Sustainability Newsletter Edition 29

The information you need to make your sustainability ambitions a reality

In this edition

Canada’s National Adaptation Strategy unveiled

The federal government recently released Canada’s National Adaptation Strategy. It is the country’s first “whole of society” approach to climate adaptation, through which set objectives and targets will guide government policy and spending.

Alongside the strategy, $1.6 billion in new federal funding was announced, adding to existing commitments that total $8 billion to date. Among other things, the new funding will help to build climate-resilient public infrastructure. It is estimated that by 2030, the average annual losses from disasters could reach $15.4 billion, if not reduced by ambitious adaptation action. Climate Proof Canada, a coalition that includes the insurance industry, welcomed the new strategy.

Listen to our podcast on Canada’s National Adaptation Strategy from September 2022, where experts further discuss the strategy’s impact on the Canadian economy and society, and its global relevance.

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Points of interest from COP27

During this year’s 2022 United Nations Climate Change Conference (COP27), a number of initiatives were introduced, including:

  • Integrity Matters was issued by the UN High-Level Expert Group on the Net Zero Commitments of Non-State Entities, chaired by the Hon. Catherine McKenna. The report aims to “prevent dishonest climate accounting” in the net zero pledges of non-state actors (such as businesses, financial institutions, cities and regions). Among the recommendations, it calls for the reduction of absolute, rather than intensity-based, emissions targets.
  • Energy Transition Accelerator is a new public-private initiative announced by John Kerry, U.S. Special Presidential Envoy on Climate Change. The initiative will allow companies to buy carbon credits, which would fund renewable energy projects in developing countries. The program is being developed in consultation with partners and is expected to be operational by COP28.
  • Climate TRACE is a new independent database for global greenhouse gas emissions, launched by Al Gore, former U.S. Vice President, and founding member of the Climate TRACE Coalition. The dataset is billed as the first global inventory that identifies and tracks the largest individual sources of emissions across twenty sectors of the economy – available publicly at no cost.
  • Finance for Climate Action was issued by the Independent High-Level Expert Group on Climate Finance, co-chaired by Lord Nicholas Stern and Vera Songwe. The report provides a framework approach for delivering on the Paris Agreement goals for climate finance. Among the recommendations, the report calls for revamping the role of multilateral development banks, including increasing the collaboration with private sector and tripling finance flows in the next five years.
  • The Nature Tech Market was issued by Nature4Climate and Capital for Climate, highlights the potential for the nature tech sector to grow to U.S. $6 billion or more by 2030. A panel on How Scaling Nature Tech Could Help Solve the Climate and Nature Crisis also highlights the financing opportunities for this market.

Dominique Barker, CIBC’s representative to Carbonplace, attended COP27 and shared valuable insights on two panel sessions, themed, “driving decarbonization with digital innovation” and “bridging access to climate action with stronger carbon markets” respectively.

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New voluntary carbon market admission and disclosure standards launched

Recognizing the growing demand for carbon credits, the London Stock Exchange launched its new voluntary carbon market designation.

The designation applies to qualifying Funds and operating companies admitted to the London Stock Exchange (Main Market or AIM) and who invest in climate change mitigation projects that yield carbon credits aligned with market rules. Once an entity is admitted, investors can purchase shares in the entity, who in turn can implement, then report, on the projects to generate carbon credit issuance. Meanwhile investors may receive carbon credits as a dividend ‘in-specie’, and/ or a cash dividend and can continue to buy and sell shares in the entity.

The London Stock Exchange aims to enable the financing of climate change mitigation projects through public markets to bring scale to the global voluntary carbon markets and ultimately help to drive further decarbonization.

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Will the energy crisis be a setback for secure energy transition?

The International Energy Agency (IEA) released the World Energy Outlook 2022. In this year’s report, the IEA explores the global energy crisis triggered by Russia’s invasion of Ukraine, and its impact on natural gas, oil, coal, electricity, food security and climate.

While the crisis may have prompted a short term spike in oil and gas prices, the cost advantages of renewables is more hopeful. The report proposes 10 guidelines to counter any longer-term setbacks for a secure energy transition, including the scaling-up of clean energy technologies. It also highlights that near-term rise in borrowing costs (with monetary policy tightening in many countries) could disadvantage some clean energy projects, but overall clean technologies still remain the most cost-efficient option for new power generation.

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Good news for carbon pricing in Canada

The Canadian federal government announced a strengthened price on pollution that will apply from April 1, 2023. Provinces and territories have the flexibility to implement their own pricing systems that meet common benchmark standards. This will provide a clear market signal on long term carbon pricing in the country, and demonstrates Canada’s leadership on the Global Carbon Pricing Challenge it set last year.

Canada’s benchmark criteria established a national minimum price on carbon starting at $20 per tonne in 2019, and has since increased to $50 per tonne in 2022. As Canada aims to significantly reduce emissions and incent innovation, carbon pricing will increase a further $15 per tonne from 2023-2030, to reach $170 per tonne by 2030.

The announcement is particularly important for the Canadian industrial sector. Greater policy certainty around carbon pricing could accelerate investment in decarbonization, as raised in a recent report by Clean Prosperity and the Canadian Climate Institute.

Canadian federal climate updates worth noting

Investment Tax Credits: The Department of Finance announced the launch of a consultation on the design of the Clean Hydrogen Investment Tax Credit (ITC) for Budget 2023, which will support investments in clean hydrogen production. The ITC will aim to secure Canada’s competitiveness, incentivize job creation, and reduce greenhouse emissions.

Clean Fuels Fund: Natural Resources Canada announced that 60 projects have been selected to receive C$800 million in funding under the C$1.5 billion federal Clean Fuels Fund. The first tranche of projects includes among others, production facilities, spanning seven jurisdictions and covering five fuel types. The second tranche of projects will be announced in December.

Alberta: Premier Smith recently released Ministerial Mandate letters. The Minister of Energy is directed to defend Alberta’s energy interests against federal overreach; help industry reach net-zero by 2050 through technology; and more. The Minister of Environment and Protected Areas is tasked with developing climate and ESG strategies; and supporting technology and innovation in emissions reductions.

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Banks need forward-looking approaches to climate and environmental risks

The European Central Bank (ECB) released its findings from a thematic review of the banking sector’s progress in addressing climate-related and environmental (C&E) risks.

Out of 186 banks reviewed (of which 107 are ‘significant institutions’), over 85% have basic practices in place, such as the initial mapping of C&E risk exposures. Less than 10% of institutions use sufficiently forward-looking and granular C&E risk information in their governance and risk management practices. 

In the ECB’s accompanying observations, it shares good practices for managing C&E risks in alignment with supervisory expectations. But swifter progress across the sector is needed, prompting the ECB to set interim deadlines requiring covered banks to adequately categorize C&E risks and perform a full assessment of the impact on their activities by March 2023.

Chart: Use of forward-looking and granular C&E risk information in selected practices to manage C&E risk

Chart: Use of forward-looking and granular C&E risk information in selected practices to manage C&E risk

Source: European Central Bank, Walking the talk: Banks gearing up to manage risks from climate change and environmental degradation (November 2022).

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Reusable bag pilot offers key insights about the circular economy

Closed Loop Partners, an investment firm and innovation center focused on building the Circular Economy, shares insights in a new report.

The Beyond the Bag Pilots were initially launched last year by Closed Loop Partners’ Consortium to Reinvent the Retail Bag to advance reuse models as a critical step toward reducing single-use plastic bag waste. By adopting reusable bag service models as one key solution, corporate retailers are better positioned to respond to increasing plastic bag regulations in the U.S., while meeting increased consumer demand for sustainable products.

The report’s key findings from the reusable bag pilots include lessons learned from the reuse models and how reuse can be scaled.

Additionally, Closed Loop Partners and Brookfield Renewable recently announced the establishment of Circular Services, a leading developer of circular economy and recycling infrastructure in the United States.

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Why not a Paris-moment for plastic pollution?

An Intergovernmental Negotiating Committee will meet in Uruguay from November 28 to December 2, 2022, in what is billed as a ‘Conference of the Parties (COP)-inspired’ conference, and builds on earlier international resolutions to end plastic pollution by 2024.
The negotiations will be led by the United Nations Environment Programme (UNEP) with the goal of developing an international legally-binding convention on plastic pollution, that will also target plastics in the marine environment. The framework aims to cover the full plastics lifecycle – from production and consumption to disposal and waste management.

Listen to our Circular Economy podcast series from March 2022 on The Sustainability Agenda and the replay of our CIBC Sustainability Circular Economy Roundtable from April 2022, where experts share leading insights on navigating the circular economy in Canada.

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Annual report warns the ‘window is closing’ on 1.5C Paris Agreement goal

The 13th edition of the Emissions Gap Report 2022, published by the UN Environment Programme (UNEP), warns the world is not on track to reach the Paris Agreement goal of 1.5 degrees Celsius. Even with current pledges on cutting greenhouse gas emissions by 2030, we will likely still see a temperature rise of 2.4 to 2.6 degrees Celsius by the end of the century.

The report calls for a deeper, system-wide transformation to cut emissions by 45% to get back on track. It also recommends an accelerated sector-by-sector change across electricity supply, industry, transportation and buildings; as well as specific actions for different actors, including businesses and the investment community.

Chart: Important actions to accelerate transformation in electricity supply, industry, transportation and buildings by different actors

Chart: Important actions to accelerate transformation in electricity supply, industry, transportation and buildings by different actors

Source: United Nations Environment Programme (UNEP), Emissions Gap Report 2022: The Closing Window – Climate crisis calls for rapid transformation of societies (2022).

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Why investing 1.4% of annual GDP is critical

According to a World Bank report on climate and development, an additional annual investment of 1.4% of world GDP between 2022-2030 could potentially reduce 70% of greenhouse gas emissions in developing countries by 2050.

The report concludes that lower income countries, who are more vulnerable to climate risk, have higher investment needs for climate adaptation and mitigation by as much as 5% of GDP.

While all countries need to increase their climate action, enabling low carbon development pathways for developing countries will help to drive deeper decarbonization to reach the Paris Agreement goals and spur opportunities for a Just Transition.

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Insurance industry’s role in accelerating new forms of capital

Aon, a leader in risk-mitigation solutions, hosted an event that focused on De-risking Nature-based Investments to Spur Carbon Markets and the Net-Zero Transition.

The discussion ranged from the role that voluntary carbon markets play in the net-zero transition; the value of nature-based solutions for climate change mitigation; opportunities and challenges of matching investors with a limited supply of high-integrity carbon projects and the role of the insurance industry in facilitating new forms of capital and scaling the carbon markets.

Panelist, Dominique Barker, Managing Director and Head of Sustainability Advisory at CIBC Capital Markets, and CIBC’s representative to Carbonplace, brought attention to the work that banks are leading to bring trust, transparency and accessibility to the carbon markets.

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The Institute for Sustainable Finance (ISF) published two new reports for the Canadian market:

In Partial Disclosure: Assessing the state of physical and transition climate risk disclosure in Canada, less than half of the largest publicly listed companies in Canada are providing information aligned with the Task Force on Climate-related Financial Disclosures (TCFD). With Canadian developments (such as the proposed Canadian Securities Administrator disclosure rule and Office of the Superintendent for Financial Institutions Guideline B-15), the report calls for more alignment with the global landscape of climate-related risk disclosure standards to streamline reporting while maintaining market competitiveness.

In Financing Climate Change Adaptation and Resilience, more capital is needed for climate-resilient infrastructure. For the private sector to consider financing adaptation and resilience projects, the report identifies that investors will need a better understanding of the flow of funds and risks (such as the costs/benefits from the implementation of mitigation strategies like for fire or flood) to build adequate risk-allocation matrices.

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New sustainability reporting rules for EU companies

The European Financial Reporting Advisory Group (EFRAG) approved an updated draft of the European Sustainability Reporting Standards (ESRS), developed to support the EU’s newly adopted Corporate Sustainability Reporting Directive (CSRD).

CSRD will impose new sustainability reporting requirements on a range of ESG issues. Disclosure standards are being recommended by EFRAG, from whom the draft is expected to be presented to the European Commission before year end and potentially adopted by mid-2023.

CSRD will apply to large EU companies (including EU subsidiaries of non-EU parent companies with either securities listed on EU-regulated markets or net turnover of more than €150 million). It will be implemented in four stages, but effective for most companies from January 1, 2024, for corporate sustainability reports due for publishing in 2025.

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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.

Portrait of businesswoman in her environmentalist green office

Deal announcements

As part of our focus 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.

Government of Canada

Joint Lead Manager on the Government of Canada’s C$500 million 5-year Ukraine Sovereignty Bond.

Note: not issued per a sustainability-linked or social bond framework.

Ontario Teachers’ Finance Trust

Joint Lead Manager on Ontario Teachers’ Finance Trust inaugural C$1.0 billion 10-year Green Bond offering.

OMERS Realty Corporation

Joint Bookrunner on OMERS Realty Corporation’s C$600 million 6-year Green Debentures.

TransAlta Corporation

Joint Bookrunner on TransAlta Corporation US$400 7-year million senior Green Bond offering.

Enbridge Inc.

Joint Bookrunner on Enbridge C$900 million 10-year Sustainability-linked Notes.

Brookfield Renewable Partners ULC

Joint Bookrunner on Brookfield Renewable Partners’ C$400 million 10-year Green Notes.

Markham District Energy

Sole Lender on a financing comprising of C$75 million Revolving Credit facility and C$27.5 million 5-year Term Loan facility

 

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Podcasts

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.

Chart of the day

Range of global warming projections for three key scenarios

Range of global warming projections for three key scenarios

Source: United Nations Environment Programme (2022). Emissions Gap Report 2022: The Closing Window – Climate crisis calls for rapid transformation of societies. Nairobi. https://www.unep.org/emissions-gap-report-2022

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Roman Dubczak
Deputy Chair
Susan Rimmer
Managing Director And Head, Global Corporate & Investment Banking
Dominique Barker
Managing Director and Head, Sustainability Advisory
Amber Choudhry
Managing Director, Debt Capital Markets
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

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