• Melissa Chase, Content Marketing Manager, Corporate Solutions

With rising demand from investors and other key stakeholders to address the environmental, social and governance issues they face, companies are considering how they can effectively manage their most material ESG issues. In this episode, featuring insights from our recent webinar on the topic, we examine some of the key ESG issues facing companies in industries with the highest average ESG risk and explore how companies can manage those issues effectively.

Companies with lower ESG risk can also learn important lessons in ESG risk management from those in high ESG risk industries. Many of these issues are common across industries, giving companies an opportunity to learn more about managing ESG risk exposure from their peers. 

For more, watch the on-demand webinar or download the ebook that inspired the session, Understanding Materiality: Lessons from Industries With High ESG Risk.

0:01:38

Episode overview

0:03:04

Explanation of how the ESG Risk Ratings are assessed

0:05:18

Overview of the industrial conglomerates industry

0:06:20

Overview of the steel industry

0:07:10

Overview of the diversified metals and precious metals industries

0:08:55

Overview of the oil and gas producers industry

0:10:53

Insights on how to manage material ESG issues

0:11:27

Environmental issues

0:12:45

Business ethics

0:13:47

Community relations

0:15:01

Occupational health and safety

0:15:33

Industry and international standards and guidance

0:17:00

The importance of ESG target setting, reporting and transparency

0:20:03

Importance of having a corporate ESG strategy

0:20:49

Takeaways from the webinar

To read the full transcript, please visit our website.

More Episodes 

• Nicholas Gandolfo, Director, Corporate Solutions

In our latest episode, we have a round-up of recent developments in the global sustainable finance market. From innovative instruments for financing conservation efforts to growing ESG activity in the private equity space, to a new taxonomy for social bonds, our hosts Nick and Aditi have you covered. Check out the highlights below or listen to the full episode wherever you stream your podcasts.

There have been some key market developments in recent months. The Platform on Sustainable Finance published its report on the EU’s Social Taxonomy providing clarification on the types of investments that would be considered socially sustainable and proposing a structure for a social taxonomy. Overall activity in social bonds issuance appears to be declining compared to recent years. This is partly due to market stabilization following a surge of issuance during the height of the pandemic and social use of proceeds frequently being included in sustainability bonds frameworks which cover both green and social projects. However, there is growing diversity in the types of social factors being addressed as more issuances come to market related to matters around gender, race, and LGBTQ issues. 

This new form of social impact bond was recently issued by the World Bank. The USD 150 million “rhino bond” or Wildlife Conservation Bond will help to fund conservation efforts for the black rhino population in South Africa. The Rhino Bond channels investments to achieve specific conservation outcomes with proceeds being used to help staff in national parks battle poachers and improve conditions for the animals. This bond offers a new model to finance conservation efforts by directly linking the outcome of rhino conservation to investor payouts, and investment success. You can read more about the bond issuance here.

Nick once again provides a list of his recommendations for reports on ESG, sustainable finance, climate change, and transition issues.

• ACT Transition Methodologies

Are you aware of the material ESG issues facing your company? Do you know how to effectively address them? Watch our recent webinar, Addressing Key Corporate ESG Issues: Lessons From Industries With High ESG Risk. Our panel of ESG sector analysts provide insight on the material ESG issues facing five high risk sectors. Learn how companies with high exposure to ESG risk manage their most material issues and how you can too.

Watch the Webinar 

0:00:46

Market overview

0:01:11

Ongoing market growth

0:01:14

Sustainable bonds in emerging markets

0:01:24

ESG performance and bond premiums

0:01:49

Social bond market under threat?

0:02:46

ESG activity in private equity

0:03:07

Implications for Ukraine conflict on green transition

0:03:49

Prevalence of sovereigns in ESG transactions

0:04:05

Sustainable securitization

0:04:44

Just transition

0:05:23

Gender-themed social bonds

0:05:56

Continuing conversation around greenwashing

0:06:31

Big pharma going green

0:07:06

Rhino bond

0:08:32

SBTi – public consultation on cement

0:08:48

Social Taxonomy Report

0:10:00

ACT Transition Methodologies

0:10:07

CBI bond pricing report

0:10:13

CBI report on taxonomies

0:10:29

TNFD beta report

0:10:57

GRI sector standard for coal

0:11:15

IPCC assessment report

0:11:33

Environmental Finance SLL/ SLB metrics report

0:12:00

SLB overview

0:15:52

SLL overview

0:18:02

Audience questions

0:22:05

Green bonds overview

0:28:16

Green loans overview

0:29:33

Social bonds overview

0:31:45

Labeled products, transition, and regulatory overview

• International Monetary Funds – Sustainable Finance in Emerging Markets is Enjoying Rapid Growth, But May Bring Risks

• Government of Chile Sustainability-Linked Bond Framework Second Party Opinion

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Host: Adam Gorley, Marketing Manager, Corporate Solutions

Guest: Shilpi Singh, Director, Corporate Solutions

In this special episode of the Sustainalytics Podcast, Adam and Shilpi discuss important considerations for any organization starting an ESG program and how to set up your program for success. You’ll hear about gaining leadership buy-in, planning and resourcing your program, meeting reporting requirements, communicating your progress with stakeholders, and the role of third parties, plus potential obstacles you can avoid.

As with most projects, good planning and commitment are strong drivers of a successful ESG program. To make the most of their effort, companies starting an ESG program need to have a clear understanding of the ESG issues that affect them, what their impacts are, and how they relate to the business strategy. With this knowledge, a company can effectively address the issues that are most material to the business and confidently and transparently communicate its ESG activities with stakeholders.

Can a firm plan and implement an ESG program on its own — that is, without guidance from an external ESG specialist? Yes, says Shilpi, but it’s not for every company. No third party knows your business like you, your team, and your stakeholders, so there is a lot of valuable ESG information that companies can gather and analyze — if you have the resources. At the same time, ESG specialists have a lot to offer in terms of understanding what actions to prioritize, competitive insights, and credibility.

• Nicholas Gandolfo, Director, Corporate Solutions

In this episode, Nick and Marika welcome special guest Simon Vacklen, Senior Manager with Sustainalytics’ Corporate Solutions  to discuss impact reporting for use of proceed bonds. As more funds are allocated to labeled and sustainability-linked bonds, there is growing demand from investors to understand and measure the positive impact of the assets and projects financed. Simon notes that while the current focus is on environmental and climate impacts, such as the amount of greenhouse gases avoided, the market is also looking toward ways to effectively quantify positive social impact.

To support companies and investors looking for opportunities to analyze and investigate the impact of their projects and investments, Sustainalytics now offers Impact Reports for Bonds and Loans. Available for pre- and post-issuance assessments, the reports provide issuers with a credible and independent analysis of the impacts both expected and achieved by financed projects.

The Climate Bonds Standard announced that it will be expanding to include criteria and certification for credible transition for heavy industrial sectors, starting with the cement industry. The cement criteria will provide science-based requirements which identify when investment and activity in the sector are aligned with the transition to the Paris Agreement objectives. Throughout 2022, the Climate Bonds Standard plans to expand its criteria to support the low-carbon transition of other heavy-emitting sectors such as basic chemicals and steel.   

0:01:10

Market news

0:01:52

AFME - ESG Finance Report 2021

0:02:23

Green bond market forecast for 2022 and beyond

0:02:57

Nuclear and gas debate in the EU green taxonomy

0:03:18

Environmental Finance Sustainable Bonds Insight 2022

0:03:57

Boom in sovereign green issuances

0:04:09

IFC updates guidelines for blue bonds

0:04:18

Transition bond debates continue

0:04:34

Ongoing discussion around mapping Scope 3 emissions

0:05:01

Outlook on scaling up carbon markets

0:05:35

ISSB and the harmonization of disclosures

0:06:13

Challenge directed at SBTi process

0:06:59

EU Green Bond Standards

0:07:04

CBI report on premiums for green and social bonds

0:07:52

CBI China Transition Report

0:08:06

Climate Bonds Standard transition criteria for cement sector

0:08:28

Special Guest - Simon Vacklen discusses impact reporting for green and social bonds

0:16:45

SLB overview

0:21:03

SLL overview

0:25:25

Audience questions

0:30:38

Green bonds overview

0:34:13

Green loans overview

0:35:49

Social bonds and loan overview

0:36:39

Labeled products overview

0:38:25

Transition bond and regulatory news

• AFME - ESG Finance Q4 and Full Year 2021 - European Sustainable Finance

• Fabbrica Italiana Sintetici Sustainability-Linked Bond Second-Party Opinion

More Episodes

• Nicholas Gandolfo, Director, Corporate Solutions

In this episode, hosts Nick and Aditi discuss notable trends and deals in sustainable finance – from rapid market growth, to increasing diversification of products, new taxonomies, sovereign green bonds and sustainability-linked bonds, impact accounting and reporting, and much more. Nick also tackles audience questions, offering some valuable insight on group frameworks and Sustainalytics’ approach to supporting transition finance.

2021 saw incredible growth in sustainable finance and ESG assets under management (AUM) are projected to reach US$50 trillion by 2025 and make up one-third of global AUM. Sustainable bonds already made up 10% of global debt issued in 2021, with US$1 trillion issued for the first time and a 40% increase over 2020. And 2022 is showing no signs of slowing down, with a hot start to the year and good momentum looking forward.

Of the WEF’s top ten global risks by severity, five are environmental issues and the top three directly relate to climate change. View the report here. Maybe it’s no surprise that this theme is carried forward from the previous risk report, but it highlights the continued importance of funding for projects that address climate risk.

As more and more companies are thinking about incorporating ESG considerations into their strategies, Sustainalytics Corporate Solutions wants to ensure they start off on the right foot. Download our practical guide to starting a corporate ESG strategy. Discover key issues that could affect your company, the benefits of action, and the risks of inaction.

Market news

02:17

Hot start to the year: looking for $1tn ESG investment in 2022

03:31

Big year for taxonomies? ASEAN, Korea, Indonesia, plus EU changes

03:58

WEF Risk Report: top risks climate-related

05:10

ESG risk ratings scrutiny – usefulness and robustness

05:45

Fashion industry financing decarbonization and scope 3 emissions

06:20

Impact accounting

07:15

Nuclear & Gas and the EU Taxonomy

07:52

John Holland Sustainability Linked Bank Guarantee (Australia)

08:32

COVID recovery and Build Back Better

09:02

CBI report: Thailand infrastructure

09:25

World Bank report: sovereign SLB KPIs

09:51

IEA report: digitization as enabler for transition

10:20

Environmental Finance report: Green Bond Impact Reporting

Green bonds overview

11:25

Sovereigns: Egypt, Cyprus, Qatar, Denmark, Uruguay

12:00

Banks

13:40

Lots of activity and diversification in India

14:50

Social bonds to fund affordable housing, microfinance, employment

Green loans overview

16:15

Renewables

16:40

Property

17:05

Industrial machinery: sustainable water management

SLB overview

18:10

Coal terminals: scope 3 emissions and transition plans

19:02

Construction: reducing scope 1 and 2 carbon emissions

19:38

Private equity: coverage approach, science-based targets

20:40

Telecom: scope 1, 2 and 3 reductions

22:55

Chemicals: scope 1 and 2, recycling, SBT, Transition Pathway Initiative, IEA

Listener questions

24:20

Q: Can a group framework cover all the entities in the group?

26:13

Q: How does Sustainalytics sign off on transition and what’s our approach?

SLLs

29:15

Sector activity: shipping, pulp and paper, finance, property, retail, telecom, rail, IT, manufacturing, chemicals, construction, and more

Labeled products overview

32:30

Saudi Arabia: green deposits

32:40

Insurance connected to climate

32:58

Trade finance and solar loans

Transition finance overview

33:28

Hydrogen, mining, oil companies, McKinsey report, Japan

34:50

Countries and regulations

• Banking Exchange: Global ESG Assets to Hit $50 Trillion by 2025

• Danske Bank Group Green Bond Framework

• Nicholas Gandolfo, Director, Corporate Solutions

In this episode, Nick and Marika provide a run-down of notable deals in the sustainable finance market, from sovereigns issuing sustainable debt, to corporate activity in green and social bonds and loans, to the introduction of new products and structures. They also answer audience questions about the outlook for labeled transition bonds and possible biodiversity-related indicators for linked transactions.

While evidence of a premium for green bonds – or greenium – continues to emerge, a similar advantage is being seen for social bond issuances. According to research, compared with conventional bond equivalents, social bonds received a yield discount of around 12 basis points at issuance. The explosion of social bond issuance in response to the COVID-19 pandemic, and the oversubscription of social bonds are contributing to this social premium or “socium” found for some social bond issues.

The World Benchmarking Alliance published a report examining the social elements of companies’ low carbon transition. The report assessed 180 companies across three sectors – oil and gas, electric utilities, and automotive – and found that the majority of high-emitting companies are not taking action to move toward a just transition. Other key findings suggest the people most at risk are left out of decision making; companies will need to reskill their workforce as part of their transition plans; companies are not using their influence to advocate for a just transition; and that a just transition needs to be underpinned by companies’ respect for human rights. Hopefully, we’ll see some of the findings from this report reflected in the performance indicators and use of proceeds of sustainable finance transactions going forward.

As more and more companies are thinking about incorporating ESG considerations into their strategies, Sustainalytics Corporate Solutions wants to ensure they start off on the right foot. Download our practical guide to starting a corporate ESG strategy. Discover key issues that could affect your company, the benefits of action, and the risks of inaction. 

01:45

Market news

02:09

Ideas for a "greener" holiday season

02:26

December market volumes

03:12

EU taxonomy discussions continue

03:34

Steeper borrowing costs for sovereigns slow on climate

04:21

Socium for social bonds

05:01

World Benchmarking Alliance just transition corporate assessments

05:49

Data centers and technology in green finance

06:48

Using avoided emissions as targets

06:54

SBTi report on private equity

07:22

TPI report on pathways for other high-emitting sectors

08:12

Green bonds overview

13:23

Social bond overview

15:03

Green loans overview

16:19

SLB overview

19:30

Audience questions

24:22

SLL overview

28:27

Labeled products, transition, and regulatory overview

• Bloomberg: Australia Seen Facing Steeper Borrowing Costs If Slow on Climate

• Nicholas Gandolfo, Director, Corporate Solutions 

Your hosts Nick and Aditi showcase recent deals and transactions in the global sustainable debt and loan markets, share interesting reports, and highlight new labeled products and regulatory developments in this space.     

Reflecting on the outcomes from COP26, Nick and Aditi highlight some of the commitments made during the conference and what they could mean going forward. Many of the delegates, including some of the world’s largest polluters, made pledges to target net-zero emissions, curb deforestation, reduce methane emissions, and ‘phase down’ coal and fossil fuels.

The issue of what developed nations could and should do to support developing nations in building resilience against the impacts of climate change was also a hot topic. Some participants and observers were dissatisfied with the outcomes from COP26, and their disappointment was understandable. Though things may not be progressing as far or as quickly as needed, it is promising to see that these pressing climate issues continue to take center stage.     

Among the recommended reading for this episode, a recent report from the International Capital Markets Association (ICMA), UN Women, and the International Finance Corporation (IFC) stands out. Bonds to Bridge the Gap: A Practitioner’s Guide to Using Sustainable Debt for Gender Equality, outlines how sustainable finance can help direct capital to reduce the financial and economic inequalities between women and men. The report offers case studies and examples of gender-related activities, targets, and key performance indicators for issuers to consider.

In a blog post from last year, Sustainalytics’ Ijeoma Madueke also discussed the idea of using gender lens investing and gender bonds to finance the empowerment and socio-economic advancement of women and girls globally. It’s clear that gender is a key issue that could, and should, be included in more sustainable finance transactions.

00:08

Introduction

00:49

Market news

01:10

Forecast for 2022

01:32

CBI Q3 report

02:55

Post-COP 26 insights

04:30

STBi - Net Zero Target Setting Mechanism

05:04

World Bank report on ways to measure GDP

05:33

ICMA, IFC, UN Women Report - Bonds to Bridge the Gender Gap

06:04

Partnership for Carbon Accounting Financials (PCAF) report

07:35

EU/China Common Ground Taxonomy

07:52

IOSCO calling for ESG ratings regulation

08:51

Green bonds overview

14:22

Social bonds and loans overview

15:05

Green loans overview

16:11

SLB overview

20:45

Audience questions

24:25

SLL overview

26:12

Labeled products overview

27:35

Transition bonds overview

29:06

Regulatory update

• Bloomberg – Modi Urges $1 Trillion to Help India’s Transition: COP26 Update

• Frost CMBS 2021-1 Green Securitized Bond Framework Second-Party Opinion

More episodes

• Nicholas Gandolfo, Director, Corporate Solutions

The recurring theme in this episode’s round up of market developments is innovation! Nick also offers a list of recommended reading for the month (be prepared, it’s a long one) and concludes the tale of his encounter with an elephant in Bangladesh first mentioned in October’s episode.

The thread of innovation continues throughout sustainable finance – from green cryptocurrency to ESG derivatives, and relinked sustainability instruments (sustainability-linked bonds tied to sustainability-linked loans). Ultimately, it’s good to see the market continue to develop, but caution and scrutiny are needed to ensure that labeling and the increasing complexity of financial instruments don’t lead to greenwashing.

On the heels of Allbirds’ initial public offering (IPO), for which Sustainalytics provided a corporate ESG assessment of the company, there are continuing discussions about the greening of IPOs. As the number of companies going public continues to rise, they are each looking for ways to signal to investors that they are a safe bet when it comes to managing material ESG risk and overall company management. Having their ESG or sustainability performance assessed by a third-party prior to their IPO is one way to do that. Watch this space as we see how this trend develops for new IPOs in 2022.

Nick runs down a list of reports and research focused on reducing emissions and transition finance.

• IEA – Tracking Report: Methane Emissions from Oil and Gas

01:28

Market overview

02:00

Greening of IPOs

02:40

Google adds carbon data to flight info

03:00

Green cryptocurrency

03:32

EF conference - ESG Risk Ratings

04:08

ESG derivatives

04:46

Taxonomy report from Natixis

05:11

Nuclear power in sustainable finance

05:46

COP 26 highlights

06:19

New in sustainability-linked finance: relinked SLB

07:04

Biodiversity COP15 highlights

07:31

Green industry unicorns

08:03

Report recommendations: McKinsey & IEA methane reports

08:40

CBI interactive data tool

09:36

Green bonds overview

15:10

Social bonds and loans overview

21:21

Audience questions

28:21

SLL overview

30:53

Labeled products overview

32:16

Transition finance overview

33:30

Regulatory and country update

• Natixis – The New Geography of Taxonomies

• Kvika Bank Green Financing Framework Second-Party Opinion

More Episodes

• Nicholas Gandolfo, Director, Corporate Solutions

In this episode, Nick and Aditi discuss hot topics in sustainable finance. As the global green, social, sustainable, and sustainability-linked market continues to thrive, our hosts take note of the growing variety in use of proceeds, the debate around sustainability-linked bond penalties, and an eyebrow-raising new SLB issuance from Philip Morris International.  

The Climate Bonds Initiative (CBI) reported that total labelled bond issuances (green, social, sustainability, transition and sustainability-linked) hit the half trillion mark in the first half of the year. That’s a 59% increase compared by 2020. For the green bond market specifically, CBI predicts annual volumes will reach $1 trillion by 2023. Other trends noted in the report are the continued growth of social and sustainability bonds, with social bond volumes quadrupling in H1 and sustainability bonds increasing 20%. The volume of sustainability-linked bonds also continued to soar in 2021. Transition bond issuances, on the other hand, are still struggling to gain traction. 

Nick notes that biodiversity continues to draw the attention of investors and issuers globally, with a growing number of reports and articles on the topic. This year also saw the UN Convention on Biological Diversity, or COP 15, wrapping up in China, and the launch of the Task Force on Nature-related Financial Disclosures over the summer. In the world of sustainable finance, we think biodiversity-related targets and use of proceeds will likely become more prominent within linked instruments and labeled bond issuances.

• Isle of Man Sustainability Finance Framework Second-Party Opinion

More Episodes

• Nicholas Gandolfo, Director, Corporate Solutions

In this episode, Nick and Marika discuss recent developments in sustainable finance that have caught their eye. The diverse topics covered range from the growing momentum behind sustainability-linked bonds to the Tokyo Olympics’ focus on sustainability to the latest report from IPCC. They also note the continued growth of sustainable finance globally due to more issuers, markets, products, and diversification.

With the summer Olympics behind us and the winter games only a few months away, Nick and Marika discuss the climate frameworks being developed by the International Olympic Committee and other global sporting organizations. These groups are considering the future impact of climate change on global sporting events and vice versa. The frameworks will address issues such as scope 3 emissions due to travel and transport and the effects of changing weather patterns on the locations for future events and athletes’ safety. 

In response to a recent article criticizing the use of ESG scores in credit analysis, Nick touches on the nuances of ESG ratings and how they are used. He cites the multidimensional nature of ESG ratings, noting that some of Sustainalytics’ clients don’t use the top-level ESG Risk Rating score, but rather use aspects of the data to inform their models and investment approach.

Two interesting and important sets of research are also highlighted. The first is Earth Overshoot Day, which fell on July 29 this year. This marks the date when the human population’s demand for ecological resources outstrips what the Earth can generate in that year. Unfortunately, the date continues to creep closer and closer to the start of the year.

The second is the Intergovernmental Panel on Climate Change’s (IPCC) sixth assessment report. Climate Change 2021: The Physical Science Basis analyzes global climate science research and warns that some of the key effects of climate change, such as rising sea levels, may be irreversible for thousands of years. This work on the current state of the global climate system and the effects of climate change will make for a sobering read ahead of the COP26 conference in Glasgow at the end of October. 

• South China Morning Post: What is Driving an Almost 200 Per Cent Growth in Sustainability-linked Debt Financing

• Scotiabank Sustainable Bond Framework Second-Party Opinion

More Episodes