The information you need to make your sustainability ambitions a reality
In this edition
- Canada’s national statement on nuclear energy affirms sector leadership opportunities
- Sustainability scorecard concerned not enough progress made
- Certified green bonds issuance hits milestone
- What matters to your shareholders?
- Podcasts – “Lessons from the wind industry” and “CIBC’s power generation target”
Canada’s national statement on nuclear energy affirms sector leadership opportunities
The Honorable Jonathan Wilkinson, Minister of Natural Resources, released a statement espousing Canada as a Tier-1 nuclear nation and the opportunities for a sector leadership role.
Citing the country’s 70 years of technological leadership, and a strong and stable regulatory and supply chain environment, Minister Wilkinson affirmed that Canada is positioned to gain from the growing global nuclear energy market, estimated to be worth $150 billion per annum by 2040.
Key attributes put Canada on top. Saskatchewan, home to the largest deposit of high-grade uranium on earth, produces over 70 percent of the world’s supply of cobalt-60 used in radiation therapy and medical equipment sterilization. While Ontario’s early adoption of small modular reactor (SMR) technology is set to deploy the first Canadian SMR at Chalk River in 2026; followed by a larger commercial SMR at Darlington by 2028. Supportive government funding and policies are also spurring advanced uranium exploration; nuclear supply chain opportunities and collaboration on globally harmonized regulations.
This momentum positions Canada as a global exporter of technology, goods and services to a global market, where countries see nuclear power as a low-carbon alternative to meet energy security and climate goals.
New framework and approach to manage climate risks
CPP Investments released their 2022 Report on Sustainable Investing which offers a fresh approach to managing climate risks.
Earlier this year, CPP Investments made the decision to commit to net-zero greenhouse gas emissions by 2050. Rather than divesting emitting companies from their portfolio, they aim to finance emissions reduction by making portfolio companies accountable for developing credible transition plans – thus, supporting decarbonization of the real economy.
The report highlights three key areas of focus: sustainability-related considerations in the investment life cycle, net-zero commitments and how active ownership delivers results. Adding to the support needed to manage climate-risks, CPP Investments set the Abatement Capacity Assessment Framework, which will help them to identify and quantify the mosaic of emissions-reducing opportunities for each company.
Sustainability scorecard concerned not enough progress made*
Generation Investment Management released its sixth annual Sustainability Trends Report for 2022. The report is a scorecard of the global progress in energy transition to net-zero.
In this year’s report, a deeper analysis of the drivers of change are discussed; in particular, the war in Ukraine and the U.S. Inflation Reduction Act as major accelerators to clean energy transition. Yet despite these developments, the report states not enough progress has been made.
A breakdown of sustainability trends is also presented by industry. Take the building industry, for instance, which accounts for 6% of the global share of emissions according to IPCC. In this year’s report, concern on the lack of government policies for energy-efficiency investments and retrofitting in buildings remain low, globally. The report calls on governments for more urgent action: “at the rate the United Kingdom is installing heat pumps in old homes, the retrofit will be completed in 600 years”.
Cumulative global heat pump installations
Heat pump sales are growing but are far below where the International Energy Agency calculates they need to be to be in line with a 1.5º pathway.
Source: International Energy Agency, Generation Investment Management (2022). Sustainability Trends Report 2022.
Noteworthy Report on Power Transition Trends*
According to BloombergNEF’s annual Power Transition Trends 2022 report, global solar generation reached 1,000TWh, while wind neared 2,000TWh – in 2021. Together, solar and wind surpassed 10% of global generation for the first time. All zero-carbon sources of generation (renewables, hydro and nuclear) totaled over 10,000TWh, or nearly 40% of global power production.
The report also highlights that global coal generation in 2020-21 increased by 8.5 percent, raising the sector’s CO2 emissions by 7 percent in 2021 from the year prior. Economic recovery, lower hydro generation due to droughts and higher natural gas prices contributed to the increase. However, the net growth in coal capacity was at its lowest in 15 years.
Global annual generation by technology
Source: Power Transition Trends 2022, BloombergNEF (2022).
Climate and nature loss need to be addressed sequentially
The Cambridge Institute for Sustainability Leadership (CISL) emphasizes that climate change and nature loss are deeply interconnected in a new report.
Integrating climate and nature: The rationale for financial institutions provides an analysis on the interconnections between climate and nature which have historically been discussed separately with the UN Framework Convention of Climate Change and the Convention on Biological Diversity. The report calls on the financial sector to consider five rationales for an integrated climate-nature approach in financial decision-making.
Integration of these considerations into mainstream finance is imperative. Targets for nature protection and restoration are expected to be finalized by the end of 2022, with regulators in the Network for Greening the Financial System (NGFS) broadening environmental risk agendas to include nature; while COP27 is due to emphasize physical adaptation.
The rationale for an integrated climate-nature approach
Source: University of Cambridge Institute for Sustainability Leadership (CISL), (2022). Integrating climate and nature: the rationale for financial institutions. Cambridge, UK: University of Cambridge Institute for Sustainability Leadership.
First key biodiversity areas registry in Canada
Canada’s Key Biodiversity Areas (KBA) Program launched a new interactive registry that identifies designated sites which play a critical role in the persistence of species and ecosystems. It is the first time ever all biodiversity is recognized in one comprehensive database.
The registry was developed by a coalition of organizations, steered by the KBA Secretariat for Canada. Three organizations that have led responsibility for identifying and supporting KBAs in Canada are Birds Canada, NatureServe Canada and Wildlife Conservation Society Canada.
As the upcoming COP15 UN Convention on Biological Diversity convenes in Montreal, KBAs can serve as an important tool to help guide decision-making in setting priorities for ecosystem protection.
Certified green bonds issuance hits milestone
The Climate Bonds Initiative (CBI) announced that the cumulative issuance of certified green bonds hit a new milestone this month – surpassing US$250 billion in nominal value.
Certified green bonds are verified by the Climate Bonds Standard and Certification Scheme as meeting climate integrity, management of proceeds and transparency practices; and where assets are aligned with the Paris Agreement goals of net zero emissions by 2050 or earlier. It is the only green bond standard that is used internationally by issuers in 30 countries.
Year-to-date has seen issuance across a number of sectors, including low carbon transport, solar and wind. CBI expects continued growth in certified issuances, and are working to expand its range of certification services and criteria to new industries joining the sustainable debt space.
US$254 billion Certified Bonds – Sector Share – October 2022
Source: Climate Bonds Initiative (2022).
New supervisory and regulatory report promotes policy consistency
The Financial Stability Board (FSB) has published a final report on Supervisory and Regulatory Approaches to Climate-related Risks, following an interim version first published in April 2022.
The report promotes a consistent approach to address climate-related risks across jurisdictions. It outlines five recommendations on supervisory and regulatory reporting, and the collection of climate-related data from financial institutions; and seven recommendations on supervisory and regulatory approaches. The recommendations are aligned with consultation feedback which the FSB received from industry bodies.
In addition, the FSB also published a Progress Report on Climate-Related Disclosures that updates the latest on the International Sustainability Standards Board (ISSB) – and others’ – work involving the Task Force on Climate-related Financial Disclosures (TCFD) framework.
NDCs: Transformational change needed despite incremental progress
The World Resources Institute have released a new report, The State of Nationally Determined Contributions (NDCs): 2022 that addresses mitigation, adaptation and finance elements of the NDCs, for which each of the Paris Agreement’s 194 parties must set to reduce greenhouse gas emissions.
Using WRI’s Climate Watch open data platform, the report warns that the pace of current NDCs progress is only incremental. For instance, NDCs aim to reduce 2030 emissions by 5.5 giggatonnes of carbon dioxide equivalent (GtCO2e), representing a 7 percent reduction from 2019 levels. Whereas, a 43 percent reduction from 2019 levels is need to reach 1.5C goals according to the Intergovernmental Panel on Climate Change (IPCC).
The report calls for transformational action, including addressing implementation and transparency elements, in the next round of NDCs updates due in early 2025.
Cloud-based solution enhances access to sustainability data intelligence
Microsoft Cloud for Sustainability has released a new data solution that helps organizations accelerate their sustainability progress.
The cloud-based tool is helping organizations to track and reduce the environmental footprint of their operations and value chains. One of the key features includes calculation methodologies that help organizations to enhance their reporting on scopes 1, 2 and 3 greenhouse gas emissions.
With more focus and emphasis on corporate disclosure of climate-related risks in the race to net-zero, tools that can enhance access to sustainability data intelligence, and enable more transparent emissions reporting, will ultimately help to scale transition efforts.
What matters to your shareholders?*
According to The Conference Board, a global non-profit think tank, shareholder focus on ESG is accelerating. In a report on Shareholder Voting Trends (2018-2022): Environmental and Climate-Related Proposals, data as at mid-July 2022 reveals that shareholders filed 813 proposals at Russell 3000 companies and 642 at S&P 500 companies – both the highest levels in five years.
Of these filings, 471 proposals related to environmental and social issues – up almost 51 percent from the year prior. The rise in these proposals has been attributed to a higher number of requests for policy changes, including the disclosure of climate change risks, diversity and pay gap analyses, political contributions and lobbying.
The report suggests these demands could signal an opportunity for corporate boards to engage more deeply with their firms’ major investors.
What did the 2022 Corporate Director Survey reveal?
PwC’s 2022 annual corporate directors survey, Charting the course through a changing governance landscape, takes the pulse on the shifting role of public company board directors. One of the areas with increased focus and disclosure is Environmental, Social and Governance (ESG) issues.
Based on responses from more than 700 public company directors, the survey reveals that two-thirds of directors believe their board understands their company’s climate risk or strategy, with half of directors believing they understand their company’s carbon emissions. This still leaves a gap.
As climate disclosure rules evolve, such as proposed U.S. Securities and Exchange Commission (SEC) regulations, boards may find that this is the next area that calls for significant focus and learning.
Recognizing Canada’s first Circular Economy Month
Did you know October 1 – 31, 2022 was, Canada’s first Circular Economy Month?
In recognition of this public awareness campaign, the Conference Board of Canada released updated content to its online hub – Aligning Fragments for a Circular Plastics Economy. The update includes new research on Canada’s Innovation Competitiveness in Chemical Plastics Recycling; Toward Policies for Plastics Recycling in Businesses and Institutions; and Perspectives From the Circular Plastics Economy Forum.
Scaling-up investor action for the Circular Economy transition
The Principles for Responsible Investment (PRI) reflects on the increasing relevance of Environmental, Social and Governance issues in investment practices. In Closing the loop: Responsible investment and the circular economy, the report calls on investors to incorporate the transition to a circular economy into their investment and ownership decisions.
The report, which is aimed at asset owners and investment managers, offers reasons why investors should take action; the types of actions that can be undertaken; relevant metrics and standards that are emerging; and how these actions can be scaled-up to support the circular economy transition.
Increased circularity has the potential to mitigate systemic issues, such as climate change and nature loss. It also offers investors potential financial opportunities associated with new business models that emerge from the transition.
Addressing high-impact product value chains to reduce negative sustainability outcomes
Source: Closing the loop: Responsible investment and the circular economy, PRI (2022).
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 supported 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.
Cameco Corporation
Financial Advisor to Cameco Corporation in its US$7.875 billion joint acquisition of Westinghouse Electric Company, and Joint Bookrunner on the acquisition financing consisting of equity and debt.
Government of Barbados
CIBC First Caribbean acted as Joint Lead Arranger, Co-Dealer Manager and Facility Agent to Government of Barbados US$146.5 million multi-currency blue loan facility.
Province of Ontario
Joint Bookrunner on the Province of Ontario’s C$1.0 billion 7-year green bond offering.
Porterbrook Rail Finance Limited
Sole Sustainability Coordinator for Porterbrook’s £500 million sustainability-linked revolving credit facility.
Enbridge Inc.
Financial advisor to Enbridge in its acquisition of a 100% interest in Tri Global Energy.
Summary of CIBC Renewables & Clean Energy Conference
CIBC hosted its inaugural CIBC Renewables & Clean Energy Conference which was held in New York on Thursday, October 6, 2022. With a renewed focus on energy optimism, the conference brought together investors, clients and subject matter experts across the renewables and clean energy sector to discuss the opportunities, challenges and outlook for renewables and broader decarbonization efforts. The well-attended event featured thematic panels covering:
- Lessons from Europe into global markets
- US market growth – How to succeed
- Offshore wind – Pushing the limits
- A differentiated development
- Investing across decarbonization opportunities
You can watch the event replay here.
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
Analysis by the Canadian Climate Institute shows that climate damages are costing Canada’s economy and making life less affordable. Investing now in proactive adaptation measures can cut the costs of many climate damages in half in both low- and high-emissions scenarios. Proactive adaptation measures also have major economy-wide benefits. For every $1 spent on adaptation measures today, $13-$15 will be returned in years ahead in direct and indirect benefits. Include podcast on climate adaptation here – it is directly linked.
Listen to CIBC’s Sustainability Agenda podcast on Canada’s National Adaptation Strategy here.
Source: Damage Control: Reducing the costs of climate impacts in Canada, Canadian Climate Institute (2022).
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