Sustainability Newsletter – May 2025

The CIBC’s 2nd annual Electrification Summit on April 23, 2025, attracted over 350 attendees from various sectors across the electrification value chain. The event featured eight panels, two keynote speeches, and two fireside chats on the evolving energy landscape in North America and Europe, focusing on trends, challenges, and opportunities associated with electrification.

Quick recap: This year’s event took place against a backdrop of transformational change in the energy sector, given the level of electricity demand, generation and investments required, as well as technological development and the political context shaping the transition. Discussions highlighted the need for a coordinated approach to electrification, with urgent need for collaboration and long-term policy vision to allow companies that are investing in electrification to have more certainty in order to make those investments.

Four key takeaways emerged:

1.    The volume of demand and generation that’s required is staggering, bringing the size of both the opportunity and the challenge to light. Electricity usage has doubled since 2000, growing much more rapidly that other final forms of energy such as fuels, and the way it is used is also shifting. Data center growth was described as a ‘generational’ investment opportunity worth USD 2 trillion in the U.S. and USD 1.5 trillion in the EU.

2.    Many challenges continue to pressure the pace and trajectory of electrification across North America and Europe. Challenges cited include interconnection queues ranging from 4 to more than 8 years; supply chain constraints such as 5-year wait lists for gas turbines; lengthy and complex permitting for energy projects; and skilled labour gaps in sectors such as nuclear power and the construction of gas-fired generation.

3.    Another strong theme emerging from the Summit is the extent of innovation underway, in part to address the above challenges. From innovative DC transmission projects and fusion pilot plants, to lower-cost batteries and AI, there is innovation occurring throughout the value chain. Collaborations with Indigenous stakeholders are also emerging as innovative partnerships that can drive equity investments in energy projects.

4.    Given the long-term nature of the assets as well as the development timeline, there were many references to programmatic solutions. Much of the emphasis focused on the need for proactive and coordinated long-term forward planning that can transcend political terms for national-scale transmission infrastructure.

Read the full post-event recap HERE. Watch the event video replay HERE.

Why is this interesting? Among the themes this year, the Electrification Summit highlighted the significant impact of AI and data centers on energy demand which continues to be one of the key issues in the energy world today. In April, the International Energy Agency (IEA) published a major new report on Energy and AI offering the most comprehensive, data-driven global analysis to date on the growing connections between energy and AI. According to the report, countries that want to benefit from the potential of AI need to quickly accelerate new investments in electricity generation and grids, improve the efficiency and flexibility of data centers, and strengthen the dialogue between policy makers, the tech sector and the energy industry.

In the wake of Canada’s recent federal election, the new government under Prime Minister Mark Carney is urged to prioritize four key climate actions in its first 100 days to support Canada’s climate goals, according to an OpEd by the Canadian Climate Institute.

Quick recap: With a fresh mandate from voters, the new federal government will be focused on the economy and energy concerns which played a significant role in the campaign. However, the Canadian Climate Institute is urging the new federal government to prioritize four key climate actions that could further buttress affordability, security, and competitiveness in a world shaken by these new uncertainties. The recommendations include: 1) Strengthen industrial carbon pricing, which is vital for reducing emissions while maintaining industrial competitiveness. The Canadian Climate Institute suggests modernizing these pricing systems to enhance effectiveness and transparency. 2) Finalize methane regulations for the oil and gas sector, which can significantly cut emissions cost-effectively. The previous government nearly completed draft regulations aiming for a 75% reduction by 2030, with potential for even greater cuts. 3) Finalize the Clean Electricity Investment Tax Credit (ITC) to support the electrification of Canada’s economy, encouraging investment in clean energy infrastructure across provinces. 4) Establish a made-in-Canada climate taxonomy for the financial sector. This framework will help investors assess climate-related risks and opportunities, enhancing Canada’s attractiveness for investment.

Why is this interesting? During his campaign, Carney indicated his support for industrial carbon pricing, especially when complemented by international trade tools such as the Carbon Border Adjustment Mechanism (CBAM). Balancing carbon policy with trade and energy security is a key priority further supported by 38 Canadian energy leaders in an open letter to Prime Minister Carney. The letter calls for an urgent action plan to support ongoing and future investments from the energy sector in Canada, including a call to repeal the federal carbon levy on large emitters. The letter advocates a return to where provinces administer the policies and pricing to enable emissions-reduction investments, improve emissions performance, and maintain competitiveness. In related news, a global landmark agreement will set a carbon price on shipping – making this the first-ever worldwide carbon price applied to an entire sector.

North American Carbon World (NACW), hosted by Climate Action Reserve, is North America’s premier event on carbon markets and climate policy. CIBC’s Ryan Fan, Vice Chair and Managing Director, Global Markets attended the event in late March 2025, and shares his insights and key takeaways.

Quick recap: Discussions at NACW highlighted the ongoing uncertainty in the Voluntary Carbon Markets (VCM). Although market growth has been challenging in the last couple of years, concerns about project quality are lessening due to improved project protocols and a deeper understanding of quality standards. However, demand for carbon dioxide removal (CDR) remains concentrated among a few major players; in 2024, just four buyers accounted for 75% of tech removal demand and 50% of nature-based removals, indicating limited participation. The lack of a strong economic rationale and an accepted framework for new buyers could continue to pressure growth. In compliance markets, the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) presents a mixed outlook. While regulatory commitments aim to enforce compliance among airlines, the absence of a penalty structure poses a significant barrier. Airlines are reportedly not securing offtake agreements, despite an anticipated shortage of eligible credits. Projections suggest CORSIA pricing could reach $45 per tonne by 2035, though the path to this target remains uncertain.

The interplay between compliance and voluntary markets indicates that project developers are increasingly leaning towards voluntary markets due to the political and regulatory uncertainties affecting compliance prices. This was not the case a year ago. Despite current challenges, there is cautious optimism among investors and trading desks, who are selectively investing in specific project types, anticipating a resurgence in demand as companies strive to meet their 2030 net-zero goals.

Why is this interesting? VCM’s demand has been hampered by the absence of an accepted framework for buyers to offset emissions and make credible claims about carbon credit usage. On the one hand, the Science-Based Targets Initiative (SBTI) remains cautious on the use of carbon credits to offset emissions in the near term. On the other hand, the Voluntary Carbon Market Integrity Initiative (VCMI) – which aims to builds trust in the VCM – launched guidance in 2023 for companies to make credible carbon credit claims through the Claims Code of Practice. Last month, VCMI published its next guidance – the Scope 3 Action Code of Practice. This new best-practice framework gives companies a practical tool to accelerate climate action, with high-quality carbon credits used in addition to, not as a substitute for, direct decarbonization of scope 3 emissions.

Sustainable Fitch’s Sustainable Finance Trends Q1 2025 report reveals a nearly 20% decline in global labelled bond issuance (comprising green, social, sustainability, and sustainability-linked bonds) in Q1 2025 compared to Q1 2024. This downturn is attributed to capital expenditure uncertainty and broader market volatility, impacting more than just labelled bonds.

Quick recap: According to Sustainable Fitch, labelled bond issuance in Q1 2025 totaled just under USD 250 billion vs. USD 308 billion in Q1 2024 – representing a 20% decrease in volume and marking the weakest first quarter in five years. Primary factors contributing to this downturn are issuer uncertainty surrounding capex spend and broader market volatility due to U.S tariffs. These factors have had a pronounced impact on the capex-dependent Use of Proceeds (UoP) for labelled debt which fund projects with dedicated environmental and/or social benefits. Sustainable Fitch also notes that these factors are affecting corporate debt more broadly and does not view the issuance decline as a labelled-debt specific problem. All categories of labelled bonds, except for sustainability bonds, saw decreases in issuance volumes. Equally, labelled debt by corporate and sovereign issuers, except for financial institutions, saw volume declines. Geographically, the U.S. is lagging behind with a 27% decline in labelled bond issuance compared to the global average.

Why is this interesting? Sustainable Fitch highlights that while risks for labelled debt are skewed downward due to market volatility, potential upsides exist. For instance, 2025 is expected to see record refinancing of labelled bonds, matching the volume issued in 2023. Additionally, strong demand from asset managers for labelled debt may also provide some support for future issuance. In late March, the UN Principles of Responsible Investing (PRI), which represents 3,048 signatories across asset owners and investment managers, published data evidencing that investors continue to engage on responsible investment issues such as climate-related risks, governance and social issues despite the changing global political and regulatory backdrop.

The International Energy Agency (IEA) published The State of Energy Innovation which is the first comprehensive global review of energy technology innovation trends. The report reveals that the total value of the market for key low-emissions technologies is projected to reach over USD 2 trillion in 10 years, yet 35% of the global emissions reductions needed to enable net-zero by 2050 still rely on technologies not yet demonstrated at commercial scale.

Quick recap: The IEA’s report on energy innovation reveals that since 2015, USD 230 billion has been injected into energy start-ups, and expectations for this market continues to grow. The IEA’s latest projections put the total value of the market for key low-emissions technologies at over USD 2 trillion in 10 years under current policy settings. However, despite this, some 35% of the emissions reductions needed to enable net-zero emissions globally still rely on technologies not yet demonstrated at commercial scale. Of the 580 demonstration projects tracked by the IEA, USD 60 billion in public and private financing has already been allocated to projects in areas such as hydrogen-based fuels production, advanced nuclear designs, floating offshore wind and CCUS. But many have not yet reached a final investment decision. Large-scale first-of-a-kind projects face a range of nontechnical challenges related to finance, business models, public support, safety standards, infrastructure, tariff design and offtake contracts. The report identifies ten areas for policy attention to address entry barriers, including calls for raising public energy R&D and demonstration spending to attract private sector co-funding and ensure the overall level of public and private support remains stable in priority areas through economic cycles. Encouragingly, the IEA has seen some creativity in policy design, including for debt products to address scale-up risks, prizes that quicken the learnings from grant-funded R&D, and open access testing, that help to use public funds more effectively and attract private capital.

Why is this interesting? The report is designed to inform the global energy innovation agenda at a time when energy innovation is increasingly at the core of countries’ competitiveness, security and resilience strategies, as well as those for addressing climate change. In related news, XPRIZE made history last month, awarding its largest ever prize funding of USD 100 million for groundbreaking carbon removal solutions. Congratulations to Mati Carbon (grand prize) for their enhanced rock weathering solution, and to runners-up NetZero (biochar), Vaulted Deep (waste management) UNDO Carbon (enhanced rock weathering).

The volume of sustainable finance debt in Q1 2025 stood at $310 billion, compared to $364 billion in Q1 2024. 

Below is a breakdown of volumes by product type. 

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