Sustainability Newsletter – March 2025

The International Energy Agency (IEA) published a new report on the Role of Traceability in Critical Minerals Supply Chains, advocating that it can serve as a vital tool in ensuring the reliability and security of responsible critical mineral supplies for the clean energy transition. Meanwhile, a proposed minerals deal between the U.S. and Ukraine could be imminent but faces uncertainty.

Quick recap: The IEA warns that the increasing demand for critical minerals, like lithium, nickel, cobalt, graphite, copper, aluminum, and rare earth elements, also increases the environmental, social, and governance risks associated with their supply chains, particularly in conflict zones. Potential risks can include corruption, environmental degradation, human rights violations, and labor issues. Failure to prevent or mitigate these risks could restrict mining companies’ access to markets, create legal barriers, and deter investment, leading to reputational harm and operational disruptions. Implementing traceability systems, which establish controls and transparency over products and their inputs can allow companies to track the origin and chain of custody of minerals, from the very start of the supply chain through to end-use, fostering responsible sourcing practices. The IEA notes that traceability measures are on the rise, with many countries either directly enacting traceability regulations or indirectly encouraging traceability as part of wider supply chain due diligence requirements. For instance, under the U.S. National Defense Authorization Act (2023), contractors of the Department of Defense will be required to show the provenance of rare earth elements, from mining to refining, starting in June 2025. 

Why is this interesting? The IEA observes that traceability can play an important role in supporting different types of policy goals, including energy and minerals security. For the U.S., minerals security is central to President Trump’s foreign policy. A proposed minerals deal with Ukraine aims to enhance U.S. interests in securing rare earth elements in return for military support to Ukraine. But how likely could this deal move the needle on U.S. minerals security? According to the Center for Strategic & International Studies (CSIS), its success is uncertain and will depend on various factors, including private sector confidence amid ongoing security risks and the ability to attract long-term investment and infrastructure rebuilding.

A new IEA report, Building the Future Transmission Grid, offers strategies to navigate supply chain challenges in the expansion of global electricity transmission grids. It finds that prices and procurement times for essential components like power transformers and cables have doubled in the last four years, creating big hurdles for grid developers. U.S. tariffs on Canada will further compound these challenges.

Quick recap: The IEA’s report outlines significant challenges in expanding global electricity transmission. While permitting issues remain the primary cause of delays, supply chain constraints for cables, transformers, materials, and other components have emerged as a critical limitation. An IEA survey of industry leaders in 2024 found that procurement now takes two to three years for cables and up to four years for large power transformers—double the time required then in 2021. Specialized components, such as direct current cables used for long-distance transmission, face even longer lead times, exceeding five years. Additionally, prices for these components have surged as cable costs have nearly doubled since 2019, and power transformer prices have risen by 75%. The situation is further complicated by competing project demands and the need for an additional 1.5 million skilled workers by 2030. Although global investment in power transmission increased by 10% in 2023 to USD 140 billion, it must surpass USD 200 billion annually by the mid-2030s to meet escalating electricity demand, and up to USD 300 billion in scenarios to achieve national and global emissions goals. The IEA recommends improving advanced planning, procurement frameworks, workforce development, permitting processes, and supply chain resilience to modernize the grid effectively.

Why is this interesting?  Analysis from the IEA has repeatedly emphasized the urgent need for investment in electricity grids to avoid future gridlock. Over the next five years, Canada’s clean energy gross domestic product is projected to reach CAD 107 billion – driven by CAD 58 billion in annual investments by 2030 and more than 600,000 jobs. But the association, Electricity Canada, warns that U.S. tariffs introduce a lot of uncertainty into the electricity supply chain – not just for new projects, but for maintenance and modernization too. With tariffs, U.S. consumers and manufacturers will themselves face higher electricity prices from electricity imports from Canada. If costs go up in the U.S., this will raise the price of U.S. materials and components exported to Canada, further complicating the energy supply chain landscape.

CIBC attended the second annual Carbon Removal Day in Ottawa hosted by Carbon Removal Canada (CRC). This year’s theme was Policy to Progress, reflecting on the current solutions that are in action and what’s needed to scale the market. 

Quick recap: The second annual Carbon Removal Day was a unique event, bringing together corporate leaders, policy makers, innovators, and more to build momentum toward a robust carbon removal ecosystem in Canada. There was consensus among attendees that Canada has the conditions to lead the carbon dioxide removal (CDR) industry, with the right mix of resources and talent to build a burgeoning carbon management sector. This was reinforced by a key announcement made by Natural Resources Canada (NRCan) on their procurement of carbon removal and the launch of a Request for Information (RFI) to engage the industry on procurement options for carbon removal services. Many project developers are also planning to launch or expedite their carbon removal projects in Canada due to the support offered by various policies like Canada’s Carbon Capture, Utilization, and Storage (CCUS) Investment Tax Credit (ITC). Additionally, a lot of discussion focused around community engagement – particularly for project developers recognizing the need to engage with communities early-on and throughout the project as it progresses to completion. 

Why is this interesting? Though still a nascent industry, the event in Ottawa fortified the message that Canada can be a CDR leader and that now is the time to accelerate growth to gigaton scale. Answering this call was the B.C. Centre for Innovation and Clean Energy (CICE) which announced Canada’s first-ever funding opportunity for CDR innovation. The initiative offers CAD 3 million in funding aimed at accelerating early-stage hard-tech CDR solutions by Canadian climate tech companies. Supported by affiliates of Shell Canada who may purchase CDR credits from successful applicants, eligible technologies include direct air capture, mineralization, ocean alkalinity enhancement, and biomass carbon removal. 

The Government of Canada recently launched its third green bond under the country’s updated Green Bond Framework. The offering is part of a commitment to help Canada mobilize capital in support of its climate and environmental objectives and serves as a sovereign benchmark for the sustainable finance market.

Quick recap: Last month, the Government of Canada priced a Canadian-dollar-denominated green bond, raising CAD 2 billion through a 7-year note. The offering is the third such green bond under Canada’s updated Green Bond Framework published in November 2023, which now includes certain nuclear energy expenditures. The offering is also the fourth Canadian-dollar-denominated green bond since the program launched in March 2022, which aims to support Canada’s sustainable finance market by providing a sovereign benchmark, advance investments in clean growth, and facilitate projects like green infrastructure and nature conservation. The bonds are designed to meet the growing demand from investors for green investment opportunities, backed by Canada’s AAA credit rating. This latest offering attracted significant investor interest, with 57% of buyers being environmentally and socially responsible investors, resulting in an order book exceeding CAD 3.1 billion. CIBC acted as joint lead on the latest offering, as well as acted as Sole Structuring Advisor on the update of Government’s Green Bond Framework.

Why is this interesting? Through this financing, Canada continues to demonstrate its commitment to achieving net-zero emissions by 2050. Last month, Canada formally submitted its 2035 nationally determined contribution (NDC) to the UNFCCC, fulling its Paris Agreement commitments to progressively raise ambitions. The target aims to cut emissions up to 50% below 2005 levels by 2035, building on the 2030 target of 40-45% below 2005 levels. The new NDC will require all sectors of the economy to reduce emissions, with the federal government providing targeted financial supports and incentives across a broad range of sectors, including for clean energy, industrial decarbonization, carbon management, and other clean technologies.

The European Commission has proposed an Omnibus package of amendments to simplify sustainability rules for EU companies, revising and narrowing the requirements for sustainable finance reporting, due diligence, the taxonomy and carbon border tax. The Commission also simultaneously launched the EU Clean Industrial Deal. What might this portend for investor confidence and the credibility of clean energy financing? 

Quick recap: The European Commission’s simplification of sustainability rules for EU companies is part of efforts to enhance European competitiveness in light of climate policy shifts in other jurisdictions like the U.S. The EU Omnibus package of revisions impact the Corporate Sustainability Reporting Directive (CSRD), Corporate Sustainability Due Diligence Directive (CSDDD), EU Taxonomy, and the Carbon Border Adjustment Mechanism (CBAM). The package aims to reduce regulatory complexity and compliance burdens for all businesses, especially for small, medium enterprises. It is expected to save around €6.3 billion in annual administrative costs and mobilize an additional €50 billion in public and private investments. Key changes include removing 80% of companies from CSRD obligations (will only apply to the largest companies with more than 1,000 employees with either a turnover above €50 million or balance sheet above €25 million), postponing CSRD reporting requirements starting in 2026 by two years (to 2028) and simplifying due diligence processes to ease CSDDD compliance for businesses. The CBAM will also exempt small importers, significantly reducing obligations for 90% of them while maintaining coverage of emissions. Additionally, the proposals aim to optimize investment programs like InvestEU, facilitating access to funding for innovative projects. The legislative proposals will move to the European Parliament and the Council for their consideration.

Why is this interesting?  Narrowing the scope of the EU’s sustainability rules could risk diminishing investor confidence due to the loss or delay of actionable company data or regulatory instability, according to Institute for Energy Economics and Financial Analysis. But alongside the Omnibus package, the European Commission also introduced the EU Clean Industrial Deal to enhance clean energy adoption, particularly in energy-intensive sectors. Key measures include creating an Industrial Decarbonization Bank with €100 billion in funding and easing state aid rules for clean energy projects. The capital ramp-up needed for the Clean Industrial Deal is expected to channel investments into sustainable economic activities.

The 12th National Report: Property Prices in Peril by First Street, a provider of climate risk financial modeling, finds that the U.S. residential real estate market is undergoing significant transformation due to climate-related risks, which has the potential to erase USD 1.47 trillion in American property values over the next 30 years. 

Quick recap:  The report finds that nearly two-thirds of U.S. adults are homeowners. But increasing severe weather exposure and rising insurance costs are driving up the overall cost of homeownership, particularly in areas facing challenges from climate-related risks, which can exacerbate natural catastrophes such as wildfires, tornados, and sea level rise. Insurance costs have escalated dramatically, more than doubling as a percentage of mortgage payments from approximately 8% in 2013 to over 20% in 2022. Homeowners’ insurance premiums are also expected to rise by an average of 29.4% by 2055 nationwide, with states like Texas, California, and Florida facing the steepest increases. The report also finds that traditional patterns of domestic migration is being disrupted, with projections indicating that over 55 million Americans may relocate within the U.S. to less vulnerable areas by 2055. Furthermore, an estimated 70,026 neighborhoods (84% of all census tracts) could experience negative property value impacts by 2055, totaling USD 1.47 trillion in losses. The report’s findings underscore the importance of strategic planning in real estate investment and community development in the face of evolving environmental challenges, and urges real estate investors to assess climate risks, adapt strategies, diversify portfolios, and plan long-term.

Why is this interesting?  Understanding these dynamics is crucial for public and private stakeholders as they navigate an increasingly complex landscape. A new first-of-its-kind report from the Canadian Climate Institute, Close to Home: How to build more housing in a changing climate, highlights that Canada needs to build 5.8 million more homes by 2030 – a 35% increase over existing housing stock – to meet housing affordability targets. However, under existing policies where land use is permissive, many new homes could be built in areas highly exposed to climate-related hazards, risking CAD 3 billion each year in costs for rebuilding and disaster relief.

In line with our commitment to make sustainability a reality for our clients and the communities we serve, CIBC Capital Markets continues to advise and lead significant client deals as part of a focused objective to help our clients achieve their sustainability goals.

Government of Canada

CIBC was joint lead on a $2 billion 7-year Green Bond by the Government of Canada. This marks the fourth Canadian-dollar-denominated transaction under the Government’s green bond program and the third green bond offering following the Government’s updated Green Bond Framework released in November 2023. Canada became the first sovereign borrower to allow for certain nuclear energy expenditures to be eligible under a green bond. CIBC also acted as Sole Structuring Advisor on the update of the Government’s Green Bond Framework.

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