ESG in Conversation

What’s Happening in Sustainable Finance: Sovereigns Focus on Biodiversity, Use of Proceed Instruments Gaining Ground as Sustainability-Linked Instruments Face Scrutiny, and More


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Episode Summary 
Hosts 
  • Nicholas Gandolfo, Director, Corporate Solutions  
  • Sabrina Tang, Sales Associate, Sustainable Finance Solutions  
  • Despite continued pressure on global financial markets, our hosts Nick and Sabrina highlight some bright spots within sustainable finance. From the array of green bond transactions coming to market in recent months, to sovereigns exploring sustainable finance opportunities to fund biodiversity, marine conservation and social programs, the sustainable finance market continues to push against market headwinds.  

    Biodiversity Rising on Sustainable Finance and Corporate Agendas 

    With COP27 ending and the UN Conference on Biodiversity (COP15) coming up in December, the issue of biodiversity continues to resonate among sustainable finance market participants. Companies are starting to focus more on biodiversity issues and their impact, and the Taskforce on Nature-related Financial Disclosures has also updated its beta framework. Sovereigns, such as Uruguay, are also joining the movement by funding efforts around biodiversity using sustainability-linked bonds.  

    Use of Proceed Instruments Increase as Sustainability-Linked Instruments Faces Scrutiny

    Contracting global financial markets has put pressure on the bond market. However, Nick does note a slight uptick in the number and variety of labeled use of proceed bond issuances in recent months relative to sustainability-linked bond issuances. This could be due, in part, to the growing scrutiny of linked bond instruments. Should they be more nuanced? Do the benefits of the pricing dynamics outweigh the penalties for not meeting targets? These are all valid questions being raised about these financing instruments that have seen tremendous growth over the last few years. It remains to be seen whether these questions translate into new norms for the market.  

    Key Moments

    0:00:57

    Market overview

    0:01:29

    GSSS market pressures

    0:02:40

    Biodiversity and sovereign SLBs

    0:03:51

    Continuing scrutiny of SLBs

    0:04:25

    FCA consultation paper

    0:05:15

    Banks explore funding pools of SLLs

    0:05:45

    Singapore banks commitments to Net Zero

    0:06:32

    New reports from Climate Bonds Initiative

    0:07:55

    SLB and SLL overview

    0:13:39

    Audience questions

    0:17:56

    Green bonds overview

    0:20:47

    Green loans overview

    0:22:25

    Social bonds and loans overview

    0:23:46

    Labeled products overview

    0:24:50

    Transition bonds overview

    0:26:41

    Regulatory and country updates

    List of Select Resources
    • Investment Magazine: Responsible Investment Hits Record in 2021  
  • Investment Week: S&P Global Ratings Downgrades GSSSB Forecast by 16% 
  • Environmental Finance: Sustainable Bonds Take Record Market Share
  • Environmental Finance: NatWest: Biodiversity-linked Sovereign SLBs Could Be 'Powerful'
  • Environmental Finance: HSBC: COP15 Will See More Green Bond Focus on Biodiversity 
  • Environmental Finance: SLB Step-ups Have Almost No Correlation With Credit Quality 
  • Environmental Finance: Sovereign Sustainability-linked Debt Initiative Launched 
  • Financial Conduct Authority (FCA): Sustainability Disclosure Requirements and Investment Labels 
  • Finance Asia: Social Risks Can Be Credit Risks: Evaluating the 'S' in ESG 
  • Finextra: Greenwashing is a Systemic Problem at UK Banks 
  • Climate Bonds Initiative: New Social and Sustainability Bond Database: Enhanced Screening Capabilities for Full GSS+ Market 
  • Sustainalytics SPOs:
    • Uruguay’s Sovereign Sustainability-Linked Bond Framework Second-Party Opinion 

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