030. The Plan outlines new mitigation measures and sets out $9.1B in new investments to be advanced in Budget 2022.
The new climate plan aims for Canada to cut emissions from the oil and gas industry – Canada’s largest emitting industry – by 42% from current levels by 2030 including actions to sweeten tax breaks for companies that embrace carbon capture, utilization and storage (CCUS) technology. There is no emissions cap for oil and gas in the Plan as the government continues their consultations. Additionally, key themes include incentivizing zero-emissions vehicles (ZEVs), reducing energy costs in homes and buildings, investing in nature and natural climate solutions as well as empowering communities to take climate action.
How Canada can thrive in a global green economy
The Pacific Institute for Climate Solutions, Smart Prosperity Institute, and the Transition Accelerator conducted a study of Canada’s prospects in a net-zero world.
The report highlights how Canada needs to take a more strategic approach and stay more local. As a small open economy, Canada will struggle to break into mature global value chains that are dominated by larger players without a clear strategy. Canada must identify niche areas where resource and innovation advantages promise a secure long-term position.
The seven priority opportunity areas identified include: 1) medium and heavy-duty vehicles; 2) alternative proteins; 3) green aluminum; 4) mass timber; 5) green chemistry; 6) hydrogen and; 7) carbon capture, utilization, and storage. To fully realize these opportunities, three enabling systems are needed: a clean grid, net-zero minerals, and robust carbon accounting.
The report proposes to be more experimental and strategic, and less risk averse. The report concludes that Canada tends to miss opportunities and fails to position itself well in a net-zero economy.
Now or Never – Third and final IPCC report out April 4, 2022
Some key highlights from the Intergovernmental Panel on Climate Change (IPCC) Sixth Assessment Report – Climate Change 2022: Mitigation of Climate Change – include:
- Investment in the shift to a low-carbon world needs to be three times higher, at minimum
- Changes in lifestyle will play a significant role in mitigating climate change especially for households with incomes in the top decile (large share of households in developed countries)
- It will be impossible to limit global temperature rise to 1.5°C without carbon removal
- Coal must be effectively phased out if the world is to stay within 1.5°C
- Methane emissions must be reduced by a third
- Growing forests and preserving soils will be necessary, but tree-planting cannot do enough to compensate for continued emissions for fossil fuels
- All sectors of the global economy, from energy and transport to buildings and food, must change dramatically and rapidly, and new technologies including hydrogen fuel and carbon capture and storage will be needed
Carbonplace and Climate Impact X collaborate to reduce complexity and increase trust, transparency and access in the voluntary carbon market
Carbonplace recently partnered with Climate Impact X – a global carbon exchange and marketplace – on a pilot to lower the barriers for organizations, such as corporations and financial institutions, seeking high-quality carbon credits on the voluntary carbon market, while allowing customers to discover, compare, buy, and retire credits. The collaboration joins the strengths of Carbonplace’s wide client base, unique settlement technology, wallet service to record and store voluntary carbon credits, and the high standards set by the regulatory environment for banks with Climate Impact X’s curated marketplace of quality-assured credits which gives existing bank customers scaled access to the carbon market. The end result is a solution that will reduce complexity and increase trust, transparency and access.
This will allow new customers to progress their climate strategies, and buy and trade carbon credits to fund large-scale emissions removals or reductions that would otherwise not be possible.
A reminder that Carbonplace is a global bank initiative founded by CIBC, along with BNP Paribas, Itaú, National Australia Bank, NatWest, Standard Chartered and UBS.
CPPIB finds demand for high-quality, verifiable carbon credits will rise faster than supply
The inaugural report from CPP Investments Insights Institute explores the growing demand for the global carbon credit markets, and the data that is leading to further investment in these markets. The carbon market offers investors the ability to fund nature-based mitigants to climate change while also earning attractive risk-adjusted returns.
CPP Investments established a partnership called “Accelerate Nature” with Conservation International – a non-profit, non-governmental organization and globally recognized leader in nature-based climate solutions – to help scale the carbon markets and create value by protecting forest ecosystems and communities. The CPP Investments Insights Institute will focus on three areas going forward: climate change, technology disruption and stakeholder capitalism.
Carbon removal – Microsoft’s second update of lessons learned
Microsoft has published its second report on the findings of their carbon program with helpful calls to action for corporate purchasers of carbon credits. Highlights include:
- Market still lacks strong, common definitions and standards
- High-durability solutions are critical, but supply is limited and expensive, and many companies cannot yet afford them at scale – durability refers to the time the carbon is captured and stored
- Forestry and soil carbon removal face sobering challenges in quality but offer short-term climate value and co-benefits beyond carbon removal
Microsoft concludes the following is needed:
- Taxonomy for carbon removal, as well as more consistent differentiation of removal durability
- Stronger measurement, validation, and oversight of climate outcomes, especially from nature-based solutions
- Public policies and investment from both public and private sectors to help develop high-durability technologies
- Increased corporate demand, especially through multiyear contracts, similar to PPAs or power purchase agreements
Core Carbon Principles (CCPs) expected to launch in Q3 2022 following a public consultation in May 2022
The Integrity Council for the Voluntary Carbon Market (Integrity Council), an independent governance body for the voluntary carbon markets, released an updated timeline of the launch of the Core Carbon Principles (CCPs) and Assessment Framework (AF). In summary:
- CCPs and AF will release a proposal for consultation in May 2022
- The consultation will be open for 30 days and will be overseen by the British Standards Institute; details on participation will be available on the ICVCM website and we will share in our next newsletter
- We expect the launch of a definitive set of global standards for carbon credit quality in Q3 2022
A “Paris Accord” to end plastic pollution by 2024
In March, the UN Environment Assembly, endorsed by 175 UN member states, adopted a resolution to end plastics pollution by 2024. A Bloomberg Green article believes if the treaty is completed, it will rival the Paris Agreement, which binds nations to targets to reduce greenhouse-gas emissions. The next step is an ad-hoc convening of nations that will decide the rules of the negotiation.
About 11 million metric tons of plastic waste end up in water each year, and the volume is expected to nearly triple by 2040. In addition, plastic production soared from 2 million tonnes in 1950 to 348 million tonnes in 2017, becoming a global industry valued at over US$500 billion; furthermore, it is expected to double in capacity by 2040. The impact of plastic production can be felt in land/air/ocean pollutions, harm to human health, and increases in GHG emissions.
Various solutions for plastic waste and pollution are available, including sustainable package design, and limiting production of virgin plastics. A shift to a circular economy can reduce the volume of plastics from entering oceans by over 80%; reduce virgin plastic production by 55%; save governments US$70 billion by 2040; reduce greenhouse gas emissions by 25%; and create 700,000 additional jobs, according to the UN Environment Assembly. Listen to our Circular Economy podcast series where experts share leading insights on navigating the circular plastics transition in Canada, and join the upcoming CIBC Circular Economy Roundtable for deeper conversations in this regard.
Consideration for a Canadian Sustainability Standards Board – open for comment
The Independent Review Committee on Standard-Setting in Canada (IRCSS) – established to review the governance and structure for Canadian accounting, auditing and assurance standards – released a consultation paper to seek input on its recommendation of a Canadian Sustainability Standards Board (CSSB) being contemplated to complement and connect to the recently announced International Sustainability Standards Board (ISSB). The consultation paper is available for public opinion until March 31st, 2022.
ISSB Launches Consultation on Proposed Climate and General Sustainability-related Financial Disclosures
The International Sustainability Standards Board (ISSB) – a new standard setting board established at COP26 to develop a comprehensive global baseline of sustainability-related disclosures standards for capital markets participants – released two proposed standards for consultation on March 31, 2022.
The proposed standards cover “General Requirement for Disclosure of Sustainability-related Financial Information”; and “Climate-related Disclosures”.
The consultation period closes on July 29, 2022. ISSB aims to publish the new Standards by the end of this year, subject to the feedback.
TNFD releases first beta version of framework for market consultation
The Taskforce on Nature-related Financial Disclosures (TNFD) released the first beta version of its Nature-related Risk Management and Disclosure Framework.
The beta framework comprises three components: foundational guidance, including key concepts and definitions; approach and language aligned with the climate-related guidance developed by The Task Force on Climate-related Financial Disclosures (TCFD); and practical guidance for nature-related risk and opportunity analysis. The framework is also designed for future alignment with the global baseline for sustainability standards under development by the International Sustainability Standards Board (ISSB).
The prototype framework will have an 18-month process of consultation and development with future iteration to be released in June 2022, October 2022 and February 2023, and the finalized version of the TNFD’s recommendations plan will be released in Q3 2023.
Indigenous Economic Reconciliation – If you don’t know this term, read this publication
The Institute for Sustainable Finance published a new addition to their series of sustainable finance primer articles: “Indigenous Economic Reconciliation.”
“Economic Reconciliation” is a commitment to make space for the Indigenous way of life where values, practices and sovereignty are respected. It is the inclusion of Indigenous people, communities and business in all aspects of economic activity. Indigenous communities continue to face multiple barriers to fully participating in the economy, despite successes in court that recognize rights and title to their land.
Indigenous populations face deeply rooted systemic barriers that are in the Canadian economic landscape, most notably the Indian Act and its restrictive land regime, inadequate implementation of the treaties, and systematic exclusion of Indigenous peoples from economic systems.
We recommend this reading, particularly where companies have exposure to Indigenous communities.
Generation Investment Management addresses need to integrate climate and justice in decisions
Generation Investment Management – a pure-play sustainable investment manager that was co-founded by former US Vice President, Al Gore, and former CEO of Goldman Sachs’ Asset Management, David Blood – released a letter from its Senior Partners highlighting how financial institutions and capital allocators need to accelerate and integrate climate and justice into their decisions. The letter focuses on three pillars of actions: 1) invest; 2) ensure a Just Transition and; 3) measure, report and engage.
The letter highlights the need for asset owners and asset managers to halt the financing of new carbon-intensive projects in order to limit global temperature rise to 1.5C and ensure a just transition; for a just transition in which workers and communities have understanding and agency over the decisions that will affect their lives and; to find ways to measure and reflect the time value of carbon in valuation, engagement and investment decisions as climate and inequality risks must be incorporated into every investment and lending decision.
Private company boards need more independent directors and sustainability expertise
Stakeholder pressure on public companies to deliver on sustainability commitments has continued to grow but there is now pressure on private companies, especially those backed by private equity firms. The reasoning is private equity will eventually exit an investment, likely by IPO. To accomplish this, adding ESG capabilities to the board and building an internal measurement and reporting capability is needed to meet institutional investors’ expectations.
The data shows that there is limited sustainability expertise among private company directors and private companies tend to not have independent directors.
Russell Reynolds Associates – an executive search and leadership advisory firm – highlights this in their latest publication: Private Company Boards Need More Independent Directors – Sustainability Offers a Win-Win Solution
CBI’s Green Bond Pricing Report: Pricing Dynamics of Green Bonds for Investors and Issuers
The Green Bond Pricing in the Primary Market H2 2021 report was released March 15th, 2022, by the Climate Bonds Initiative, which analyzes the pricing advantages for issuers and investors in primary and secondary markets.
Research based on the Climate Bonds Green Bond Database looked at 73 green bonds with a combined face value of US$72B. Findings show that green bonds, compared to their vanilla equivalents, achieve larger book cover and spread compression. Green bonds also experience stronger secondary market performance, tightening after both 7 and 28 days when compared to baskets constructed of matched vanilla bonds and indices.
It notes that stronger performance has helped justify the greenium to investors, and the increased demand for sustainable investments is expected to offer some protection against expected rate increases in 2022.
Project Drawdown – Linking Climate Solutions to Poverty Alleviation
Drawdown Lift by Project Drawdown was formed in 2021 to deepen understanding of the links between climate solutions and poverty alleviation, focusing on low- and middle- income countries (LMICS) in sub-Saharan Africa and South Asia.
The recently published report introduces Project Lift’s Human Well-Being Index – an adaptation of the Doughnut Economics Framework – and analyzes both direct and indirect human well-being co-benefits from 28 solutions in five climate solutions groups: 1) improving agriculture and agroforestry; 2) protecting and restoring ecosystems; 3) adopting clean cooking; 4) providing clean electricity, and; 5) fostering equality (see below). The human well-being co-benefits are especially strong around solutions for income and work, health, food, education, gender equality, and energy.
People living in extreme poverty often live in regions that have been and are projected to be most impacted by climate change – climate solutions can be transformational in helping alleviate poverty for LMICs.
Source: Project Drawdown
Sustainability across CIBC
We are committed to making sustainability a reality for our clients and the communities we serve. Whether through greening their balance sheet or providing sustainability advisory services, our objective is to help our clients become global leaders in environmental stewardship and sustainability.
CIBC Sets 2030 Targets to Reduce Financed Emissions in the Oil and Gas Sector
IBC recently announced targets to significantly reduce the carbon intensity of our financed emissions in the oil and gas sector by 2030. These targets include:
- 35% reduction in operational emissions intensity (Scope 1 and 2); and
- 27% reduction in end use emissions intensity (Scope 3) compared to a 2020 base year
We are committed to continue collaborating with carbon-intensive sectors towards a successful transition to net-zero.
CIBC releases 2021 Sustainability Report highlighting progress in tackling urgent sustainability challenges
CIBC released its 2021 Sustainability Report which provides an in-depth overview of our actions to tackle the urgent sustainability challenges that are affecting people, our communities and our planet.
In this year’s report, we highlight the progress, actions and investments we’re making against a recently announced refocused ESG strategy built around three pillars: accelerating climate action, creating access to opportunities, and building integrity and trust.
Focusing on the S and G, not just the E, in an ESG strategy
CIBC’s Ian de Verteuil in this interview with BNN Bloomberg, highlighted the need to focus on the social and governance elements, and not just the environmental elements in an ESG strategy – with specific attention to ESG funds where the focus on carbon has led to holdings of twice as much Russian oil and gas vs. Canadian oil and gas at the end of last year. Watch the full interview here for additional insight.
Deal announcements
In line with our commitment to make sustainability a reality for our clients and the communities we serve, CIBC Capital Markets led significant client deals and provided sustainability advisory as part of a focused objective to help our clients become global leaders in environmental stewardship and sustainability.
iA Financial Group
Joint Bookrunner on a $300MM Sustainability Bonds, issued under the company’s newly launched Sustainability Bond Framework. CIBC also acted as a Co-Sustainability Structuring Advisor for the framework
Government of Canada
Joint Lead Manager on their $5B inaugural Green Bond – represents the largest C$ Green Bond transaction in the Canadian Debt Capital Markets
Dream Industrial Real Estate Investment Trust
Joint Bookrunner on a $200M 4-year Debenture – The third Green Bond offering for the issuer
Gildan
Co-Lead Sustainability Structuring Agent for the transitioning of Gildan’s existing USD$1B 5-year revolving credit facility into a Sustainability-Linked Loan
CIBC Events
Upcoming event
CIBC Sustainability Circular Economy Roundtable: Enabling the Ecosystem
Publications
The Sustainability Agenda
CIBC Capital Markets’ 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.
