The information you need to make your sustainability ambitions a reality
In this edition
- Latest developments from U.S. SEC Climate and ESG Task Force
- World’s first science-based target methodology for land sector emissions– Agriculture and forest sectors, pay attention
- $12 trillion in cost-savings from energy transition a ‘win-win’
- Podcasts – “Canada’s National Adaptation Strategy” and “The Inflation Reduction Act”
Nature’s invoice now due
Deloitte, with contributions from WWF Australia, have authored Banking on natural capital: unlock the true value of nature. Written primarily for the financial services industry, it discusses the opportunities, challenges and actions for integrating natural capital and its values into financial markets and mechanisms.
Key is defining the equivalent monetary value on our use (and depletion) of natural assets. Without this, the integration of natural capital considerations into balance sheets, corporate strategies, and risk frameworks will be stalled. As one report contributor, acting CEO of WWF Australia, notes: “If nature were to issue an invoice for use of its goods and services, how would this change the way we do business?”
The report defines ‘ecological footprint’ as a way to translate the unsustainable utilization of nature into numerical terms. It also conveys that the gap between global ecological demand and supply is widening, creating an ‘ecological deficit’, spurring the need to transition from a nature-negative to a nature-positive economy by 2030.
Global ecological footprint vs natural capital supply
Source: Deloitte (2022). Banking on natural capital: unlock the true value of nature; based on data from Footprint Network, 2022 National Footprint and Biocapacity Accounts.
New report aims to foster a nature-positive insurance industry
The University of Cambridge Institute for Sustainability Leadership (CISL) have released a new report: Why nature matters: Nature-related risks and opportunities for insurance underwriting. The report highlights the correlation of nature-related risks, caused by biodiversity loss, as a potentially significant threat to financial stability.
Many re/insurers are beginning to recognize that nature-related risks are potentially material to their underwriting businesses. However, such risks are not currently being assessed or embedded into underwriting practices, according to data from NGFS-INSPIRE cited in the report.
The report recommends principles for a framework that can support the identification and assessment of such risks in re/insurance underwriting and calls for nature-positive activities that reduce the impact of nature loss.
In fostering biodiversity, re/insurers may also generate a key co-benefit- that of potentially lowering the incidence and severity of future insured claims.
Feedback loops from investing in nature
Source: University of Cambridge Institute for Sustainability Leadership (2022). Why nature matters: Nature-related risks and opportunities for insurance underwriting. Cambridge, UK: University of Cambridge Institute for Sustainability Leadership.
World’s first science-based target methodology for land sector emissions – Agriculture and forest sectors, pay attention
The Science-Based Target initiative (SBTi) has launched what it describes as the “world’s first” sector standard for emissions reductions and removals for businesses with land-intensive operations, such as in food, agriculture and forestry.
Science-based targets offer companies, who have made net-zero commitments in line with Paris Agreement goals, the means to set, measure and report their greenhouse gas emissions using science-driven methodologies and best practices. Until now, emissions generated from forestry, agriculture and other land uses have not generally been accounted for in companies’ set targets because of the lack of guidelines and standards.
SBTi’s newly launched Forest, Land and Agriculture Guidance (FLAG), which was developed through public consultation, will address that gap. The FLAG is expected to support more corporate emissions reduction or removal target setting over the next year and beyond.
Scaling-up the market for carbon credits in the concrete industry
CarbonCure Technologies, a cleantech company specializing in sustainable concrete, has released a case study that profiles one of the largest investments in carbon avoidance and reduction in the concrete industry to date.
The milestone investment in 2022, a $25 million purchase agreement of CarbonCure’s carbon reduction and removal credits over a 10-year term, was made by Invert Inc., a specialized emissions reduction and offsetting company.
The investment underlines the opportunities to accelerate and scale the decarbonization of embodied carbon from the manufacturing of building materials and construction.
Gigatonne-scale CDR must include social justice-oriented thinking
The CDR Primer is a new resource guide on the fundamentals of carbon dioxide removal (CDR). It is the result of two years of collaboration across a unique inter-disciplinary group of academics, scientists, technologists, policy and other cohorts, whose goal is to create a common science-based language to facilitate gigatonne-scale CDR deployment.
As CDR technologies enter the mainstream climate policy arena, and where nations are setting climate neutrality legislation, the primer aims to offer scientific metrics and principles to base policies not just on building CDR capacity, but also on how that capacity is developed.
It advocates that modelling gigatonne-scale CDR cannot exclude a social justice-oriented framework and calls on legislators to design equitable CDR implementation strategies that account for the risks and co-benefits of CDR deployment. Considerations like weighing economic development against emissions reductions, or how that deployment may impact other social needs like food security, must be centered on social justice and participatory decision-making.
Latest developments from U.S. SEC Climate and ESG Task Force
Recognizing that climate risks and sustainability are increasingly critical issues for the capital markets and investors, the U.S. Securities and Exchange Commissions (SEC) continues its enforcement on company disclosure gaps with more examples of enforcement actions filed to date.
Last year, the U.S. SEC established a Climate and ESG Task Force within its Division of Enforcement with a mandate to proactively identify misconduct through material gaps or misstatements in issuers’ disclosure of climate and ESG-related risks.
This year has seen a number of companies face allegations of misrepresentation – such as alleged misleading statements and omissions to investors – according to the latest examples available on the Task Force’s webpage.
Social and sustainability bond database enhances market transparency for investors
From the market intelligence team at Climate Bonds Initiative (CBI), a newly launched social and sustainability bond database will track the issuance of primary labelled social and sustainability bonds in the global debt capital markets. For issuances to be eligible for inclusion in the new dataset, CBI also released an accompanying methodology that will consider specific data points aligning to a set taxonomy of eligible use of proceeds.
CBI already offers labelled green bond data which is an authoritative source of best practice green debt product data in the market. The addition of a supplemental data source dedicated to labelled social and sustainability bonds is expected to increase market transparency for investors.
Classification
Source: Climate Bonds Initiative (2022). Social and Sustainability Bond Database Methodology
$12 trillion in cost-savings from energy transition a ‘win-win’
According to a new study through the Institute for New Economic Thinking at the Oxford Martin School, a rapid green energy transition by 2050 could result in $12 trillion of net savings to the world. The research team used ‘probabilistic’ forecast modelling to estimate the costs of future energy systems and calculate the potential savings.
The study is also helping to dispel long-held misconceptions about the high cost of transitioning to net-zero carbon energy. Past models may have overestimated green technology costs, which in turn, may have deterred private sector investments and slowed public policy-setting that would have accelerated the green transition.
“Only a few years ago, net zero by 2050 was believed to be so expensive that it was barely considered credible, yet now even the most pessimistic models concede its entirely within reach”, notes lead author, Dr Robert Way.
Completely replacing fossil fuels with green energy by 2050 will save the world trillions and contribute to a more energy-secure future – a ‘win-win’.
Financial structuring begins for largest carbon capture and storage project
Summit Carbon Solutions, a transformative decarbonization developer, has announced it has engaged CIBC World Markets as financial structuring advisor for a $4.5 billion carbon capture and storage project in the U.S. Midwest.
Project Footprint involves partnerships with 30 ethanol and nitrogen plants across Iowa, Nebraska, Minnesota, North Dakota and South Dakota. The project, which is expected to be completed in 2024, will capture 12 million tons of carbon dioxide per year produced from these facilities and store underground.
CIBC World Markets, selected for its expertise in energy-related project finance, as well as other partners, will advise on the project-level debt.
Calling on standard-setters to enhance GHG Protocol guidance
A Closer Look at the GHG Protocol: Observations and Implications for Standards Setters and Regulators has been released this month by the Institute for Sustainable Finance (ISF) and Chartered Professional Accountants of Canada (CPA Canada).
The report highlights that the business and reporting environment in Canada has changed since the Greenhouse Gas Protocol (GHG Protocol), a global standardized framework for measuring and reporting emissions, was established over 20 years ago. While the GHG Protocol offers important standards, the complexity of interpretations of the guidance is leading to inconsistent application of GHG accounting and reporting disclosures.
As Canadian and global securities regulators make emission disclosures mandatory, and more reliance will likely be placed on the GHG Protocol, the report calls on standard-setters to reconvene discussion to refine the GHG Protocol guidance, so that it may enhance the quality of GHG information in the marketplace.
Climate Week NYC 2022 wraps up
The 14th annual Climate Week NYC, a key summit on climate action, took place in New York City from September 19 – 25, 2022. This year’s theme, ‘Get it Done’, was focused on increasing climate action pathways.
The organizer, Climate Group, is offering watch on demand video segment replays of the main program. These segments include the Opening Ceremony, as well as replays of streamed sessions from The Hub Live discussing various themes – from the just transition in emerging economies, to environmental health equity to supplier climate education and action.
Climate Week NYC brought a global audience of senior leaders from business, government and the climate community, including our own representatives from CIBC Capital Markets.
Sustainability across CIBC
At CIBC, we are focused on our goal to make 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.
Deal announcements
In line with our commitment to make sustainability a reality for our clients and the communities we serve, CIBC Capital Markets continues to support and provide sustainability advisory as part of a focused objective to help our clients become global leaders in environmental stewardship and sustainability.
TELUS Corporation
Joint Bookrunner on TELUS’ C$2.0 billion three tranche bond offering, which included C$1.1 billion of 10 year Sustainability-Linked Notes.
Summary of the 3rd Annual CIBC Virtual Sustainability Conference
CIBC hosted its 3rd Annual CIBC Virtual Sustainability Conference, themed – Accelerating Climate Action on Thursday, September 29, 2022. The conference featured thematic panels covering:
- The importance of carbon removal technologies
- Voluntary carbon markets
- Natural capital as an asset class
- The growing role of climate tech funds
Some key takeaways from the panels include:
- Carbon dioxide removal (CDR), alongside emission reductions, are key to reaching 1.5C limit. CDR strategies need to be integrated into broader corporate climate plans. Companies like Microsoft and Shopify are helping to demonstrate the demand for CDR through carbon buying programs that fund the deployment of CDR technologies. Panelists called on government and market participants to generate more demand signals, additional market supply, and for companies to accelerate their net-zero strategies.
- Voluntary carbon markets have seen rapid growth in the last 5 years. For growth to scale, enhanced transparency and high quality carbon offsets will be key. Companies like Sylvera and Climate Impact X are helping to demonstrate supply side integrity, calling for clearer price signals.
- Natural Capital doesn’t come for free: extractive industries can cause material damage to nature which exposes the private sector to nature risks. Significant accounting structural changes are needed. Panelists call on the private sector to bring natural capital into the financial capital world, where nature-related financial disclosures can be embedded into corporate balance sheets and incentivize “bottom line” decision-making.
- SET Ventures, ETF Partners and Just Climate speak to the “sweet spots” each focus on to be addressable and make an impact. Panelists call on investors to catch up on reality about ‘breakthrough’ technologies – those technologies are already here.
You can watch the event replay here.
Sustainability across CIBC
At CIBC, we are focused on our goal to make 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.
Podcasts
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.
Chart of the day
The hardest to abate sectors
Source: Mission Possible Partnership
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