“Ethical Markets highly recommends all the reports from the Grantham Institute, leaders in reforming obsolete economics and financial models and driving the shift of assets trapped in 19th and 20th century sectors toward fully financing the global acceleration of renewable resources, efficiency and the circular economy. We have covered this global shift since 2009 in our Green Transition Scoreboard® reports, now forthcoming in our e-textbook:
“MAPPING THE GLOBAL GREEN TRANSITION, 2009-2020“ with Forewords by NASA Chief Scientist Dennis Bushnell, Amy Domini (forthcoming ) and KoAnn Skrzyniarz, CEO and Founder, Sustainable Brands Worldwide. We include many references to the pioneer work of the Grantham Institute.
~Hazel Henderson, Editor“
In this update Alberto De Paoli explains how one of the world’s top energy companies is seeking to align itself with the UN’s Sustainable Development Goals. Nick Robins looks at what leaders of financial institutions should be doing in the lead up to COP26 and we also have commentaries on lessons to be learnt from the UK floods and on how governments can implement Just Transition Sovereign Bonds. Among new publications featured are a report providing a framework for factoring natural capital risk into sovereign debt analysis and new data on what action, if any, some of the largest publicly-listed industrial companies are taking on climate change. Financial success through sustainability leadership: how one energy company is aligning its business strategies to the UN’s Sustainable Development Goals
By Alberto De Paoli, Chief Financial Officer of the Enel Group and co-chair of the UN Global Compact’s CFO Taskforce
In this post for the Sustainable Finance Leadership series, Alberto De Paoli explains how Enel, a multinational energy company, is leveraging the opportunities offered by decarbonisation to deliver on social and environmental goals.
The need for decisive action on environmental sustainability by both private and public sector players is increasingly urgent given the threat posed by climate change. In addition, from a financial standpoint, there is a growing pool of investors that are seeking stable, long-term returns, which has resulted in an exponential increase in the interest in sustainable finance.
These two factors have created the ideal environment for an alignment of financing strategies and business models towards the pursuit of the United Nations’ Sustainable Development Goals (SDGs) while contributing to the generation of long-term value.
Shifting from green to sustainability-linked bonds
Since 2017, the Enel Group has been one of the foremost corporate issuers of green bonds, which are mainly issued to finance specific projects such as the development of renewable energy generation plants. In September and October of 2019, Enel launched the world’s first and second ever ‘general purpose’ SDG-linked bonds on the US and European markets to great success – the issuance was almost four times oversubscribed and its cost was, on average, around 15 basis points (bps) lower compared to a conventional bond. We expect these bonds to become the new standard.
Investors in this new type of bond are asked to finance the company in order to reach certain strategic targets related to the achievement of the SDGs’ objectives. These targets include increasing the percentage of renewables in the company’s total installed generation mix over the next three years. The SDG-linked bond responds to the need for a financial instrument that, unlike green bonds, is tied not to specific projects but instead to company-wide strategic sustainable targets like the penetration of renewable sources in the generation mix and a 70 per cent reduction in greenhouse gas emissions by 2030.
Furthermore, by shifting from green bonds to our sustainability-linked bonds, Enel received a discount on the cost of debt compared to a normal bond. This discount is possible because investors will finance our sustainable strategy, instead of a single project, and if we achieve the sustainable targets set in the bond, we will have improved earnings growth and visibility, and therefore lower the Group’s risk profile. Read more
Time for finance to turn down the heat
As the financial system gears up for the COP26 UN climate summit in November, leaders of financial institutions will need to know the answer to two questions: what is your temperature score and how will you bring it down to 1.5°C as soon as possible? Nick Robins looks at the progress being made.
Flood risk is rising and so must our resilience to it
Addressing the risks of flooding in the UK and building resilience against them is the only way to help ensure the affordability and availability of insurance say Swenja Surminski and Viktor Roezer in this commentary.
The sovereign transition to sustainability: Understanding the dependence of sovereign debt on nature
This report examines the case for the structural inclusion of natural capital into the issuance, assessment and stewardship of sovereign bonds, with a particular focus on Argentina and Brazil. Summary version available in English, Spanish and Portuguese.
Financing a Global Climate Deal
This panel discussion will focus on how to harness the world’s financial system behind a rapid transition to a net-zero, resilient and inclusive global economy. Panellists include Ann Pettifor (Director of PRIME and author of The Case for the Green New Deal), Gianpiero Nacci (Deputy Director of the Energy Efficiency and Climate Change team at EBRD), Rhian-Mari Thomas (Chief Executive Officer at the Green Finance Institute) and Steve Waygood (Chief Responsible Investment Officer at Aviva Investors). This event is being held as part of the LSE Festival: Shape the World.
New research finds slow climate progress in high-emitting industries
New research by the Transition Pathway Initiative finds that 29% of the largest publicly-listed industrial companies are set to align their emissions with the Paris Pledges by 2030. These companies are aligned with the emission reduction pledges made by national governments in the Paris Agreement. However, those pledges are not anticipated to keep global warming below dangerous levels.
Are financial markets aligned with climate action? New evidence from the Paris Agreement
This paper provides new evidence that financial markets value firms’ expansion into production of low carbon goods and services, but they remain cautious on divesting from the most polluting industries.
Supporting a just transition in Northern Ireland
Highlights from the first meeting of the Belfast Climate Commission which focused on the role of the finance sector in ensuring a just transition in Northern Ireland. The workshop was organised as part of the UK-wide Place-based Climate Action Network (PCAN).
4+ ways insurance can support a transition to a low-carbon resilient future
In this article for Risk Management, Swenja Surminski identifies key things the insurance sector and risk management function can do to help building a more resilient future.