Big tech is transforming every aspect of our world. But how, and at what cost? This season of Land of the Giants – The Disney Dilemma – focuses on Disney’s ability to weather the ups and downs of the business cycle and changing tastes and explores what has kept it successful for over 100 years. The entertainment giant has leveraged nostalgia and its intellectual property to build a beloved brand, but after an acquisition spree that included Marvel, Lucasfilm, and 20th Century Fox, can it sus ...
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محتوای ارائه شده توسط Morningstar Sustainalytics Podcast. تمام محتوای پادکست شامل قسمت‌ها، گرافیک‌ها و توضیحات پادکست مستقیماً توسط Morningstar Sustainalytics Podcast یا شریک پلتفرم پادکست آن‌ها آپلود و ارائه می‌شوند. اگر فکر می‌کنید شخصی بدون اجازه شما از اثر دارای حق نسخه‌برداری شما استفاده می‌کند، می‌توانید روندی که در اینجا شرح داده شده است را دنبال کنید.https://fa.player.fm/legal
مشابه ESG in Conversation
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The Influence Factor by The Influencer Marketing Factory
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The Influence Factor by The Influencer Marketing Factory
The Influencer Marketing Factory
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Alessandro Bogliari, CEO and Co-Founder of The Influencer Marketing Factory, a global influencer marketing agency, talks with great guests about influencer marketing, social media, the creator economy, social commerce and much more.
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News and insight from the business world. Download the podcast via the BBC Sounds app.
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The Partnership Economy explores the power of partnerships through candid conversations and stories with industry leaders. Our hosts, David A. Yovanno, CEO and Todd Crawford, Co-founder, of impact.com, unpack the future of partnerships as a lever for scale and an opportunity to put the consumer first.
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It didn’t all change in March 2020. Not really. The UK high street has been in the throes of a gradual revolution for decades. From the rise of ecommerce, to the birth of mobile, social commerce, and a growing emphasis on experience, change has been underway for a while. In fact for many, the pandemic has acted as a wake-up call. Digital transformation was no longer a ‘nice to have’ but a matter of survival. Necessity sparked innovation and customers are enjoying more flexibility and conveni ...
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Call them changemakers. Call them rule breakers. We call them Redefiners. And in this provocative podcast, we explore how daring leaders from across industries and around the globe are redefining their organizations—and themselves—to create extraordinary impact in today’s rapidly changing world. In each episode, Russell Reynolds Associates Leadership Advisor Hoda Tahoun and former CEO Clarke Murphy host engaging, purposeful conversations with leaders in and out of the business world who shar ...
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Some Goodness is hosted by Richard Ellis, a seasoned sales leader passionate about inviting top business minds to share their wisdom. Each episode is only 15-20 minutes, perfect for your commute or workout.
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In each episode of "Goldman Sachs Exchanges," people from the firm share their insights on developments shaping industries, markets and the global economy.
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The Moneycontrol Podcast is your daily source of business news, investment analysis and advice on stocks and the markets. Tune in to broaden your horizons with podcasts by journalists, experts and analysts giving you a head-start in the investment game.
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Custom Manufacturing Industry podcast is an entrepreneurship and motivational podcast on all platforms, hosted by Aaron Clippinger. Being CEO of multiple companies including the signage industry and the software industry, Aaron has over 20 years of consulting and business management. His software has grown internationally and with over a billion dollars annually going through the software. Using his Accounting degree, Aaron will be talking about his organizational ways to get things done. Hi ...
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The world often feels rigged. And this episode is a wake-up call to recognize the barriers that exist for those who don’t fit the traditional mold. In this episode, which is a kind of tribute to my dear departed Dad, I recount some powerful lessons from the man who was a brilliant psychiatrist and my biggest champion. He taught me that if something feels off about the environment you’re in, it probably is—and it’s absolutely hella-not your fault. We dare to break into the uncomfortable truth that many workplaces are designed for a very specific demographic, leaving neurodivergent individuals, particularly those on the autism spectrum, feeling excluded. I share three stories in which my Dad imparted to me more than my fair share of his wisdom, and I'm hoping you to can feel empowered. You'll learn that we can advocate for ourselves and others to create a more inclusive work culture. Newsletter Paste this into your browser if the newsletter link is broken - https://www.lbeehealth.com/ Join our Patreon - https://differentnotbrokenpodcast.com/patreon Mentioned in this episode: Sign Up For Our Newsletter Stay updated on all the things! Get added to our newsletter mailing list. Newsletter…
ESG in Conversation: Using ESG Data in Portfolio Construction
Manage episode 441826764 series 3551879
محتوای ارائه شده توسط Morningstar Sustainalytics Podcast. تمام محتوای پادکست شامل قسمت‌ها، گرافیک‌ها و توضیحات پادکست مستقیماً توسط Morningstar Sustainalytics Podcast یا شریک پلتفرم پادکست آن‌ها آپلود و ارائه می‌شوند. اگر فکر می‌کنید شخصی بدون اجازه شما از اثر دارای حق نسخه‌برداری شما استفاده می‌کند، می‌توانید روندی که در اینجا شرح داده شده است را دنبال کنید.https://fa.player.fm/legal
Episode Summary Host:
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- Melissa Chase, Senior Content Marketing Manager, Morningstar Sustainalytics
- Aymen Karoui, Director of Methodology and Product Architecture, Morningstar Sustainalytics
How can ESG ratings help investors identify risk when constructing and maintaining their portfolios? In this episode, we explore the practical answers to this question and more. We also feature research leveraging Sustainalytics’ Low Carbon Transition Ratings and Physical Climate Risk Metrics assessing companies' misalignment with the transition to net zero.
We also discussed COP 16, which is focused on biodiversity and the key role of the private sector in addressing biodiversity loss. A recent article using data from our Biodiversity and Natural Capital Stewardship program found that many companies are at the beginning of their journeys.
Share Your FeedbackPlease take a moment to share your thoughts on ESG in Conversation. You can email us at podcast@sustainalytics.com.
Key Moments00:00:00
Introduction
00:01:07
Interview with Aymen Karoui about Morningstar Sustainalytics report series in collaboration with Natixis exploring the ESG Risk Ratings and portfolio risk
00:19:51
Overview of the “Navigating Material Climate Risks in the Global Equities Market” report
00:20:57
Overview of “Mobilizing the Private Sector for COP16: A Critical Juncture for Biodiversity Action”
00:22:29
Highlights of upcoming Morningstar Sustainalytics events
Links to Select Resources
75 قسمت
اشتراک گذاریManage episode 441826764 series 3551879
محتوای ارائه شده توسط Morningstar Sustainalytics Podcast. تمام محتوای پادکست شامل قسمت‌ها، گرافیک‌ها و توضیحات پادکست مستقیماً توسط Morningstar Sustainalytics Podcast یا شریک پلتفرم پادکست آن‌ها آپلود و ارائه می‌شوند. اگر فکر می‌کنید شخصی بدون اجازه شما از اثر دارای حق نسخه‌برداری شما استفاده می‌کند، می‌توانید روندی که در اینجا شرح داده شده است را دنبال کنید.https://fa.player.fm/legal
Episode Summary Host:
…
continue reading
- Melissa Chase, Senior Content Marketing Manager, Morningstar Sustainalytics
- Aymen Karoui, Director of Methodology and Product Architecture, Morningstar Sustainalytics
How can ESG ratings help investors identify risk when constructing and maintaining their portfolios? In this episode, we explore the practical answers to this question and more. We also feature research leveraging Sustainalytics’ Low Carbon Transition Ratings and Physical Climate Risk Metrics assessing companies' misalignment with the transition to net zero.
We also discussed COP 16, which is focused on biodiversity and the key role of the private sector in addressing biodiversity loss. A recent article using data from our Biodiversity and Natural Capital Stewardship program found that many companies are at the beginning of their journeys.
Share Your FeedbackPlease take a moment to share your thoughts on ESG in Conversation. You can email us at podcast@sustainalytics.com.
Key Moments00:00:00
Introduction
00:01:07
Interview with Aymen Karoui about Morningstar Sustainalytics report series in collaboration with Natixis exploring the ESG Risk Ratings and portfolio risk
00:19:51
Overview of the “Navigating Material Climate Risks in the Global Equities Market” report
00:20:57
Overview of “Mobilizing the Private Sector for COP16: A Critical Juncture for Biodiversity Action”
00:22:29
Highlights of upcoming Morningstar Sustainalytics events
Links to Select Resources
75 قسمت
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Episode Summary Host: Melissa Chase, Senior Content Marketing Manager, Morningstar Sustainalytics Lindsey Stewart, CFA, Director of Investment Stewardship Research, Morningstar Sustainalytics Guests: Ruthann Bartello, Senior Director, Global Lead, Stewardship Kevin Ranney, Senior Director, Sustainable Fixed Income Research Allocating Funds to Support a Sustainable Future In this episode of ESG in Conversation, Melissa and Lindsey chat about the continued volatility in the sustainable investing market, as well as luxury brands’ focus on ESG and sustainable supply chains. To kick things off, Melissa interviews Kevin Ranney, Senior Director, Sustainable Fixed Income Research. He talks about the evolution of the sustainable fixed income market and shares insights on the latest enhancements to Morningstar Sustainalytics’ second-party opinion assessment framework. Later, Lindsey sits down with Ruthann Bartello, Senior Director, Global Lead, Stewardship, where they discuss Sustainalytics’ involvement in the Pact for the Future and the importance of bringing the investor voice to the conversation about funding the UN Sustainable Development Goals. Share Your Feedback Please take a moment to share your thoughts on ESG in Conversation. You can email us at podcast@sustainalytics.com. Key Moments 00:00:24 Introduction 00:06:25 Interview with Kevin Ranney on the evolution of sustainable fixed income investing and Morningstar Sustainalytics second-party opinion framework. 00:24:44 Interview with Ruthann Bartello about efforts to allocate more funding to the Sustainable Development Goals. 00:36:24 Closing remarks Links to Select Resources Sustainalytics Insight: Second Party Opinions a Primary Focus Webinar | Enhanced Assessment Framework for Use of Proceeds Second-Party Opinions Listen to more episodes here .…
Episode Summary Host: Melissa Chase, Senior Content Marketing Manager, Morningstar Sustainalytics Lindsey Stewart, CFA, Director of Investment Stewardship Research, Morningstar Sustainalytics Guests: Hortense Bioy, CFA, Head of Sustainable Investing Research Jackie Cook, Senior Director, Stewardship Trends in Sustainable Investing and ESG-Focused Proxy Voting Activities ESG In Conversation welcomes Lindsey Stewart as the new co-host for the podcast. He and Melissa chat about current developments in the sustainable investment space and the uncertainties investors and companies face. This month’s episode includes three compelling interviews with some of Sustainalytics’ experts, including Lindsey. Tune in to hear perspectives on sustainable investing trends and the continuously changing regulatory landscape. The discussions also cover recent research examining patterns in investors’ proxy voting activities, how companies’ share structures can influence vote outcomes and how that plays out for certain ballot items like say on pay. Share Your Feedback Please take a moment to share your thoughts on ESG in Conversation. You can email us at podcast@sustainalytics.com . Key Moments 00:00:26 Introduction 00:03:32 Interview with Hortense Bioy on sustainable investing trends, regulatory changes and the impact on the investment funds landscape. 00:14:29 Interview with Jackie Cook covering recent research on the impact of dual class share structures on sustainability-focused shareholder resolutions. 00:28:42 Interview with Lindsey Stewart on the widening gap between European and US investors environmentally and socially focused shareholder resolutions. 00:36:24 Closing remarks Links to Select Resources Six Sustainable Investing Trends to Watch in 2025 Report Shareholder Democracy and the Challenge of Dual Class Share Structures Say on Pay: CEO Compensation and the Long Tail of Shareholder Dissent Voting on ESG: A Gap Becomes a Gulf Ad: To learn more about the Morningstar Sustainable Investing Summit and to register visit https://www.morningstar.com/business/events/morningstar-sustainable-investing-summit…
Episode Summary Host: Melissa Chase, Senior Content Marketing Manager, Morningstar Sustainalytics Guest: Thomas Kuh, Head of ESG Strategy, Morningstar Indexes Barbara Lambotte, Head of Sustainable Fixed Income Research Azadeh Sabour, Director of Climate Thought Leadership, North America Anne Schoemaker, Director, ESG Products Catalina Secreteanu, Managing Director, ESG Solutions, Europe Lindsey Stewart, Director of Investment Stewardship Research 2025: A Year of Change in Sustainable Investing It’s the start of a new year, a time when many focus on setting new goals and ambitions. In this episode of ESG in Conversation, we explore the resolutions investors and issuers might make when it comes to ESG, climate transition and regulatory issues. Experts from Morningstar Sustainalytics weigh in and share their predictions on what financial market participants will, or should, focus on in the year ahead. Share Your Feedback Please take a moment to share your thoughts on ESG in Conversation. You can email us at podcast@sustainalytics.com or take this short survey. Key Moments 00:00:00 Introduction 00:00:35 Thomas Kuh discusses asset owners 00:05:43 Catalina Secreteanu discussion ESG risk and opportunities 00:08:35 Anne Schoemaker discusses regulations 00:12:52 Azadeh Sabour discusses climate transition finance 00:21:58 Lindsey Stewart discusses stewardship 00:26:03 Barbara Lambotte discusses sustainable fixed income 00:30:59 Closing remarks Links to Select Resources Morningstar Sustainable Investing Index Solutions Material ESG Issues Resource Center ESG Regulatory Insights Hub Climate Solutions Resource Center Stewardship Services Corporate Solutions – Sustainable Finance and Lending Solutions…
Episode Summary Host: Melissa Chase, Senior Content Marketing Manager, Morningstar Sustainalytics Guest: Thomas Kuh, Head of ESG Strategy, Morningstar Indexes Arthur Carabia, ESG Research Policy Director at Morningstar Kilian Theil, Associate Director, Intelligent Process Automation, Morningstar Sustainalytics Andrei Hera, former Senior Manager Data Science, Morningstar Sustainalytics Aymen Karoui, Director of Methodology and Product Architecture, Morningstar Sustainalytics 2024: A Year in Conversation This year, ESG in Conversation examined the sustainability and climate issues that were top of mind for asset owners, asset managers, companies and financial market participants globally. Featuring insights from Morningstar Sustainalytics, listeners heard from subject matter experts on ESG, climate and regulatory issues affecting the market. In this episode, we share some key insights from this past season. Check out the full episodes via the links below and subscribe to the show on your favorite podcast app to hear what’s on the horizon in the year to come. Share Your Feedback Please take a moment to share your thoughts on ESG in Conversation. You can email us at podcast@sustainalytics.com. Key Moments 00:00:00 Introduction 00:00:30 Asset owners share their voice 00:02:48 The AI revolution comes to ESG 00:07:00 Climate disclosure rules come to the US 00:10:10 Harmonizing sustainability regulations remains a challenge 00:16:36 Insights on leveraging ESG ratings in portfolio construction 00:19:50 Closing remarks 00:20:49 The last word Links to Select Resources: Featured episodes: Asset Owners Share Their Views on the Changing Investment Landscape The AI Revolution Comes to ESG The SEC’s New Rules on Climate When It Comes to Sustainable Investing, It's A Material World Using ESG Data in Portfolio Construction 2024 Voice of the Asset Owner Survey – Quantitative Analysis…
Episode Summary Host: Melissa Chase, Senior Content Marketing Manager, Morningstar Sustainalytics Guest: Aymen Karoui, Director of Methodology and Product Architecture, Morningstar Sustainalytics Data as the Foundation for Successful Portfolios How can ESG ratings help investors identify risk when constructing and maintaining their portfolios? In this episode, we explore the practical answers to this question and more. We also feature research leveraging Sustainalytics’ Low Carbon Transition Ratings and Physical Climate Risk Metrics assessing companies' misalignment with the transition to net zero. We also discussed COP 16, which is focused on biodiversity and the key role of the private sector in addressing biodiversity loss. A recent article using data from our Biodiversity and Natural Capital Stewardship program found that many companies are at the beginning of their journeys. Share Your Feedback Please take a moment to share your thoughts on ESG in Conversation. You can email us at podcast@sustainalytics.com. Key Moments 00:00:00 Introduction 00:01:07 Interview with Aymen Karoui about Morningstar Sustainalytics report series in collaboration with Natixis exploring the ESG Risk Ratings and portfolio risk 00:19:51 Overview of the “Navigating Material Climate Risks in the Global Equities Market” report 00:20:57 Overview of “Mobilizing the Private Sector for COP16: A Critical Juncture for Biodiversity Action” 00:22:29 Highlights of upcoming Morningstar Sustainalytics events Links to Select Resources Report series with Natixis ESG Risk Ratings: A 360° Review ESG Risk Ratings: Distilling for Enhanced Performance and Downside Protection ESG Risk Premium: A Further Look Navigating Material Climate Risks in the Global Equities Markets Mobilizing the Private Sector for COP16: A Critical Juncture for Biodiversity Action Morningstar Sustainable Investing Summit 2024 More episodes…
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Episode Summary Host: Melissa Chase, Senior Content Marketing Manager, Morningstar Sustainalytics Guest: Arthur Carabia, ESG Research Policy Director at Morningstar In Global Financial Markets, ESG Materiality Matters On the heels of the EU parliamentary elections and ahead of pivotal contests in the U.S., the U.K. and elsewhere, ESG in Conversation met with Director of ESG Policy Research, Arthur Carabia to discuss what a change in political agendas and shifting priorities could mean for ESG and sustainability-focused regulations globally. We also explore the topic of ESG materiality and what it means to asset owners globally, and we discuss its foundational role in the enhancements to Morningstar Sustainalytics' ESG Risks Ratings and corporate governance assessment framework. Share Your Feedback Please take a moment to share your thoughts on ESG in Conversation. You can email us at podcast@sustainalytics.com. Key Moments 00:00:00 Introduction 00:01:34 Interview with Arthur Carabia about EU election outcomes and the state of ESG regulatory landscape 00:25:14 Overview of the Voice of the Asset Owner Survey 2024 00:26:34 Updates on Sustainalytics’ corporate governance assessment framework 00:28:14 Introduction to “Fundamentals of ESG Materiality: An Overview for Investors” Links to Select Resources Voice of the Asset Owner Survey 2024: Qualitative Insights On the Materiality of Corporate Governance: Themes, Applications and Best Practices Fundamentals of ESG Materiality: An Overview for Investors Webinar | Single, Double or Dynamic? An Exploration of Materiality in ESG Approaches to Investment More Episodes…
Episode Summary Host: Melissa Chase, Senior Content Marketing Manager, Morningstar Sustainalytics Guest: Arthur Carabia, ESG Research Policy Director at Morningstar The SEC’s New Rule Ushers in Climate Transparency and Reporting in the U.S. In late March, the U.S. Securities and Exchange Commission introduced a climate disclosure rule that applies to its 10,000 registrant companies. In this episode of ESG in Conversation, we welcome back Arthur Carabia to shed light on what this new rule means for companies and their investors. He also shares his take on how the rule compares to other sustainability and climate disclosure regulations globally. Sticking to the regulatory theme, you’ll learn about the EU’s regulations on deforestation-free products and why the issue of environmental regulation is so significant across industries according to our ESG Risk Ratings. Finally, we share insight on the troublingly persistent issue of child labor in the cocoa supply chain. Share Your Feedback Please take a moment to share your thoughts on ESG in Conversation. You can email us at podcast@sustainalytics.com or take this short survey. Key Moments 00:00:00 Introduction 00:01:38 Interview with Arthur Carabia about the SEC’s new climate disclosure rule 00:12:53 Overview of the EU Regulation on Deforestation-Free Products 00:14:09 Insights from Morningstar Sustainalytics annual Industry Reports 00:15:13 Details on child labor in global cocoa supply chains Links to Select Resources The SEC’s Climate Disclosure Rule: A Step in the Right Direction EUDR: Navigating the EU Regulation on Deforestation-Free Products The State of ESG Risk Across Industries: Three Key Takeaways From Our Annual Industry Reports Child Labor in Cocoa Supply Chains: Unveiling the Layers of Human Rights Challenges More Episodes…
Episode Summary Host: Melissa Chase, Senior Content Marketing Manager, Morningstar Sustainalytics Guests: Kilian Theil, Associate Director, Intelligent Process Automation, Morningstar Sustainalytics Andrei Hera, Senior Manager Data Science, Morningstar Sustainalytics AI Technology is Reshaping the World of ESG Assessments In recent years the marvels of artificial intelligence have been touted across various sectors. As applications of AI technology proliferate, in this episode of ESG in Conversation we chat about how it’s being used in the ESG research space. Members of Morningstar Sustainalytics data research and development teams discuss how the company has been leveraging AI technologies for the past decade and what’s on the horizon in terms of gathering and analyzing corporate ESG risk data. You’ll also learn more about ESG risks in global supply chains as we share insights from our recently published ESG Spotlight series. The reports explore the impact of supply chain incidents, with a focus on human rights and biodiversity loss. They also offer investors frameworks for assessing supply chain-related risks among portfolio companies and potential strategies to improve portfolio performance and mitigate losses. Share Your Thoughts About the Show Please take a moment to share your thoughts on ESG in Conversation. You can email us at podcast@sustainalytics.com or take this short survey. Key Moments 00:00:00 Introduction 00:01:17 Interview with Kilian Theil and Andrei Hera on how AI is changing the world of ESG research and assessments 00:20:52 Overview of the ESG Spotlight series on ESG risks in supply chains Links to Select Resources Artificial Intelligence for ESG Assessments Supply Chain Incidents: Understanding the Impacts Unlocking Human Rights in Corporate Supply Chains Biodiversity in the Balance: Hedging Portfolio Risks…
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ESG in Conversation
Episode Summary Host: Melissa Chase, Senior Content Marketing Manager, Morningstar Sustainalytics Guest: Thomas Kuh, Head of ESG Strategy, Morningstar Indexes Survey Says... Asset Owners Are Committed to Sustainable Investing In this episode of ESG in Conversation, Thomas Kuh, Head of ESG Strategy at Morningstar Indexes shares the results from Morningstar Indexes and Morningstar Sustainalytics’ Voice of the Asset Owner Survey. Not surprisingly, asset owners are concerned about the influence of global events on the market. They are confused about ever-changing regulations and are seeking improvements and reliability from ESG service providers. Despite these challenges, asset owners also say they remain committed to sustainability and are putting more resources towards their ESG strategies. You’ll also learn more about the low-carbon transition risks facing some of the world’s biggest food companies and the steps they can take to get their emissions reductions back on track. Finally, the start of 2024 brings new sustainability-focused regulations. The Corporate Sustainability Reporting Directive (CSRD) came into effect in the European Union on Jan. 1 and will apply to nearly 60,000 companies globally. The directive could be a watershed moment for corporate reporting as well as investors seeking more sustainability data from issuers. Tell Us What You Think Please take a moment to share your thoughts on ESG in Conversation. You can email us at podcast@sustainalytics.com or take this short survey. Key Moments 00:00:00 Introduction 00:01:30 Interview with Thomas Kuh discussing asset owners’ views on ESG investing 00:10:52 Insights on the low-carbon transition risks of major food companies and how they can reduce emissions 00:12.33 Details on the Corporate Sustainability Reporting Directive Links to Select Resources Voice of the Asset Owner 2023: Quantitative Analysis Big Food’s Broken Promises: The Data Behind the Food Industry’s Rising Emissions CSRD Reporting: Preparing for Mandatory ESG Disclosure Deadlines More Episodes…
Episode Summary Host: Melissa Chase, Senior Content Marketing Manager, Sustainalytics Guest: Ruthann Bartello, Commercialization Director, Stewardship Services Investors’ Greenwashing Concerns and How to Address Them Greenwashing is a growing concern among financial market participants. Whether it’s measuring the sustainability performance of companies in a portfolio or ensuring that their own firms and offerings are not making exaggerated claims about their sustainability impacts, asset managers are on the lookout for potential greenwashing risks. Adding to the confusion is a lack of clarity around what defines a sustainable investment, as well as the growing list of regulations and reporting frameworks asset managers need to comply with. In this episode, we discuss the European Sustainability Reporting Standards, the cornerstone of the Corporate Sustainability Reporting Directive, which should pave the way for more accessible and standardized corporate sustainability information. You also hear from Morningstar Sustainalytics’ Ruthann Bartello about the key strategies investors can use to mitigate greenwashing risks in their investment products and across their portfolios. Share Your Feedback With the Team Please take a moment to share your thoughts on ESG in Conversation. You can email us at podcast@sustainalytics.com. Key Moments 00:00:00 Introduction 00:01:50 Morningstar Sustainalytics new ebook “Seeing Through the Green: As Guide to Greenwashing Risks for Asset Managers” 00:03:00 The final Corporate Sustainability Reporting Directive and its standards are published 00:4:09 Investor stewardship as a tool to combat greenwashing. 00:5:30 Interview with Ruthann Bartello on key strategies institutional investors can use to address greenwashing 00:06:07 Greenwashing explained 00:08:15 Investor concerns around greenwashing 00:09:58 What’s behind investors’ concerns 00:11:35 Consequences of greenwashing for investors 00:15:05 Key regulations related to greenwashing 00:19:31 Strategies for asset managers to mitigate against greenwashing risks 00:20:23 Tips for asset managers to build a robust investment strategy 00:24:49 Final thoughts Links to Select Resources Seeing Through the Green: As Guide to Greenwashing Risks for Asset Managers Implications of CSRD: What the Final Standards Mean for Investors and Issuers ESG Stewardship: A Powerful Tool to Mitigate Greenwashing Risks More episodes…
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ESG in Conversation
Episode Summary Host: Melissa Chase, Senior Content Marketing Manager, Sustainalytics Guest: Arthur Carabia, Director, ESG Policy Research, Morningstar New Format, Same Great Insights We are excited to share with you the revamped ESG in Conversation! In this new format, we’re expanding the focus beyond sustainable finance to share the latest environmental, social and corporate governance insights. In addition to highlighting recent research from our global team of ESG experts, we will continue to bring you deep dives into the ESG, climate, impact, sustainable finance and regulatory insights you need to know about. In this episode you’ll learn about the upcoming greenhouse gas reporting requirements for companies in North America, the implications of Europe’s policy response to the climate crisis, the Fit for 55 package, and what it means for companies that supply goods and services in the EU. Also, Morningstar’s Arthur Carabia discusses what the recently published International Sustainability Standards Boards reporting standards mean for companies and investors. Tell Us What You Think Please take a moment to share your thoughts on ESG in Conversation. You can email us at podcast@sustainalytics.com. Key Moments 00:00:00 Introduction 00:01:45 Greenhouse gas emissions requirements for North American companies 00:03:50 Interview with Arthur Carabia about the launch of the ISSB standards 00:10:40 Highlights of the EU’s Fit for 55 legislation Links to Select Resources Mandatory Scope 3 Emissions Reporting in the U.S. and Canada: Most Companies Are Unprepared Policy Responses to Climate Change: The EU’s Fit for 55 Package and Its Implications for Companies and Investors What the New ISSB Climate Standard Means for Investors More Episodes…
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ESG in Conversation
In this episode of ESG in Conversation, we’re exploring the question: what does it take to be a sustainability leader in 2023 and beyond? You’ll hear from Joseph Hill, London Techstars alumn and CEO of Zephframe, about the sustainability challenges facing start-ups. You’ll also hear from Eileen Buckley, VP of Corporate Responsibility at Stryker, about the importance of integrating sustainability across an organization. Gabriel Presler, Global Head for Enterprise Sustainability at Morningstar, also joins in to discuss the role investors play in sustainability leadership.…
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ESG in Conversation
1 ESG In Conversation | How Do Businesses, Governments and Investors Fit Into the Circular Economy? 19:33
Host: Curtis File, Editorial Manager, ESG and Sustainable Finance Featuring: Juliette Goulet, Project Manager, Ellen MacArthur Foundation Wayne Hubbard, CEO, ReLondon Joris Laseur, Associate Director, Stewardship, Morningstar Sustainalytics Jonathan Kellar, Manager, Stewardship, Morningstar Sustainalytics As global leaders gain a more nuanced understanding of climate change, they are looking at the circular economy as a potential solution to mitigate their impact. In a circular economy, organizations aim to prevent waste throughout the value chain instead of relying solely on recycling. This approach involves sharing, leasing, reusing, repairing, and recycling materials and products for as long as possible. Proponents say the approach comes with huge potential upside. The Ellen MacArthur Foundation , for example, projects that a circular economy could reduce greenhouse gas emissions by 25%, create 700,000 jobs, and save $200 billion per year by 2040. But the path to achieving those goals is far from clear, and it will require an all-hands-on-deck effort. In this episode of ESG in Conversation, we’re exploring the question: how do businesses, governments and investors fit into the circular economy? You’ll hear from Juliette Goulet, a seasoned sustainability practitioner from the Ellen MacArthur Foundation, about the challenges of implementing a circular economy. You’ll also hear from Wayne Hubbard, CEO of ReLondon , about putting the circular economy into practice in London, England. Joris Laseur and Jonathan Kellar from Morningstar Sustainaltyics’ stewardship team also join to discuss the role investors play in helping businesses reduce their waste and implement circular business practices.…
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ESG in Conversation
Episode Summary Hosts Nicholas Gandolfo, Vice President, Corporate Solutions Aditi Bhatia, Senior Regional Manager, Corporate Solutions What Will the EU Green Bond Standard Mean for the Market? With the European Union’s Green Bond Standard set to come into effect sometime next year, we look at what it could mean for the global sustainable finance market more broadly. Although the highly anticipated framework is expected to be the gold standard for what we see in the market going forward, there are ongoing concerns about its usability. Some market participants are worried about the potential difficulty in meeting all the requirements of the Green Bond Standard and whether the standard is too prescriptive in its requirements to set up a framework. Sustainable Finance Meets AI The sustainable debt market continues to see innovations in the types of projects being funded. One example is the use of green bonds to raise money for artificial intelligence (AI) projects related to green or social initiatives. The green bond issuance highlighted in this episode will finance AI projects related to improving the environmental performance of buildings through data analytics and energy management software. Using AI to support corporate sustainability improvements is not new, but funding such projects using sustainable debt instruments could be the next wave. Changes Coming to the Podcast! Our sustainable finance insights show will be taking a break for the summer. We’ll be back this fall with some exciting changes to bring you more ESG, sustainable finance and responsible investing insights. In the meantime, please subscribe to ESG in Conversation on your favorite podcast platform and enjoy new episodes each month! Key Moments 0:00:49 Market overview 0:01:36 CBI Q1 highlights report 0:03:04 LMA sustainability linked loan drafting model 0:03:28 Sustainable bond market risks 0:04:44 Gender-focused social bonds 0:05:37 Transition plan guidelines 0:05:58 Debt for nature swaps 0:06:23 IRENA report on the cost of energy transition 0:07:00 New CBI reports 0:07:42 SLB and SLL overview 0:11:35 Audience questions 0:16:08 Green bonds and loans overview 0:19:25 Labeled products, transition bonds and regulatory updates Links to Select Resources Climate Bonds Initiative – Sustainable Debt Market Summary Q1 2023 Environmental Finance – LMA Publishes ‘Vital’ Sustainability-Linked Loan Drafting Model Morningstar Sustainalytics – Anticipating the Inevitable: What to Expect from the European Green Bonds Regulation Responsible Investor – Details Emerge on EU Green Bond Standard as Concerns About Uptake Remain Environmental Finance – Sustainable Bond Market Risks Fragmentation Amid ‘Regulatory Overload’ BusinessWorld – No Plans for Follow-Up Offer of Catastrophe Bonds – De Leon WION – Bhutan Takes Steps to Set Up Green Cryptocurrency Mining Operation: Report Environmental Finance – ‘Huge Opportunities’ for Gender-Focused Corporate Sustainable Bond Growth Environmental Finance – GSAM: 36% of European Investors Ready to Invest in Social Bonds Forbes – Companies Going Green Should Add Finance To Sustainability Strategies Eco-Business – The Next Wave of Greenwashing: Offsets, Competitor Claims and ‘Transition-Washing’ Environmental Finance – Banks Call on EU to Provide Transition Plan Guidelines Environmental Finance – Credit Suisse Arranges $1.6bn Debt-for-Nature Conversion With Ecuador IRENA – Low-Cost Finance for the Energy Transition Climate Bonds Initiative Reports Concrete Policies to Underpin the Cement Transition ASEAN Sustainable Finance State of the Market 2022 Property Certification Opportunities in Tokyo Sneak Peek: The CBI’s Resilience Taxonomy Blueprint Sustainalytics Second-Party Opinions TDC NET Sustainability-Linked Finance Framework Second Party Opinion UMH Properties Inc. Sustainable Finance Framework Second-Party Opinion Grupo Bimbo Sustainable Financing Framework Second-Party Opinion More Episodes…
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ESG in Conversation
1 What’s Happening in Sustainable Finance: GSSS Market Rebounds, Sovereign Sustainable Debt, and Much More 29:44
Episode Summary Hosts: Sabrina Tang Sales Associate, Sustainable Finance Solutions Nicholas Gandolfo, Vice President, Corporate Solutions Is the Sustainable Finance Market Rebounding in 2023? In this month’s episode, Nick and Sabrina dig into the sustainable finance market’s rebound in Q1. Despite the market pressures caused by inflation and the banking shake-ups at UBS and Credit Suisse, sustainable finance activity saw an upward trend in the first part of the year. Although Nick and Sabrina stop short of making any predictions about where volumes will land by the end of the year, they do note some interesting dynamics in the market: green use of proceed bonds remain strong, social and sustainability focused bonds are down slightly, and sustainability-linked finance appears to be gaining some ground again despite continued market scrutiny. Scrutiny Continues for Sustainability-Linked Bonds Despite the rebound in sustainability-linked bond (SLB) activity in Q1 this year, concerns remain about this sustainable debt instrument. Several recent articles and reports discuss the credibility of SLB targets, whether coupon rates offer enough of a penalty if targets are missed, and whether the performance targets and indicators have an impact on sustainability. There’s also some media coverage on SLB issuers missing their stated sustainability performance targets. Although not ideal, missed targets among SLB issuers could be viewed as a sign of their rather than an indication of something being fundamentally wrong. For issuers considering sustainability-linked debt instruments and seeking additional guidance, check out the latest market references from Climate Bonds Initiatives (CBI) . The Sustainable Sovereign Debt Club Continues to Grow CBI’s 2022 market summary highlights the growth of sovereign bond issuances. This is great to see because sustainable debt from sovereigns catalyzed the market in many cases. Sabrina highlights the recent activity from Turkey, Austria, Italy, and Cyprus as well as the sovereign green bond program being considered by the Australian government. In addition to more countries seeing the opportunities in sustainable debt instruments, regulators across a growing number of jurisdictions are ramping up sustainable finance activities in their countries. Developments are ongoing in India, Indonesia, Malaysia, Sri Lanka, Japan, and Vietnam to name just a few. Key Moments 0:00:59 Market overview 0:02:07 Q1 market overview 0:03:25 CBI 2022 state of the market report 0:05:22 Continuing SLB scrutiny 0:06:46 Climate transition plan transparency 0:08:34 More updates to the EU taxonomy 0:09:34 Additional articles and reports to read (see links below) 0:11:34 SLB and SLL overview 0:14:15 Audience questions 0:18:14 Green bonds overview 0:21:13 Green loans overview 0:22:30 Social bonds and loans overview 0:23:25 Labeled products, transition bonds and regulatory updates Links to Select Resources Climate Bonds Initiative – Green and Other Labelled Bonds Fought Inflation to Amass USD858.bn Volume in 2022 Climate Bonds Initiative – Sustainable Debt: Global State of the Market 2022 Environmental Finance - ‘It’s time to stop step-up-only sustainability-linked bonds’ Environmental Finance – Union Investment: SLBs Can Have Impact Environmental Finance – CBI Launch Sustainability-Linked Bond Certification Scheme Energy Monitor – Are We About to See a Surge in Sovereign Sustainability-Linked Bonds? Environmental Finance – Sustainability-Linked Targets Could Add ‘Discipline’ in Green Bond Markets Retail Banker International – CaixaBank Rolls Out Metaverse Initiative to Promote Sustainability Responsible Investor – Market Hails ‘Surprisingly Helpful’ SFDR Clarifications from European Commission GreenBiz – Should Sustainability Teams Report Directly to the CEO? Climate Action 100+ - Climate Action 100+ Releases the Latest Evolution of the Net Zero Company Benchmark Financial Times – New Standards Keep the Greenwash off Green Bonds The Strait Times – Companies Risk Penalties as Asia and Australia Target Greenwashing Environmental Finance – ‘Greenwashing is rife’ in Green Bonds, Says EU’s Tang IPCC – AR6 Synthesis Report: Climate Change 2023 Environmental Finance – Nature-Related Sovereign Issuances Set to Grow, Insight Predicts Climate Bonds Initiative – Sustainability-Linked Debt Instrument Certification Sustainalytics Second-Party Opinions Hera Group’s Green Financing Framework Second-Party Opinion Council of Europe Development Bank Social Inclusion Bond Framework Second-Party Opinion More Episodes…
Host: Curtis File, Editorial Manager, ESG and Sustainable Finance Featuring: Sune Andersen, Manager, Stewardship Simon Butler, Associate Professor, University of East Anglia Gayaneh Shahbazian, ESG Research Manager, Biodiversity The statistics are concerning. The International Union for the Conservation of Nature (IUCN) estimates that up to 28% of all species are at risk of extinction. Given these alarming figures, it is crucial for investors to take action and ensure their investments do not further harm our vulnerable ecosystems. Join us on the latest episode of ESG in Conversation, where we delve into the critical question: how can investors effectively address biodiversity loss? Gain valuable insights from Dr. Simon Butler, an esteemed professor specializing in acoustic ecology, whose work underscores the urgent need to tackle biodiversity issues. Additionally, hear from Morningstar Sustainaltyics' stewardship and ESG research teams, providing valuable perspectives on investor engagement on biodiversity loss and the challenges faced by corporations in disclosing nature-related risks.…
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ESG in Conversation
1 What’s Happening in Sustainable Finance: A Flurry of Updates in Regulations, Taxonomies, Frameworks, and Much More 27:00
Episode Summary Hosts: Nishant Bhagchandani, Sales Manager, Sustainable Finance Solutions Nicholas Gandolfo, Vice President, Corporate Solutions Regulation, Guidance and Taxonomy Updates Keep Market Participants on Their Toes In this episode, Nick and Nishant discuss the flurry of updates in the sustainable finance regulation and guidance space. The European Union has reached a long-awaited deal on the first set of comprehensive rules for issuing green bonds. Although voluntary, the EU Green Bond Standards will help investors identify high-quality green bonds and may set a precedent for other jurisdictions. The Green Loan Principles, Social Loan Principles, and Sustainability-Linked Loan Principles were also recently updated to align more closely to current market practice and provide additional guidance to borrowers (e.g., recommendations that borrowers obtain an independent external review of their green, social and sustainability-linked loan processes). Other updates include recommendations for the sustainable finance taxonomies being developed in Australia and Canada, as well as the new draft version of the Taskforce for Nature-related Financial Disclosures (TNFD) framework. What the Final TNFD Framework Could Mean for Sustainable Finance With the release of the fourth beta framework from the TNFD, market participants eagerly await the final version, due to be published this fall. This latest beta release includes a full draft reporting framework and a set of disclosure metrics, along with assessment metrics to be used by companies. The disclosure metrics will also include some core measures which are applicable to all sectors. The final framework will help to standardize the sustainability metrics companies report on, making them usable in sustainability-linked instruments and speeding up the framework’s adoption. Key Moments 0:00:59 Market overview 0:02:32 Market forecast 0:03:22 SVB failure and climate tech 0:04:05 Morningstar Sustainalytics launches Low Carbon Transition Ratings 0:04:37 Relinking in sustainable finance 0:05:11 TNFD release beta version 4 of framework 0:05:56 Insights from Kanga News Sustainable Debt Conference 0:06:30 Taxonomy developments in Australia and Canada 0:07:24 Agreement of EU Green Bond Standards 0:08:33 High Seas Treaty will boost blue bond issuance 0:08:45 SLBs as a hedge against sustainability policies 0:09:00 Transition finance standards 0:09:12 Updated principles for green, social and sustainability-linked loans 0:10:58 SLB and SLL overview 0:13:48 Audience questions 0:17:43 Green bonds overview 0:20:56 Social bonds and loans overview 0:22:40 Labeled products, transition bonds and regulatory updates Links to Select Resources JD Supra – Asian ESG Debt Markets Take a Breath After Record Run Bloomberg – Green Bonds Turbo Charge ESG Debt Sales to Busiest February Ever ESG Clarity – Natixis Q&A: ‘Liquidity Will Be Driven by ESG Transparency and Clarity’ Environmental Finance – Credit Suisse: Another Headwind for 'Green' AT1 Bonds Morningstar Sustainalytics Launches its Low Carbon Transition Ratings Bank of China Ltd Announcement – Sustainability Re-Linked Notes Coupon Adjustment: Annual Coupon Adjustment of Sustainability Re-Linked Notes Environmental Finance – Forthcoming TNFD Metrics Would Work in Sustainability-Linked Instruments Environmental Finance – Traffic-Light System Recommended for Australia's Taxonomy Environmental Finance – EU Green Bond Standard: Provisional Deal on Landmark Regulation Agreed ESG Clarity – High Seas Treaty Will Boost Interest, Access and Issuance of Blue Bonds Climate Bonds Initiative – India’s Debut in the Sovereign Green Bond Market: First Deal Landed a Greenium! IRENA – Investments in Renewables Reached Record High, But Need Massive Increase and More Equitable Distribution International Energy Agency – Global CO2 Emissions Rose Less Than Initially Feared in 2022 as Clean Energy Growth Offset Much of the Impact of Greater Coal and Oil Use Climate Bonds Initiative – Climate Bonds Standard Expands With New Agri-Food Transitions Criteria: Commodity and Supply Chain TWGs And IWGs Now Onboarding More Episodes…
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ESG in Conversation
1 ESG In Conversation | How Are Sustainability Professionals Really Putting ESG into Practice? 14:37
With all the noise about ESG in the news, it can be hard to discern what is really going on. We know that the increased demand for companies to address ESG issues has meant that organizations have had to make significant changes to how they work. But when it comes to addressing, managing and reporting on ESG issues, what’s really going on behind corporate doors? In this episode of ESG in Conversation, we explore that question by examining how the roles of CSR and sustainability professionals are evolving to address material ESG issues. You’ll hear about the results of the Morningstar Sustainalytics Corporate ESG Survey, with insights about the challenges, concerns, and evolving roles of CSR and sustainability professionals around the world. View the show notes in full detail at the Sustainalytics Resource Centre . Read the full Morningstar Sustainalytics Corporate ESG Survey Report 2022 Download the report to learn about the ESG challenges companies face around the world and the resources CSR and sustainability professionals are using to meet them, key steps to ESG maturity, where companies are focusing their ESG investments, and how companies are using their ESG ratings and scores.…
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ESG in Conversation
1 What’s Happening in Sustainable Finance: Innovative Finance Instruments Breaking Ground, Use of Proceed Bonds Back in Vogue, and More 26:00
Episode Summary Hosts: Winnie Chung, Senior Associate, Corporate Solutions Nicholas Gandolfo, Vice President, Corporate Solutions Growing Innovation with Sustainable Finance Instruments In this episode, Nick and Winnie chat about the latest news and transactions in the sustainable finance space. With a focus on innovation, they discuss the new ways in which issuers are leveraging sustainable finance instruments to fund their green and social projects. For instance, the World Bank’s recent bond issuance will forgo investor coupon payments, instead using the funds to finance a project manufacturing water purifiers in Vietnam. Using purifiers will replace biomass burning (traditionally used to boil water to make it safe to drink), resulting in lower carbon emissions. The carbon emissions saved will be turned into carbon credits and sold to fund a coupon payment to bond investors. Nick also notes innovation picking up in the areas of blue bonds and the maritime economy as well as biodiversity-focused finance activities. Investors Swing Back to Use of Proceed Instruments Winnie and Nick also touch on the growing ambivalence towards sustainability-linked instruments. In 2022, sustainability-linked bonds and loans seemed to lose some of their appeal as scrutiny of targets and performance indicators intensified and accusations of greenwashing arose. Adding to the discontent – slipping targets. Analysis from Barclays finds that nine out of 12 SLBs with target measurement dates in 2023 are off track to hit those targets. Consequently, we’re seeing a swing back toward traditional use of proceed instruments. This is particularly true within the green bond market which took less of a hit compared to other types of labelled bonds in 2022. With more green bond disclosure guidance and regulations expected from more jurisdictions, such as India, Bolivia, EU and Latin America, investors will likely continue to seek security in the more structured green bond market. Key Moments 0:02:20 Market overview 0:02:37 Expected market rebound 0:03:15 Innovative structure from World Bank 0:04:03 Swing back to use of proceeds? 0:04:23 Innovative structure from ENEL 0:05:10 Blue and biodiversity activity 0:05:31 Continued scrutiny of SLLs and SLBs 0:06:40 ASEAN developments 0:07:34 New CBI reports 0:08:04 SLB and SLL overview 0:11:52 Green bonds overview 0:17:35 Green loans overview 0:17:57 Audience questions 0:21:05 Social bonds and loans overview 0:22:03 Labeled products, transition bonds and regulatory updates Links to Select Resources Bloomberg – ESG Bond Sales Hit 12-Month High; Debut Deals Pile Up Environmental Finance – Sustainable Bonds Insights 2023 Published Environmental Finance – World Bank Issues ‘Unique’ Carbon Credit-Linked Bond Environmental Finance – IFC adds ‘Blue’, Biodiversity Projects to Green Bond Framework UN Environment Programme – Countries Search for Financing to Counter Biodiversity Crisis Responsible Investor – SLB Issuers ‘Likely to Miss Majority of 2022 and 2023 Targets’ Environmental Finance – SLB Issuers ‘Lose Their Halo,’ says HSBC LSTA – Drafting Guidance for Sustainability-Linked Loans (Feb 17, 2023) Environmental Finance – Philippines Opens Consultation on Sustainability-Linked Bonds Standards Financial Times – Sustainability Bond Market Stumbles as Investors Get Picky CarbonCredits.com – JBS “Green Bonds” and GHG Emissions Under Investigation Bloomberg – Barclays Sees Real Greenwashing Risk in ESG Debt-Swap Market Climate Bonds Initiative – Sustainable Agriculture Brief Climate Bonds Initiative – Scaling Credible Transition Finance – ASEAN Edition Capital Monitor – Why Japan Embraces Transition Bonds Business Standard – SEBI Asks Issuers for Additional Disclosure in Guidelines on Green Bonds ESG Clarity – Mandatory Climate Finance Disclosure ‘Evens Playing Field’ for Australia Sustainalytics SPOs: Nokia Sustainable Finance Framework Second Party Opinion State Bank of India ESG Financing Framework Second-Party Opinion Hertz Green Finance Framework Second-Party Opinion More Episodes…
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ESG in Conversation
1 What’s Happening in Sustainable Finance: On the Horizon for 2023, Reporting on Financed Emissions for Sovereign Debt, and More 35:22
Episode Summary Hosts Nicholas Gandolfo, Vice President, Corporate Solutions Sabrina Tang, Sales Associate, Corporate Solutions In this episode, Nick and Sabrina reviewed what’s new in sustainable finance and shared some notable deals and transactions that have hit the market. They discussed the overall decline of global bond markets and expressed some optimism for the year to come, as sustainability is a central issue for investors, companies and governments and is still closely tied to capital markets. They also shared research on the carbon performance of food producers and a report on how to scale credible transition finance among countries in Southeast Asian. Sustainable Market Hopes for 2023 If you’ve been following sustainable finance market activities, it’s no surprise that 2022 was not a great year overall. Markets were down in volume for the first time in 11 years. According to figures from Environmental Finance , total annual sustainable bond issuance fell 19%, from US$1.05 trillion in 2021 to US$845 billion in 2022. Social, sustainability and sustainability-linked bonds were hit hardest – down about 25% compared to 2021, while green bonds fared a bit better with a more modest 14% issuance decline. Despite the lower issuance volumes, there is hope for a rebound in 2023 as overall markets stabilize and issuers seek financing. This year may see use of proceed instruments like green bonds continue to gain ground compared to performance based, sustainability-linked bonds. We may also see more transition deals, social and biodiversity focused activity, as well as more complicated transactions going to market. It’s still early days, so let’s see how things develop. Updated Standard for Reporting Financed Emissions in Sovereign Debt If you’re a bank trying to figure out how to report on your financed emissions, be sure to read through Partnership for Carbon Reporting Financials’ (PCAF) recently updated standard . Global GHG Accounting and Reporting Standard for Financed Emissions addresses demands from financial institutions and provides a methodology to help investors in sovereign debt account and report greenhouse gas emissions. The methodology on sovereign debt includes bonds and loans of all maturities, however, only debt issued by the central bank on behalf of the sovereign would be covered. The methodology also requires reporting of scope 1, scope 2 and scope 3 emissions and recommends getting the information from countries’ reported data via the United Nations Framework Convention on Climate Change. Key Moments 0:01:16 Market overview 0:03:24 COP15 insights 0:04:22 Australia sustainable finance taxonomy 0:05:04 BNP Paribas social impact bond 0:05:16 TPI paper on food producers' carbon performance 0:06:53 Updated PCAF standard 0:07:31 Banks' transition planning under scrutiny from ECB 0:08:05 Activity in carbon markets 0:08:45 Austria launches green commercial paper program 0:09:14 CBI paper on transition finance in ASEAN 0:10:17 SLB and SLL overview 0:15:34 Audience questions 0:21:00 Green bonds overview 0:23:56 Green loans overview 0:25:06 Social bonds and loans overview 0:27:38 Labeled products, transition bonds and regulatory updates Links to Select Resources Environmental Finance – Annual Sustainable Bond Issuance Falls for First Time Since 2011 Bloomberg.com – Global Debt Market Lost at Least $75 Billion of Business in 2022 Reuters – ESG Watch: Despite Setbacks, Green Finance Ends 2022 in Good Health Global Capital – High Hopes for Corporate Issuance in 2023 Environmental Finance – COP15 Agreement 'Significant,' but Credit Impact Depends on Implementation Environmental Finance – Climate Change Litigation: 11 Key Cases for Insurers to Watch Australian Sustainable Finance Institute – Taxonomy Project Global Capital – Saving Biodiversity: The Next Mountain for Capital Markets Transition Pathways Initiative – TPI Carbon Performance Assessment of Food Producers: Discussion Paper Environmental Finance – PCAF Sovereign Debt Methodology Plugs Gap in Emissions Accounting, Says Allianz European Central Bank – Supervisory Priorities and Risk Assessment for 2023-2025 Environmental Finance – Carbon Markets Can Help Provide Nature-based Solutions The Hindu Business Line – Sovereign Green Bonds Will Act as Benchmark for Private ESG-linked Debt: RBI’s Rao Global Capital – Austria to Launch Green Commercial Paper in 2023 Climate Bonds Initiative – Scaling Credible Transition Finance – ASEAN Edition Sustainalytics SPOs: UNIQA Green Bond Impact Report Mosaic Solar Green Use of Proceeds Securitized Bond (2022-3)…
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ESG in Conversation
1 What’s Happening in Sustainable Finance: Climate on the International Agenda, New Instruments to Support Emerging Markets, and Much More 36:38
Episode Summary Hosts Nicholas Gandolfo, Vice President, Corporate Solutions Aditi Bhatia, Senior Regional Sales Manager, Corporate Solutions In this episode, our hosts Nick and Aditi discuss the recently held COP27 and COP15 conferences and what their outcomes could mean for green and social financing globally. They also touch on the concept of blended finance and how that might be used to support climate adaptation in emerging markets. Increasing activity among sovereigns is also discussed, as countries come to market more frequently with sustainable debt. Lastly, Nick and Aditi share a rundown of other notable sustainable finance transactions. Climate High on the International Agenda Given the current climate crisis, expectations were high for COP27. From an environmental standpoint, the final agreement was seen as a disappointment by some observers. However, the conference closed with a ground-breaking agreement to set up a loss and damages fund, which aims to provide financial assistance to countries vulnerable to, or impacted by, the effects of climate change. COP15, the United Nations Biodiversity Conference, also concluded late last year with a landmark agreement that includes measures to halt and reverse nature loss – such as putting 30% of the planet and 30% of degraded ecosystems under protection by 2030. The plan also includes a target of mobilizing at least US$200 billion per year from public and private sources for biodiversity-related funding. Finally, the G20 conference in Bali also turned its attention to issues around climate change, low-carbon transition, and climate adaptation. Innovative Solutions to Fund Sustainable Development With an estimated US$9.2 trillion needed to meet global climate and environmental goals,1 private and public sectors are looking for more ways to funnel money to finance mitigation and conservation efforts. To address this need, market participants are discussing innovative solutions like blended finance, which is the strategic use of development finance (such as public or philanthropic capital) and private investment capital to fund sustainable development projects in developing countries.2 A new crop of instruments is also emerging to offer potential solutions. This includes instruments like debt-for-nature swaps, a financial mechanism that allows portions of a developing country’s foreign debt to be forgiven, in exchange for commitments of investment in biodiversity conservation and environmental policy measures.3 We anticipate seeing more variety in the types of instruments being developed to support conservation and climate adaptation in countries most vulnerable to climate change. Check Out Our Special Episode on Sustainable Finance in the Metals and Mining Sector In case you missed it, we recently took a deep dive into the sustainable and transition finance opportunities within the metals, mining and commodities sector. Our panel discussed key considerations for banks, issuers and investors interested in using sustainable finance instruments to help fund improvements across the sector and mitigate potential risks. The sector is incredibly important because of its crucial role in the global transition to a low-carbon economy. However, these companies face numerous environmental and social challenges, which if not managed effectively could negatively impact their access to capital. Listen here: Sustainable Finance Insights: Special Episode on Sustainable Finance in the Metals, Mining and Commodities Sector Key Moments 0:00:51 Market overview 0:01:38 COP27 insights 0:03:48 G20 Summit 0:04:35 COP 15 insights 0:05:00 State of the bond market and outlook for 2023 0:05:56 Sovereigns’ ambitions in sustainable finance 0:06:33 Social taxonomy update 0:06:52 Green bond tokenization 0:07:12 Emergence of blended finance 0:08:02 More activity in transition finance market 0:08:19 Market scrutiny of SLBs 0:10:08 ICMA paper on sustainable repos 0:10:34 Food security as social use of proceeds 0:10:54 More activity around carbon markets globally 0:11:15 PCAF publishes second version of Global GHG Account and Reporting Standard 0:11:48 CBI principles for transitioning agriculture sector 0:12:23 SLB and SLL overview 0:17:39 Audience questions 0:23:26 Green bonds overview 0:26:51 Green loans overview 0:28:50 Social bonds and loans overview 0:31:04 Labeled products, transition bonds and regulatory updates Links to Select Resources IFLR - COP15: Financial Firms Look to Scale Up Nature Finance Bloomberg - Global ESG Bond Issuance Headed for First Full-Year Decline Ever GlobalCapital – Record Volumes Spark January Debate in FIG Market Responsible Investor – World Bank: Only 31 Southeast Asian Companies Have Issued Sustainable Debt Since 2017 OMFIF – Sovereigns Need to Show More Ambition With ESG Bond Frameworks GlobalCapital – ESAs Call for Evidence of Greenwashing Open Access Government – Social Taxonomy: A Step Towards Social Sustainability Environmental Finance – Banks Urged to Rework Financing Instruments for Climate Adaptation Blockchain News – HK to Issue Tokenized Green Bond, Open Market for Virtual Assets ETFs Trading China Dialogue – China’s Central Bank to Focus on Transition Finance The Manila Times – ASEAN Launches Sustainable and Responsible Fund Standards Bloomberg Law – ESG-Linked Bonds Seen Stalling on Greenwash and Legal Fears Environmental Finance – Snam’s Return to Transition Bonds ‘A Big Sign’ SLBs are Under Pressure GlobalCapital – Crunch Time Coming for SLBs as First Step-Ups Appear The Business Times – ESG is Taking Over the Loan Market Environmental Finance – ICMA Principles Could be Adapted for ‘Sustainable Repos’ Climate Home News – John Kerry: Carbon Offsets Can Help Wean Developing Countries Off Coal World Economic Forum – Climate Adaptation: The $2 Trillion Market the Private Sector Cannot Ignore Responsible Investor – Scope 3 Emissions Key to Financial Sector Net Zero Plans, says GFANZ Climate Bonds Initiative – Principles and Hallmarks for Transitioning Agri-Food Systems: Opportunities, Pathways and Actions Sustainalytics SPOs: AIB Green Bond Framework Second-Party Opinion Storebrand Green Bond Framework Volkswagen Aktiengesellschaft Green Finance Framework Second-Party Opinion City of Atlanta Social Bond Framework Second-Party Opinion CABEI Green and Blue Bond Framework Second-Party Opinion VPBank Social Finance Framework Second-Party Opinion Sources 1Roston, E. 2022. “McKinsey Pegs the Price Tag for a Livable Climate at $9.2 Trillion a Year.” Bloomberg. January 25, 2022. https://www.bloomberg.com/news/articles/2022-01-25/mckinsey-pegs-price-tag-of-livable-climate-at-9-2-trillion-a-year 2 See OECD: https://www.oecd.org/development/financing-sustainable-development/blended-finance-principles/ and Bank of America: https://about.bankofamerica.com/en/making-an-impact/blended-finance 3 See Earth.org: https://earth.org/debt-for-nature-swaps/…
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ESG in Conversation
Episode Summary Host: Curtis File, Editorial Manager, ESG and Sustainable Finance Featuring: Melissa Hudson, Associate Director, Research Products Liam Zerter, Associate Director, Quantitative Research Manager In this episode of the Sustainalytics Podcast, Curtis explores cybersecurity and data privacy issues, with commentary from Melissa Hudson and Liam Zerter about the real impact of cyberattacks on businesses. You’ll learn about the 2021 United Kronos Group ransomware attack, cybersecurity trends that organizations should monitor, how cyberattacks affect the bottom line, and why companies should invest in developing robust cybersecurity and data privacy policies. The Current Cybersecurity and Data Privacy Trends Companies Should Monitor Within the last two years in particular, both the frequency and severity of cyberattacks against businesses have continued to climb. As companies have modernized and expanded their digital infrastructure to remain competitive, they have also increased their vulnerability. High-profile data breaches have led to increased pressure from regulators, consumers, and the insurance industry, who increasingly view such incidents as market failures. Why Having a Strong Cybersecurity Policy is Important Perhaps most importantly for a company’s bottom line, Morningstar Sustainalytics’ researchers found that companies that had robust data privacy and cybersecurity policies were able to recover faster from a cyberattack compared to peers with poor or weak policies. Beyond providing a boost to recovery, companies must also invest in their cybersecurity infrastructure in order to keep up with the rapidly changing regulatory landscape. Those that don’t take immediate action will be left behind. Read Our eBook, Data Privacy, Cybersecurity and ESG: Managing Risks in a Changing Business Environment Download the ebook to learn about the types of data privacy and cyber threats companies are facing, the potential ESG risks for companies that do not properly address data privacy and security, and how organizations can manage and mitigate data privacy and security risks. Key Moments 00:00 United Kronos Group Ransomware Attack 01:54 Introduction to the Cybersecurity and Data Privacy Landscape 03:35 Five Global Events Driving Cybersecurity and Data Privacy Trends 05:18 Consequences of Under-Investment in Cybersecurity 06:40 The Increasing Frequency and Severity of Cyberattacks 08:00 How Cyberattacks Impact Stock Price 09:45 The Importance of Strong Data Privacy and Cybersecurity Policy 10:34 A Developing Regulatory Landscape 12:09 Looking Forward Transcript 00:02 Curtis File: In December 2021, a group of cybercriminals sent panic across the United States. United Kronos Group, a payroll and HR software company, was targeted by a ransomware attack. The attack took out its Kronos Private Cloud platform, and this left major retailers and state governments scrambling to pay employees as the holidays approached. But worse, a number of hospitals were affected. Kronos was a mission critical provider of administrative services for hospitals across the United States. From small, remote hospitals to urban medical systems, the attack interrupted services and, in many cases resulted, in delayed health care delivery. So why was this able to happen? 00:46 John Riggi: In response to the pandemic, hospitals rapidly deployed and expanded network-connected and internet-connected technologies to accommodate a surge of COVID patients and a remote administrative workforce. So, what this did is create many more opportunities for bad guys to penetrate our networks. It's what we call an expanded attack surface.1 01:18 CF: That was a clip of John Riggi, Senior Adviser for cybersecurity and risk for the American Hospital Association. At the time of the Kronos attack, he spoke openly to media about his concern for the cybersecurity threats the health care industry is facing. He told NPR: “As we always do, hospitals and health systems will get it done and care for patients, but under additional stress and burden they don't need right now.” The incident highlighted the real impact of cybersecurity breaches when corporations and government systems are attacked, our coworkers, friends and family are the collateral damage. I'm Curtis File, Editorial manager with Sustainalytics and your host for today as we look at cyberattacks and what they mean for ESG risk management. Cybersecurity and data privacy have become hot button issues, particularly in the last two years. Consumers have become more informed about data privacy issues, demanding companies take accountability for how they process user data. At the same time, there's been a significant increase in the number and severity of cyberattacks against businesses. To better understand the concrete business impact of cyberattacks, Sustainalytics’ experts set out to create a report based on our own research and data, asking, “does a major cybersecurity incident have a meaningful impact on stock price returns?” And it turns out... 02:45 Melissa Hudson: The answer is yes. 02:47 CF: That's Melissa Hudson, Associate Director, Research Products and one of the authors of the report. You'll be hearing more from her today, along with another Sustainalytics expert, Liam Zerter, Associate Director, Quantitative Research Manager. We'll be taking a closer look at the results of the report to get a better understanding of cybersecurity and data privacy. But before we get into the data in numbers, let's take a broader look at cybersecurity as an ESG risk. Melissa Hudson explains. 03:15 MH: If I could sum up what we're seeing, it's that both data and digitization have become a double-edged sword. They are key drivers of value and efficiency, but they also create a significant new target commodity and increased corporate vulnerability. We see five recent global events as key. First, COVID 19 and the unprecedented disruption and movement to remote work that came with it. Second, the 2020 SolarWinds attack, a game changer that Microsoft CEO called the largest and most sophisticated attack the world has ever seen. Then came the 2021 Colonial Pipeline hack that showed the U.S. public the real-life, real-time impact of a cyberattack on critical infrastructure. Fourth, the Russian invasion of the Ukraine earlier this year, which led many to fear the possibility of cyber warfare. Finally, over the course of this time-period, we've seen the emergence of ransomware and in particular its productized form known as “ransomware as a service”. So, on the one side, disruption, sophisticated technologies, supply chains and critical infrastructure attacks are placing an increased focus on how vulnerable our integrated cyber ecosystem has become. While, on the other, ransomware is leveling the playing field in terms of risk. Companies and industries once considered immune are having to deal with business interruption and extortion as ransomware is made available to less sophisticated actors. In short, we're reckoning with a significant realignment in global cyber security risk. And the pace of corporate investment in cybersecurity has not kept up. 05:29 CF: That underinvestment in cybersecurity is a critical issue. The frequency of cyberattacks only continues to climb, and so does the severity of losses. As a result, stakeholders are being taken off guard as they're suddenly confronted with significant transition risks. And the public costs of underinvestment in cybersecurity are increasingly being viewed as market failures in much the same way as environmental issues. These costs are driving increased regulation, stronger enforcement, and pressure from the insurance industry. 05:59 MH: Marsh and McLennan see an inflection point in the market comparable to that faced by property insurers 30 years ago following Hurricane Andrew in Florida. Following Andrew, almost a million policyholders lost coverage after their insurance companies went bankrupt. In today's context, we are seeing a cyber-insurance market with increasing premiums, more exclusions, and, in a signal that mirrors our own analysis, coverage availability tightly linked to implementing industry standard cybersecurity safeguards. 06:40 CF: With regulators and insurers increasingly scrutinizing companies’ cybersecurity practices. Sustainalytics researchers wanted to know: Are cybersecurity incidents really increasing in number and severity? Do cyberattacks impact share price? And if so, how? And do strong privacy and security practices pay off? Let's start with the first question. Liam Zerter has the answers. 07:03 Liam Zerter: Let's take a look at the data privacy and security incidents that Sustainalytics tracks. If we take a look at 2013, moving to 2021, data privacy and security has been growing at a cumulative aggregate growth rate of 37%. If you compare this to the total incident growth rate, which is influenced by a coverage, that's been growing at 24%. We have a pretty clear double-digit growth that's occurring. But the more interesting story is when you look down at the risk level from before 2018 and post 2018. So, from 2013 to 2017, those high-risk business incidents have been going for about an average of, you know, five per year. But in 2019 to 2021, now you're averaging 26. So, you're looking at what might be a 5x increase and those big write tail events occurring. 08:00 CF: To get a better understanding of what that fivefold increase in incidents means, Sustainalytics researchers put together an event study to look at the price reaction to news of a major cyberattack. They compared a portfolio of companies that had been involved in a high-risk cybersecurity incident against the S&P 500 and a global sector benchmark. 08:20 LZ: From day zero going forward, in the first four days, you have a -2.3% drop in the first four days and a partial rebound. Some companies start getting some confidence back in the market, but this is short lived. The absolute bottom that occurs is 60 trading days in. This is particularly interesting because some analysts and news anchors on BNN Bloomberg for example, will actually reference that, if a big controversy happens to a company, you know, wait three months and sometimes the market forgets about that controversy, even occurring. That's very interesting to see that this also aligns to that type of saying. 09:06 CF: But that's not the end of the story. The real surprise for researchers came when looking at the long-term impact. One year later. 09:14 LZ: The incident portfolio is actually still negative in absolute terms returns. But it's even worse off when compared to the S&P 500 and the sector benchmark. Now we have a scenario where, you know, it's clearly showing that there is a drag being placed on these companies for a longer-term period. Some studies may, that are out there, may actually say it could take up to two years for some companies that have been severely cyber attacked to start acting normal again. 09:45 CF: The reports are bleak. Malicious actors don't just deal from corporations, they damage the relationship between companies and their stakeholders. So, what can companies do to protect themselves? Liam says having robust security and data privacy policies can buffer the negative impact. 10:02 LZ: When we looked at data privacy and security policy management scores, those companies that had really strong scores, 75 to 100, 1 year after the incident actually traded pretty close in line with their relative benchmark. They actually weren't affected all too much in most cases. But those companies that had a score of zero or no score available at all because the industry that they participate in, they were down nearly -5%. So, there's a significant gap difference. 10:34 CF: Beyond providing a boost to recovery, the regulatory landscape is changing. Taking a casual approach to cybersecurity and data privacy is no longer an option. New and stricter data privacy regulations are on the horizon, with many nations looking to the EU GDPR as an example. On the cybersecurity front, laws, design requirements and reporting standards are continually evolving. Melissa says organizations must pay close attention to both data privacy and cybersecurity regulations to ensure they maintain compliance. 11:05 MH: In general, we're seeing a broad convergence towards GDPR-like regulatory regimes, at least in the developed world. California's New privacy laws have set a high bar for the U.S. and the majority of states now have their own. Canada, for example, is in the process of amending the breadth and depth of its privacy law to meet or closely aligned with GDPR standards. While Australia has just greatly increased the fines for privacy breaches in light of at least two major incidents. On the cyber security front, we have also begun to see significant developments related to freestanding cybersecurity law, technology design requirements, and increasing attention to critical infrastructure standards and reporting. A trend that has only accelerated with the SolarWinds and Colonial Pipeline attacks. 12:09 CF: Those attacks have highlighted that as a society, we have greatly underestimated cybersecurity risk. While digitization has made it easier for businesses to scale and operate more efficiently. It's also made it easier for malicious actors to exploit vulnerabilities—as demonstrated by the Kronos attack. Going forward, organizations are going to be facing increased pressure and scrutiny from government regulations, the insurance industry and stakeholders conducting due diligence on cybersecurity risks. As a result, companies are going to have to both increase their investment in cybersecurity, and increase their level of disclosure around risk mitigation, with particular attention to controls related to privacy and security management. Companies that failed to do so may ultimately face operational and remediation costs, financial penalties, reputational damage and lost business. That's it for this episode of the Sustainalytics podcast. If you'd like more information about data privacy and cybersecurity threats companies are facing around the world, and how your company can better manage these risks, head over to the resource center at www.sustainalytics.com and read our e-book Data Privacy, Cybersecurity and ESG: Managing Risks in a Changing Business Environment . We'll put the link in the show notes. Alternatively, you can check out the full report, The Impact of Cyberattacks on Stock Prices authored by Melissa Hudson and Liam Zerter. Or watch their in-depth webinar Cyber Attacks, Corporate Exposure and Material ESG Risk . If you have any questions, or suggestions for topics you'd like to learn more about, email us at podcast@sustainalytics.com . Thanks again to Melissa and Liam for providing their insight. And thank you for listening. References 1. CyberMed Summit. “Cyberattack Preparedness and Hospital Readiness Across American Healthcare.” YouTube Video, 22:37. February 6, 2022. https://www.youtube.com/watch?v=0gfSxfHSzzI…
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ESG in Conversation
1 What’s Happening in Sustainable Finance: Funding Emerging Markets’ Climate Adaption, Regulatory Focus on Scope 3 Emissions, and More 57:54
Episode Summary Hosts Nicholas Gandolfo, Director, Corporate Solutions Aditi Bhatia, Regional Sales Manager, Corporate Solutions In this episode, Nick and Aditi highlight developments in the sustainable finance markets as 2022 winds down. They note that global cumulative green bond issuance has surpassed the US$2 trillion threshold , marking another milestone for sustainable finance. They also discuss the diversification of key performance indicators used in sustainability-linked instruments, the growing opportunities for using sustainable finance as a tool to fund climate adaptation in emerging markets, and regulators’ increasing focus on reporting for scope 3 emissions. Finally, they respond to audience questions about impact investing and sleeper sustainability-linked loans. Cumulative Issuance of Climate-aligned Bonds Passes $2 Trillion Mark According to the Climate Bonds Initiative, to date over US$2 trillion in greens bonds have been issued globally, marking another major milestone in sustainable finance. Despite broader market conditions resulting in lower volumes year-over-year, use of proceed bonds, such as green bonds, are rebounding slightly. Using Sustainable Finance to Support Funding in Emerging Markets When thinking about how to ensure a just transition, a recurring question is, "How can market participants initiate more financing for adaptation, resilience, and development, to help countries who most vulnerable to climate change, but that are not major contributors to it?" One answer is sustainable finance. Sustainability-labeled debt can provide opportunities to drive and scale financial flows in emerging markets. Though issuing a green bond doesn’t eliminate the liquidity, currency or country risk facing some emerging market nations, hopefully more funds can be leveraged under the sustainable finance umbrella to drive additional financing and a just climate transition for these countries. Growing Regulatory Focus on Scope 3 Reporting Regulators globally continue to push for disclosure and reporting of scope 3 emissions. In October 2022, the International Sustainability Standards Board (ISSB) voted unanimously to require companies to disclose scope 1, scope 2 and scope 3 greenhouse gas emissions, and will develop relief provisions to help companies apply the scope 3 requirements.2 This follows the U.S. Securities and Exchange Commission’s proposal for climate disclosure published earlier this year which includes reporting on Scope 3 for large U.S. companies. 0:00:51 Market overview 0:01:24 Use of proceed rebound 0:02:15 CBI conference outcomes 0:03:22 Green bond issuances pass US$2 trillion globally 0:04:08 FCA report on fund labeling 0:04:58 CBI reports and consultations 0:05:36 Scope 3 reporting in the news 0:06:21 Sustainable finance for emerging markets 0:07:01 Funding instruments to support conservation - blended finance and debt to nature swaps 0:09:00 Green and social loans tied to banks SLL pools 0:09:46 SLB and SLL overview 0:14:04 Audience questions 0:19:47 Green bonds and loans overview 0:25:40 Social bonds and loans overview 0:29:05 Labeled products, transition bonds and regulatory updates Links to Select Resources Environmental Finance – World Bank Warns of SLB Greenwashing Risk From 'Structural Loopholes' Environmental Finance – Climate Bonds Standard Extension to SLBs to 'Fire Integrity' Global Capital – French Agencies Struggle to Tighten Green Deals Environmental Finance – EM Financial Institution Green Bond Impact Reporting Study Published IISD - AfDB Report Assesses Feasibility of Debt-for-Nature Swaps in Africa Environmental Finance – Investors Calling on TNFD to Address Nature Restoration Environmental Finance – Inflation Reduction Act 'Could Transform Bond Market', Conference Hears Global Capital – Bonds Tied to Banks’ SLL Pools Could Spread in 2023 Global Capital – Dearth of Climate Adaptation Bonds Spurs Call for New Asset Class Delano – Green Bonds Issuers Adapt to EU Taxonomy: LuxSE Climate Bonds Initiative – 101 for Policymakers Climate Bonds Initiative Hydrogen Production Criteria Sustainalytics SPOs: Uruguay’s Sovereign Sustainability-Linked Bond Framework Second-Party Opinion CEMEX Sustainability-Linked Financing Framework Second-Party Opinion PT Semen Indonesia (Persero) Tbk Sustainability-Linked Finance Framework Second-Party Opinion Government of Chile Sustainability-Linked Bond Framework Second Party Opinion Japan Bank for International Cooperation Green Bond Second-Party Opinion IIFL Home Finance Limited Sustainable Finance Framework Second-Party Opinion Georgian Renewable Power Operations Green Bond Framework Second-Party Opinion Carmila Green Bond Framework Second-Party Opinion First Help Financial Social Bond Framework Second-Party Opinion More Episodes…
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ESG in Conversation
1 Sustainable Finance Insights: Special Episode on Sustainable Finance in the Metals, Mining and Commodities Sector 57:54
Episode Summary Hosts Aditi Bhatia, Regional Sales Manager, Corporate Solutions Nicholas Gandolfo, Director, Corporate Solutions Nishant Bhagchandani, Sales Manager, Corporate Solutions Vanessa Tang, Sales Associate, Corporate Solutions In this special episode, we focus our lens on sustainable and transition finance opportunities within the metals, mining and commodities sector, amid growing interest from companies and investors. The sector is incredibly important because of its crucial role in the global transition to a low-carbon economy. The demand for minerals used in clean energy technologies is expected to increase four-fold by 2040 to meet climate goals.1 However, mining is also resource intensive, contributing to between four and seven percent of global greenhouse gas emissions,2 and affecting water resources. The various social challenges the sector faces greatly impact local communities, even after mines are closed. As with other harder-to-abate sectors, maintaining access to capital amid a long list of environmental, social and governance risks can be a challenge. Listen to our panelists discuss key considerations for banks, issuers and investors interested in using sustainable finance instruments to help fund improvements across the metals and mining sector and mitigate potential environmental, social and regulatory risks. They share insights on the trends they’re seeing in the market, the conversations they’re having with issuers and banks, and what’s next in sustainable finance for the metals and mining sector. Key Moments 0:00:57 Introductions 0:02:44 Overview of Sustainalytics’ approach to sustainable finance 0:04:29 Exploring the growing interest in sustainable finance for the mining sector 0:08:42 Use of proceeds or linked finance? Considerations for mining companies and banks 0:12:48 Applying the Climate Transition Finance Handbook 0:15:24 External reviewer landscape – how does Sustainalytics compare? 0:19:38 The benefits of labeling transactions from the mining sector 0:26:13 How Sustainalytics supports banks’ sustainable finance activities 0:29:45 Sustainable finance questions from banks 0:37:08 A look at transaction trends and market developments 0:45:03 Green Bond Impact Reporting – The next frontier in sustainable finance 0:53:17 Outlook for sustainable finance in the metals and mining sector Links to Select Resources International Energy Agency (IEA) – The Role of Critical Minerals in Clean Energy Transitions International Capital Market Association (ICMA) – Climate Transition Finance Handbook World Bank – Minerals for Climate Action: The Mineral Intensity of the Clean Energy Transition ICMA – Registry of key performance indicators for sustainability-linked bonds ICMA – Principles, Guidelines and Handbooks Loan Syndications and Trading Association (LSTA) – Sustainability-Linked Loan Principles Task Force for Climate-Related Financial Disclosures (TCFD) Taskforce for Nature-Related Financial Disclosures (TNFD) Global Reporting Initiative (GRI) – Sector standard project for mining Sustainalytics Bond Impact Reporting Sustainalytics Corporate Impact Reporting Sustainalytics Supply Chain Solutions – ESG Assessment Platform Sources 1 IEA. 2021. “The Role of Critical Minerals in Clean Energy Transitions.” May 2021. https://www.iea.org/reports/the-role-of-critical-minerals-in-clean-energy-transitions . 2 Delevingne, L., Glazener, W., Gregoir, L., and Henderson, K. 2020. “Climate Risk and Decarbonization: What Every Mining CEO Needs to Know.” McKinsey Sustainability. January 28, 2020. https://www.mckinsey.com/capabilities/sustainability/our-insights/climate-risk-and-decarbonization-what-every-mining-ceo-needs-to-know . More Episodes…
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ESG in Conversation
1 What’s Happening in Sustainable Finance: Sovereigns Focus on Biodiversity, Use of Proceed Instruments Gaining Ground as Sustainability-Linked Instruments Face Scrutiny, and More 29:24
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 More Episodes…
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ESG in Conversation
1 What’s Happening in Sustainable Finance: Blue Bonds Make Waves, ‘Sleeping’ Sustainability-Linked Loans Raise Eyebrows, and More 36:16
Episode Summary Hosts Nicholas Gandolfo, Director, Corporate Solutions Sabrina Tang, Sales Associate, Sustainable Finance Solutions In this episode, Nick and Sabrina examine some of the interesting transactions and developments in the global sustainable finance market. Despite a general slowdown in the volume of issuances, there are still innovative transaction structures being proposed and sustainability-linked instruments (i.e., bonds and loans) continue to perform well. Green bonds continue to anchor the sustainable debt market, with several notable transactions in the blue bond space. Finally, audience questions are addressed, regarding clarity on whether sustainability-linked instruments can be structured in a program and the difference between social bonds and social impact bonds. Blue Bonds Making Waves in Sustainable Finance More corporate and sovereign issuers are exploring blue bonds to help finance their environmental conservation efforts. A blue bond is a debt instrument similar to a green bond, but with a focus on marine and ocean-based projects. In their market overview, Nick and Sabrina highlight blue bond proposals from the Securities and Exchange Board of India, the issuance of the first blue bond in Japan, and blue bond-related activities in Indonesia. The protection and conservation of oceans, waterways, and the life within them is essential for both business and society. “Sleeping” Sustainability-Linked Loans: A Concern for the Sustainable Finance Market? Nick notes the emergence of “sleeping” sustainability-linked loans, in which companies seek to build into their conventional loan documentation the ability to convert to an SLL at a later date. The key performance indicators (KPIs) and sustainability performance targets (SPTs) are also set at a later date. These types of loans are raising concerns among market participants around transparency, as its important to make sure that SLLs are not labelled as such until they have KPI and SPTs in place. The credibility of sustainability-linked instruments and sustainability washing is an area of evolving interest and scrutiny in the market. As defined by the Sustainability-Linked Loan Principles , SLLs “incentivize the borrower’s achievement of ambitious, predetermined sustainability performance objectives.” Sustainability performance is measured using predefined sustainability performance targets (SPTs), as measured by predefined key performance indicators (KPIs). It is also recommended that borrowers and lenders have the appropriateness of the SPTs, and the methodology applied to assess them, reviewed by an external party as a condition preceding the loan. Details of U.S. Inflation Reduction Act Show Promise for Renewables The recently passed Inflation Reduction Act in the United States aims to control inflation by reducing the deficit, lowering prescription drug prices and investing in domestic energy. A key component of this last goal is the promotion of clean energy. This legislation will result in the biggest infrastructure spend on renewables in recent history, hopefully setting the tone for the future. Government stimulus like this could be significant in paving the way for more rapid acceleration towards net zero. Key Moments 0:01:29 Market overview 0:01:29 CBI half-year market review 0:02:44 Major issuance locations - China, Germany, Netherlands, U.S., France 0:03:58 U.S. Infrastructure Reduction Act good sign for renewables 0:04:58 Nuclear popping up 0:05:10 ESG increasingly being linked to remuneration 0:05:32 More green taxonomies being developed 0:05:56 Sustainability being integrated into leveraged loan market 0:06:19 China Green Bond Standard 0:06:36 Diversifying nature of sustainable bonds across Asia 0:06:55 "Sleeping” sustainability-linked loans on the market 0:07:58 SLB overview 0:11:28 SLL overview 0:15:52 Audience questions 0:22:03 Green bonds overview 0:28:20 Green loans overview 0:29:25 Social bonds and loans overview 0:31:17 Labeled products overview 0:33:27 Transition bonds overview 0:33:36 Regulatory and country updates List of Select Resources Climate Bonds Initiative: Sustainable Debt Market Summary H1 2022 Environmental Finance: Rise of SLBs Helps Labelled Debt Retain 19% Share of European Market Bloomberg: Green Bond Sales Drop to 19-Month Low on Tight Issuance Windows The Edge Singapore: Economic Uncertainties a Boost for SGD Bonds The Telegraph: Fund Nuclear Power With Green Bonds, Treasury Told NT News: ESG Looms as Potential Remuneration Hurdle, UBS Says Environmental Finance: Half of European ESG Leveraged Loans Have 'Weak' Target Promises Caixin Global: China’s New Green Bond Standards Aim to Curb ‘Greenwashing’ China Dialogue: China’s New Green Finance Guidelines Have a Deforestation Blind Spot Environmental Finance: Comment: Sustainability-Linked Finance - Failure Must Be an Option Bloomberg: 'Sleeping' ESG Loans Are a Worrying Trend, BNP Says IntraFish Finance: Maruha Nichiro to Issue Japan's First Blue Bond as it Reports 25% Earnings Hike Responsible Investor: Indian Blue Bond Mining Provision Draw Market Scepticism Sustainalytics SPOs: Berlin Hyp Sustainability-Linked Bond Framework Second-Party Opinion Wells Fargo Sustainability Bond Framework Second-Party Opinion Lenovo Group Limited Green Finance Framework More Episodes…
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ESG in Conversation
1 What’s Happening in Sustainable Finance: Market Headwinds, GHG Targets in Sustainability-Linked Instruments, the Focus on Supply Chain, and More 30:34
Episode Summary Hosts Nicholas Gandolfo, Director, Corporate Solutions Aditi Bhatia, Regional Sales Manager, Corporate Solutions In this episode, Nick and Aditi share recent developments in the global sustainable finance market. They touch on the cooling bond market and the shifting geographic split in green bond issuance, noting that EU dominance is waning as other jurisdictions close the gap. Nick gives his thoughts on the impact of the forthcoming EU green bond standard on what future bond frameworks will include, what will be reported, and the level of external review required. In her update on sustainability-linked loans and bonds, Aditi highlights a couple of transactions, notable for their use of gender-based KPIs aiming to increase the number of women in management positions. Finally, Nick applauds Sustainalytics’ Corporate Solutions business for providing the most second-party opinions in the first half of the year , as cited by Environmental Finance. Study of Greenhouse Gas Targets Used in Linked Finance Environmental Finance recently published a report analyzing the types of key performance indicators being used in sustainability-linked bonds and loans . Across sustainability-linked instruments, carbon and greenhouse gas emission reduction KPIs accounted for about 75% of KPIs used, with other environmental issues, such as water, making up 10%, social issues another 10% and less than 5% related to governance issues. This makes sense, given the quantitative nature of GHG and carbon emission metrics. The report also noted the emergence of KPIs tied to scope 3 emissions, which is a promising trend given the high impact of scope 3 emissions for some industries. Focus on Supply Chain Sustainability Improvements For organizations looking to support ESG and sustainability improvements in their supply chain, it’s important to understand suppliers’ needs and motivations. Some large players in food and agriculture are offering financial incentives to farmers to implement sustainable practices. Others are supporting programs to pilot and scale innovative sustainability solutions. Still others are working to advance social goals, such as furthering opportunities for minority and female entrepreneurs. Sustainalytics’ Corporate Solutions is working more and more with clients to support their evaluation of suppliers – from KPIs connected to suppliers to ESG assessments of their suppliers . Key Moments 0:00:48 Market overview 0:02:01 Changing geographic in green bond market 0:02:25 Sustainalytics leads SPOs in H1 2022 0:02:55 Green/social split tranche instead of sustainability issuance 0:03:40 Nuclear back on the radar 0:04:33 Malaysia Islamic financing 0:04:45 EU Green Bond Standards coming soon 0:05:29 Guidance for finance sector decarbonization 0:06:05 Updated Climate Bonds Initiative methodology 0:06:41 Securitization and structured deals 0:06:45 Sustainable finance and supply chain 0:07:21 New NNIP social bond fund 0:07:39 More articles on biodiversity 0:08:00 KPIs used is sustainability-linked instruments 0:09:52 SLB and SLL overview 0:13:54 Audience questions 0:18:32 Green bonds overview 0:22:52 Green loans overview 0:24:28 Social bonds and loans overview 0:26:15 Labeled products overview 0:27:40 Transition bonds overview 0:28:25 Regulatory and country updates List of Select Resources Environmental Leader: Sustainable Finance Markets Cool After Record-Setting Year Investment Executive: As markets wobble, sustainable finance suffers too S&P Market Intelligence: Europe's dominance in green bond market fades amid record growth in China Environmental Finance: Sustainalytics delivers most SPOs in first half of 2022 Asia One: New World Development offers world's first USD social and green dual tranche bond in public markets totalling USD700m Bloomberg: Once-Unthinkable Nuclear Green Bonds Are Coming to Europe Environmental Finance: Issuers opt for SLBs as EU tightens green bond rules, says BdF Environmental Finance: Focus on banking transition plans as priority, IIGCC recommends Environmental Finance: CBI tightens green bond criteria and readies social expansion Green Biz: Supply chain emissions are top of mind for food and ag Environmental Finance: Green securitisations 'under-utilised in Europe' Funds Europe: NN IP launches SDG-focused social bond fund Environmental Finance: Sustainability-linked Debt - Carbon Emissions KPIs More Episodes…
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ESG in Conversation
1 What’s Happening in Sustainable Finance: The Shifting Regulatory Landscape, Reporting on Impact, Focus on Biodiversity, and More 39:52
Episode Summary Hosts Nicholas Gandolfo, Director, Corporate Solutions Sabrina Tang, Sales Associate, Sustainable Finance Solutions In this episode, Nick and Sabrina recap recent developments in the global green, social, sustainability, and sustainability-linked market. They highlight a major milestone for Morningstar Sustainalytics’ sustainable finance team, which delivered its 1,000th second-party opinion in the spring. They also discuss the ever-evolving regulatory environment around ESG disclosures and reporting, the prevalence of measuring impact in the green, social, sustainability and sustainability-linked (GSSS) bond market, and share some of the updated GSSS guidance coming from International Capital Markets Association (ICMA). ESG and Sustainable Finance Regulations Continue to Roll Out Globally As noted in previous episodes, the regulatory train continues to roll along for issuers, investors, and service providers in the sustainable finance space. In the U.S., the Securities and Exchange Commission is proposing greater corporate disclosures related to climate and scope 1, 2, and 3 emissions. Also, in Europe, negotiations for the EU Green Bond Standard continue. Finally, there are continued calls for regulation of ESG data and ratings providers as this information is increasingly integrated into global investment decisions. Companies and investors should continue to monitor the shifting regulatory landscape and be prepared to disclose more when it comes to climate and other ESG-related issues. Reporting on Impact: The Next Big Thing in the GSSS Market It’s a promising sign that a growing number of issuers are funding green and social projects with labeled bonds, but investors also want to know that proceeds from their GSSS bonds are having a positive impact. So, more and more issuers are crunching the numbers on the impact of their sustainable bonds and loans. During its annual conference, the ICMA released new and updated guidance for GSSS bonds, which includes new metrics for impact reporting for green and social projects. Sustainalytics’ Corporate Solutions offers Impact Reporting for Bonds and Loans providing issuers with analysis of the expected and achieved impacts of their financed projects. Growing Focus on Biodiversity The Taskforce for Nature-based Financial Disclosures has published the next iteration of its reporting framework, which is looking at issues related to biodiversity and metrics. The International Finance Corporation and World Benchmark Alliance are also working to help advance the biodiversity finance market. Nick anticipates that we’ll start to see and hear more about companies being “nature positive,” how that can be measured, which KPIs should be targeted and tracked, and which use of proceeds are eligible. With over half of the world’s GDP at risk due to biodiversity loss, it’s great to see a growing spotlight on biodiversity. Key Moments 0:01:25 Market overview 0:01:36 Sustainalytics’ 1,000th SPO 0:02:07 Bond market headwinds 0:03:12 Mainstreaming of sustainable finance 0:03:35 Blue carbon credits 0:03:40 Scrutiny over greenwashing continues 0:04:41 EU Green Bond Standard 0:05:11 Measuring impact in the GSSS bond market 0:06:13 Nuclear, gas and the Green Taxonomy 0:06:41 SEC proposal for scope 1, 2, and 3 disclosures 0:07:02 TNFD published next draft framework 0:07:36 GFANZ released guidance for decarbonizing portfolios 0:07:59 ICMA guidance updates 0:10:14 Australian Sustainable Finance Initiative taxonomy 0:10:51 FIFA World Cup going carbon neutral? 0:11:09 New reports from CBI 0:11:51 SLB overview 0:15:14 SLL overview 0:19:40 Audience questions 0:25:00 Green bonds overview 0:31:45 Green loans overview 0:34:09 Social bonds and loans overview 0:35:33 Labeled products overview 0:36:35 Transition bonds overview 0:38:07 Regulatory and country updates List of Select Resources Sustainalytics – The Road to 1,000th SPO: How We Got Here and What’s Next in Sustainable Finance Environmental Finance - 'Strong rebound' in EM Sustainable Bond Issuance in 2021 Oilprice.com - Could Blue Carbon Credits Be the Future of Sustainable Financing? Market Screener - European Green Bonds: Proposed Regulatory Tightening Aims to Curb Greenwashing Portfolio Adviser - ‘Clear rationale’ for Regulating ESG Ratings, says FCA TNFD - TNFD Releases Second Iteration Beta Framework Including Initial Guidance on Metrics Environmental Finance - IFC Launches Biodiversity Guide Draft for Bonds Glasgow Financial Alliance for Net Zero (GFANZ) - GFANZ Releases Guidance on Credible Net-zero Transition Plans and Seeks Public Input to Accelerate Action ICMA - The Principles Announce Key Publications and Resources in Support of Market Transparency and Development Regulation Asia - Australia to Start Work on Sustainable Finance Taxonomy in July Doha News - Will the FIFA World Cup be Carbon Neutral? Advocates Cast Doubt Climate Bonds Initiative ASEAN Sustainable Debt Market 2021 China Green Bond Market Report 2021 Launch (Event Recording) Sustainalytics SPOs: The Ministry of Finance Singapore Singapore Green Bond Framework Second-Party Opinion BDO Sustainable Finance Framework Second-Party Opinion More Episodes…
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ESG in Conversation
1 The Sustainalytics Podcast | Aligning Executive Action to Strategy With Sustainability-Linked Compensation 13:40
Episode Summary Host: Adam Gorley, Marketing Manager, Corporate Solutions Featuring: Upasna Handa, Senior Associate, Product Commercialization Henry Hofman, Associate Director, Corporate Governance Research In this episode of the Sustainalytics Podcast, Adam talks with Upasna and Henry to explore what it means to link executive compensation to ESG metrics and how to meet some of the key challenges. You’ll learn about how tying ESG performance to compensation can enhance a company’s accountability and transparency, the types of metrics firms use, industries and regions with high pay-link adoption , existing and proposed regulations, steps to make your company’s program credible and transparent, and more. What ESG Metrics Are Companies Using To Assess Executive Compensation? The metrics a company will use in its ESG-linked compensation program will depend on the nature of the business, but there are common themes. Perhaps it’s no surprise that there is a particular focus on environmental issues, such as emission levels, sustainable production, energy efficiency, and waste management. But companies are increasingly using metrics to focus executives’ attention on social and governance issues like diversity and inclusion, culture, employee engagement, shareholder relations, and board composition. Challenges To Adopting ESG-Linked Compensation If your organization is tracking ESG metrics, you may have already dealt with some of the main challenges: determining the most material ESG issues for your company, setting targets and KPIs, and measuring your efforts. Nonetheless, this remains new territory for many, and any organization planning to set up an ESG-based executive incentive program should take a step back to understand what is required in order to make the program credible, transparent, and effective. Read Our eBook, Real ESG Accountability: Tying Your Company’s ESG Performance to Leadership Compensation Download the ebook to discover how linking executive compensation to ESG metrics can support corporate goals, the current state of ESG-based incentives from Sustainalytics’ research, why ESG-linked compensation is a practical step forward on accountability, details on what any firm can do to execute a credible and transparent ESG pay-link. Key Moments 00:20 Episode overview 01:50 Intro to sustainability-linked compensation 02:11 Commonly used metrics in ESG pay-links 03:15 Key challenges and questions 04:10 Long-term and short-term incentives 05:30 Accountability and transparency 06:30 Regional overview 07:54 Industry overview 08:40 Regulatory outlook 09:08 UK Investment Association “Principles of Remuneration” 09:22 EU Shareholders Rights Directive II 09:48 U.S. Tax Code amendments and SEC comments 10:18 Meeting the challenges of ESG pay-links 11:34 Setting up credible and transparent pay-links 12:44 Looking to the future Transcript 00:07 Adam Gorley: Hello and thanks for tuning into the latest episode of the Sustainalytics Podcast! I’m Adam Gorley, Producer with Sustainalytics, and I’ll be your host today as we look at sustainability-linked compensation. Many companies around the world are introducing programs and practices to improve their sustainability with respect to the environment, social issues, and corporate governance. These organizations are examining the ESG issues that are most material to them, setting goals and targets to address those issues, and developing methods to measure the results so they can understand their progress. But despite all that valuable effort, it’s also essential to put in place a process to align action with those goals. To effectively meet this challenge, many organizations are starting to incentivize executives by linking a portion of their compensation to the company’s performance on specific ESG metrics. Is this something your organization has introduced or considered implementing? We’d love to hear your thoughts. You can get in touch at podcast@sustainalytics.com .com . In this episode, you’ll hear about ESG-linked compensation from two of Sustainalytics’ in-house experts on the topic: Upasna Handa, Senior Associate, Product Commercialization, and Henry Hofman, Associate Director, Corporate Governance Research . We’ll be looking at how tying executive compensation to ESG performance can enhance a company’s accountability and transparency and the challenges organizations are facing. We’ll also talk about the types of metrics firms use for ESG-linked compensation programs, how you can ensure your company’s ESG-based incentive program is credible and transparent, and much more. But first, let’s take a closer look at what sustainability-linked compensation means . In essence, it’s a variation on the standard practice of linking executive compensation to financial and operational metrics, such as profit, growth, employee turnover, customer churn, and so on. The key difference is that sustainability-linked compensation is tied to non-financial ESG metrics. Upasna outlines some of them: 02:11 Upasna Handa: While the details of ESG-linked executive compensation vary from company to company, and also from sector to sector, there are some common issues or common metrics that performance is measured against. For example, across the environment pillar, we often see emission levels, sustainable production, energy efficiency, and waste management. Across social and governance, we see diversity and inclusion, culture, employee engagement, and community. And across the governance pillar, we see corporate governance, shareholder relations, and board composition pretty often across industries. 02:45 AG: Companies may be choosing these particular ESG issues to respond to stakeholder pressure, meet or prepare for regulations, enhance their reputation, reach new markets, and other reasons. But, as Upasna notes, the specifics will depend on the individual firm. Henry adds: 03:02 Henry Hofman: Ultimately, we expect the firms to be able to identify which metrics are most important to them and most relevant to their business model to ensure that executives are being incentivized in the correct way to achieve meaningful change. 03:15 AG: Unfortunately, while ESG pay-links are based on a tried-and-tested business practice, they come with several unique and important challenges. While most companies understand clearly the strategic financial and operational risks they face, their targets and key performance indicators (KPIs), and how to measure them, the same cannot be said for the material ESG issues (or MEIs) companies face. Basically, this is unfamiliar territory for many organizations. Upasna explains some of the core challenges facing companies when it comes to tying executive compensation to ESG metrics: 03:49 UH: The major challenges in incorporating ESG metrics into executive pay includes structuring the ESG-linked pay. So, clearly articulating material ESG issues, ensuring the board understands them, deciding on appropriate KPIs, and also measuring the success of these ESG programs based on those. Another important component would be the time period that we're looking at when it comes to structuring to effect meaningful changes. An important question here would be: will a short-term or a long-term timeframe be the most effective for our company? Is it better to set ambitious well-calibrated one-year targets rather than vague long-term ones? And also, because companies looking to progress on core strategic priorities need to incentivize top leadership to think more long-term, so are we going to have those KPIs as more long-term incentive plans? Environmental goals sit comfortably within long-term incentive plans as of now because of the long-term orientation, but some ESG targets, such as health, safety, gender pay targets, and even diversity and inclusion targets, can be calibrated over a single year. So, for example, BP uses ESG metrics in both its annual bonuses and its long-term incentive plans. Starting in 2020, the bonus has a 15% weightage on safety, which was a well-established metric, and on the environment, which relates to short-term emission reduction targets. The long-term incentive plan now has a 40% weighting to strategic goals including input measures around renewables, energy transition, etc. 05:24 AG: We’ll come back to how companies are meeting the challenges in a few minutes. Before that, I want to explore the important question of value. Specifically, how can linking executive pay to ESG metrics enhance a company’s accountability and transparency? 05:38 UH: When we talk about accountability, tying variable compensation to ESG performance provides an additional tool for firms and boards to hold their executives accountable, while they're communicating their principles and objectives with employees, investors, regulators, and other important stakeholders. This is especially important when it comes to companies in high ESG risk industries , which may have more difficult material ESG issues to address. And coming to transparency, when companies incorporate ESG into incentive plans, their boards, investors, employees, communities, and other stakeholders have a valuable tool to track their progress on ESG issues. 06:21 AG: So, ESG pay-links are growing in popularity due to increased demand for accountability and transparency, but how is this trend affecting different regions and industries? Not surprisingly, some places and types of business are seeing more activity than others when it comes to linking compensation to sustainability metrics. Here’s Henry Hofman: 06:40 HH: Looking at the data, I think there's some interesting patterns that emerge. It’s probably important to note as well though that our research is obviously based on publicly disclosed information, so there is a bit of a correlation between those regions that tend to have just generally good governance disclosures and where we see stronger examples of ESG being related to pay. But having said that, the European companies and U.S. companies based on our data are the highest adopters with 17% and 13% of our universe incorporating ESG metrics into their executive remuneration, either as a part of their long-term compensation plans or their short-term programs. There are some other countries outside of Europe and the U.S. that have particularly strong practices: Australia and South Africa both stand out as having a high adoption rate. 07:34 AG: As Henry suggests, the likely reasons for these numbers are fairly clear. Where there are strong corporate governance regimes, active stakeholders, investor pressure, effective say-on-pay mechanisms, and so on, those are the regions where you’ll find more companies implementing ESG pay-links. But what about industries? Are organizations in some sectors more likely to adopt ESG pay-links? 07:58 HH: So, I think that's really interesting, and the data suggests that those industries that are most often in the public eye, I would say, for perhaps having ESG practices that are less than ideal — there's no hard and fast rule — but those industries do tend to have a reasonable uptake. So, we're talking about precious metals and diversified metals, oil and gas producers, refiners and pipelines, and utilities. These are the industries that we are seeing that actually have the higher takeup in terms of setting ESG metrics and linking it to executive compensation. I would say though that, even within these industries, there's still at most only about a 30% takeup. So, there's certainly a long way still to go. 08:42 AG: This leads us to the issue of regulations. While it is common to hear about broad ESG and sustainability-related regulations — particularly with respect to reporting — the development of requirements specifically related to compensation is still in the early stages. I’ll let Upasna fill us in. 09:00 UH: There are multiple efforts from government, industry, and professional bodies around the world to establish more ESG reporting standards for disclosure, measurement, remuneration, and so on. Starting off with The Investment Association in the UK, this body has released a document titled, “ The Principles of Remuneration ,” which includes guidance on how to develop ESG bonuses and compensation schemes. We have the Shareholder Rights Directive II from the EU. These are actually say-on-pay provisions that provide shareholders with the right to vote on remuneration policies and reports. And the updated directive requires numerous additional European countries to regulate shareholders’ right to vote on executive board pay. Many more companies that have ESG pay-links must now disclose their own plans. Coming to the U.S., we have the U.S. Tax Code. Amendments now enable firms to increase bonuses with their assessment of a company's commitment to ESG principles. Another very important change that has taken place in the U.S. is a push for ESG-linked compensation from the SEC. The SEC Commissioner Allison Herren Lee is urging corporate boards to make changes in line with the agency's push for more ESG disclosures and also tying executive compensation to ESG metrics. 10:18 AG: And this brings us back to the challenges companies face when it comes to implementing an ESG-linked compensation program — and how they can overcome the obstacles. Recall, the key challenges include: uncovering the ESG issues that are material to your organization; clearly articulating the MEIs so that the board understands their importance; determining appropriate goals and KPIs; and measuring progress. Regulations also pose a challenge, but the good news is that the same steps an organization takes to tackle the broader challenges will also help them prepare to meet regulations. Moreover, by investing the time and effort to get it right, organizations will help ensure they are setting up their ESG pay-links in a credible and transparent way. 11:00 UH: So, companies can actually prepare by ensuring the relevance and the materiality of their key performance indicators or KPIs and the level of ambition demonstrated by the sustainable performance targets or the SPTs to ensure transparency. This is important when we look at any ESG metrics, so we need to make sure the KPIs and the SPTs are in place. It is, of course, important to understand also what your peers are doing as well as the investor perspective. But more than that it is crucial to understand your own ESG agenda and how you want to measure the success. To have a credible and effective ESG compensation program, that would involve multiple elements including a clear articulation of material ESG issues, solid board engagement and buy-in from senior leadership, selection of appropriate metrics supported by operational data, and the means for measuring that success. Selecting the right ESG metrics is not an easy task, so for most board members, they find it challenging to narrow down the discussion on suitable ESG metrics out of the hundreds of options presented. The consensus is not to consider this as a “check the box” kind of exercise, but to identify metrics that are linked to more of the company's purpose and the ones that truly drive long-term sustainable value creation for the firm. 12:19 AG: While it might not be an easy task, companies that do not take meaningful steps toward “sustainable value creation” will likely have trouble growing their business over the long term. That’s essentially why practices that align executive action to strategic priorities — like ESG-based compensation — are so important: it’s one thing to set goals, but taking the necessary steps to achieve those goals is where change and growth happens. Looking to the future, we can expect to see more companies around the world adopt ESG pay-links as good corporate governance practices advance, stakeholders take a more active role in calling for accountability, and regulators step in to guide the process and prevent greenwashing. That’s it for this episode of the Sustainalytics Podcast! If you want more details on ESG-linked executive compensation, please visit Sustainalytics Resource Center and download our recent ebook, “ Real ESG Accountability: Tying Executive Compensation to ESG Performance ” or see the link in the show notes. Have a question or a suggestion on what we should talk about next? You can email us at podcast@sustainalytics.com .com . Thanks again to our guests, Upasna Handa and Henry Hofman, and thank you for listening. Until next time!…
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ESG in Conversation
1 What’s Happening in Sustainable Finance: Whether War Could Spur Adoption of Renewables, Thoughts on Just Adaptation, and More. 38:28
Episode Summary Hosts Nicholas Gandolfo, Director, Corporate Solutions Marika Stocker, Senior Manager, Corporate Solutions In this episode, Nick and Marika highlight recent developments in the sustainable finance market. They note that the market is coming off a banner year — over US$1 trillion in volumes overall in 2021 —and shed light on the deals and transactions contributing to market growth. They also answer audience questions, sharing Sustainalytics’ take on where nuclear energy and mining could fit in sustainable finance. Be sure to submit your questions to podcast@sustainalytics.com . Could Geopolitical Conflict Spur Adoption of Renewables? Discussion around the adoption of renewable energy is growing given the impact of Russia’s war in Ukraine and other global conflicts on oil and gas exports and imports. These geopolitical conflicts have exposed the risks of overreliance on producers and certain types of energy. One possible reaction to the disrupted and restricted energy supply from Russia is an acceleration of renewables deployment across Europe. This would hopefully spur broader adoption within the region and beyond. Just Adaptation: Helping Nations Build Resilience to Climate Change As governments consider what it takes to transition to a low-carbon economy, the concept of just adaptation is also being discussed. Stakeholders are looking beyond a just transition and examining the inequity between developed and developing countries in their abilities to adapt to climate change. Developing nations are more likely to be affected and have fewer resources to adequately prepare their populations and natural environments despite contributing less to the drivers of climate change compared to developed nations. Nick notes that there is potential to use sustainable finance to balance this inequity. Hopefully, we will see an evolution in sustainable finance issuances from sovereigns and corporates, with use of proceeds and KPIs that tap into some of these issues. Real ESG Accountability: Tying Your Company’s ESG Performance to Leadership Compensation Stakeholders are increasing pressure on companies to tie executive compensation to ESG performance for enhanced accountability and transparency. Download our latest ebook to discover how ESG incentive plans can align executive action with strategic priorities. Download the eBook Key Moments 0:00:52 Market overview 0:01:22 CBI report 2021 review 0:02:21 EF Article — GB market growth 100-fold in 10 years 0:02:50 IPCC reports 0:03:35 IFC — Guide to issuing green bonds 0:03:40 Ukraine conflict and social bonds 0:04:41 Fintech and climate tech 0:05:11 Just transition and just adaptation 0:06:13 Social taxonomy 0:06:41 EU Green Bond Standards 0:07:02 Financed emissions 0:07:36 ESG and derivatives 0:07:59 From CBI — webinar on China and new criteria for chemicals sector 0:08:36 SLB overview 0:14:14 SLL overview 0:18:10 Audience questions 0:26:09 Green bonds overview 0:30:47 Green loans overview 0:32:02 Social bonds and loans overview 0:33:42 Labeled products overview 0:34:27 Transition bonds overview 0:35:37 Regulatory and country updates Links to Select Resources Climate Bonds Initiative – Sustainable Debt Global State of the Market 2021 Environmental Finance – “Dramatic” 100-Fold Green Finance Growth Over Last Decade Environmental Finance – IFC publishes step-by-step green bond issuance guide GreenBiz – Will Russia’s War Spur Europe to Move on Green Energy? Fintech Futures – ESG and Fintechs: How Firms are Benefiting from an ESG Focus Environmental Finance – EU GBS 'may be a step backward' for green bond impact reporting IFR – Financial Markets Wrestle with Scope 3 Requirements Deloitte – Sustainable Finance Magazine (page 10) ISDA – Pre-AGM Symposium: ESG and the Role on Derivatives Climate Bonds Initiative – Green Bond China Investor Survey 2022 Climate Bonds Initiative – Basic Chemicals Criteria Sustainalytics SPOs: Pernod Ricard Sustainability-Linked Framework Second-Party Opinion JAB Holdings Sustainability-Linked Bond Framework EU SURE Social Bond Framework Second-Party Opinion OP Mortgage Bank Annual Review (2022) Green Financing Framework for Jabil Second-Party Opinion Equinix Green Finance Framework Second-Party Opinion More Episodes…
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