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Sustainable Finance European Style

At the European Financial Forum 2018 in Dublin, Ireland, Commissioner Valdis Dombrovskis first row center, Raquel Lucas, of Commissioner Dombrovskis' team, on the left, and on the right, Gerry Kiely, who heads the European Commission in Dublin. Feb. 1, 2018 (Photo courtesy European Commission) Posted for media use.

At the European Financial Forum 2018 in Dublin, Ireland, Commissioner Valdis Dombrovskis first row center, Raquel Lucas, of Commissioner Dombrovskis’ team, on the left, and on the right, Gerry Kiely, who heads the European Commission in Dublin. Feb. 1, 2018 (Photo courtesy European Commission) Posted for media use.

By Sunny Lewis

BRUSSELS, Belgium, January 31, 2018 (Maximpact.com  News) – An EU-wide label for green investment funds, a European standard for green bonds, and a classification system to provide market clarity on what is sustainable are recommended in the final report of the High-Level Expert Group on Sustainable Finance, published this week.

The European Commission said it welcomes the report, which sets out strategic recommendations for a financial system that supports sustainable investments.

In 2015, landmark international agreements were established with the adoption of the UN 2030 Agenda and Sustainable Development Goals and the Paris Climate Agreement. The report attempts to put the EU on the path to fulfilling its obligations under these agreements.

The Commission established the independent High-Level Expert Group (HLEG) in December 2016. It is made up of 20 senior experts from civil society, the finance sector, academia and observers from European and international institutions.

HLEG is chaired by Christian Thimann, a professor at the Paris School of Economics and head of strategy, sustainability and public affairs of the AXA Group, based in Paris. He is an external member of the Council of Economic Advisers to the French Prime Minister.

The report by the High-Level Expert Group maps the challenges and opportunities that the EU faces in developing a sustainable finance policy that supports the transition to a more resource-efficient and circular economy.

In its report HLEG advises that reorienting investment flows into long-term, sustainable projects will improve the stability of the financial system.

The HLEG final report proposes:

  • a classification system to provide market clarity on what is sustainable
  • an EU-wide label for green investment funds
  • a European standard for green bonds
  • clarifying the duties of investors in achieving a more sustainable financial system
  • improving disclosure by financial institutions and companies on how sustainability is factored into their decision-making
  • making sustainability part of the mandates of the European Supervisory Authorities

The European Commission says it will now move to finalize its strategy on sustainable finance on the basis of these recommendations.

Delivering an EU strategy on sustainable finance is a priority action of the Commission’s Capital Markets Union (CMU) Action Plan, as well as one of the key steps towards implementing the Paris Agreement on climate and the EU’s Agenda for sustainable development.

To achieve the EU’s 2030 targets agreed in Paris, including a 40 percent cut in greenhouse gas emissions, we need around €180 billion of additional investments a year, says the Commission.

The financial sector has a key role to play in reaching these goals, as large amounts of private capital could be mobilized towards such sustainable investments.

The Commission is determined to lead the global work in this area and help sustainability-conscious investors to choose suitable projects and companies.

Valdis Dombrovskis, EU vice-president responsible for financial stability, financial services and capital markets said, “The signature of the Paris agreement in 2015 marked a milestone for the world and for the global economy. We are now moving towards a low-carbon society, where renewable energy and smart technologies improve our quality of life, spurring job creation and growth, without damaging our planet.”

“Finance has a big role to play in funding a sustainable future,” declared Dombrovskis. “I welcome the outstanding work of the HLEG which is excellent input for our upcoming strategy.”

“I believe this report is a manifesto for far-reaching reform,” Dombrovskis told the European Financial Forum 2018 at Ireland’s Dublin Castle today.

He said the Commission will use the HLEG report to propose an EU strategy on sustainable finance in March, followed by several legislative proposals.

“The future of finance will not only be digital, it will also have to be green,” said Dombrovskis.

Commenting on the HLEG recommendations, he said, “First, we need a unified EU classification system or taxonomy for sustainable assets. We need to define what is green and what is not green. And we need to identify the areas where sustainable investment is most needed and can make the biggest impact. A unified EU classification is fundamental for the development of any green finance policy. We will follow up this recommendation with the first piece of legislation in spring.”

As recommended in the report, Dombrovskis said, “We will present a proposal on fiduciary duty. It will clarify the need to take sustainability into account when managing money for others. Clients have the right to know how sustainable their investments are.”

Third, he said, “We could boost green investments and loans by introducing a so-called green supporting factor. This could be done at first stage by lowering capital requirements for certain climate-friendly investments, such as energy-efficient mortgages or low-carbon cars.

However, said the vice-president, “This exercise would be delicate. Green does not mean risk-free. Any measures would have to be carefully calibrated, and based on a clear EU classification.”

Finally, said Dombrovskis, “Further development of the green bond market can drive the investment that we need. With a unified classification system for sustainable assets, we could establish criteria and labels for green bonds and investment funds. These labels would help investors to easily identify financial products that comply with green or low-carbon criteria. We could extend the existing European Eco-label to financial products.”

The EU has set itself ambitious climate, environmental and sustainability targets, through its 2030 Energy and Climate framework, the Energy Union and its Circular Economy Action Plan.

These commitments, and the growing awareness of the urgency to address environmental challenges and sustainability risks, call for an effective EU strategy on sustainable finance.

Jyrki Katainen, vice-president responsible for jobs, growth, investment and competitiveness, said, “The EU is already at the forefront of investing in resource efficiency and social infrastructure, not least through the European Fund for Strategic Investments and its reinforced focus on climate action.”

“At the same time,” said Katainen, “creating an enabling framework for private investors is crucial to achieving the transition to a cleaner, more resource-efficient, circular economy.”

“The High-Level Expert Group on Sustainable Finance’s final report provides us with a roadmap to do just that, and we welcome their invaluable contribution to this very important issue,” he said.

The group’s report will form the basis of the Commission’s comprehensive Action Plan on sustainable finance that it will put forward in the coming weeks. Both the findings of the report and the Commission’s Action Plan will be discussed at a high-level conference on March 22 in Brussels.

Similar ideas are taking hold at banks across the European Union.

Green Tagging is emerging as the new strategy for Europe’s banks to scale up financing of energy-efficient housing and real estate, finds a report released in Paris in December alongside the One Planet Summit hosted by France’s President Emmanuel Macron.

Green Tagging is a systematic process where banks identify the environmental attributes of their loans and underlying asset collateral as a tool for scaling up sustainable finance.

The report, from the consulting firm Climate Strategy & Partners  and the UN Environment Inquiry into the Design of a Sustainable Financial System, finds that green tagging around real estate and energy efficiency is growing at a critical time.

Nick Robins, co-author and co-director of the UN Environment Inquiry, said, “Green Tagging is in an early stage of development, but the pace of change is now striking. Key banks are now recognizing that they need to understand the environmental performance of their real estate lending book in order to better serve their clients and deliver their sustainability goals.”

This report describes how 10 European banks “are beginning to identify, analyze and promote green finance for housing and real estate through the direct attribution of environmental characteristics in their lending and debt capital markets operations,” said Peter Sweatman, co-author of the report and chief executive of Climate Strategy & Partners.

The 10 pioneer banks are: ABN AMRO Bank in the Netherlands; Banco Bilbao Vizcaya Argentaria in Spain; Berlin Hyp in Germany; HSBC a British multinational bank with roots in Hong Kong; ING Real Estate Finance, a global financial institution of Dutch origin; Lloyds Bank, a British retail and commercial bank; Skandinaviska Enskilda Banken AB, a Swedish financial group; Italian bankds Suedtiroler Volksbank and UniCredit; and Triodos Bank, a Netherlands-based commercial bank.

The Green Tagging of bank assets allows for easier access to green bond markets, better tracking of green loan performance and provides greater transparency of climate risks and portfolio resilience.

“Tagging our commercial real estate and mortgage loans to existing energy and environmental standards enabled our internal transparency and supported our issuance of the first green covered bond,” said Bodo Winkler from Berlin Hyp, currently the largest European commercial bank issuer of green bonds. “The green tagging data provided us valuable insights into the relative credit and economic performance for our loans to green buildings compared to standard ones.”

Joop Hessels from ABN AMRO said, “Identifying and tagging green buildings in the bank systems in a European context was essential for the world’s first green bond to define green real estate, issued by ABN AMRO, and in advising other new green real estate backed bond issuers.”

Featured image:  Euro banknotes and coins, February 19, 2016 (Photo by verkeorg) Creative Commons license via Flickr

Training


One Planet Summit Inspires Climate Action

By Sunny Lewis

PARIS, France, December 12, 2017 (Maximpact.com  News) – Two years to the day after the historic Paris Agreement on climate, more than 50 heads of state, as well as environment ministers and regional leaders, bank and finance executives and celebrities are meeting today to drive action that will finance global efforts to meet the goals of the agreement.

The Paris Agreement’s central aim is to strengthen the global response to the threat of climate change by keeping a global temperature rise this century well below 2 degrees Celsius above pre-industrial levels and to pursue efforts to limit the temperature increase to 1.5 degrees Celsius. The agreement also aims to strengthen the ability of countries to deal with the impacts of climate change.

Today’s invitation-only One Planet Summit, convened by President of France Emmanuel Macron, was attended by British Prime Minister Theresa May, Spain’s Mariano Rajoy, European Commission President Jean-Claude Juncker, and Mexican President Enrique Peña Nieto, among many others.

President Juncker said, “The time has now come to raise our game and set all the wheels in motion — regulatory, financial and other — to enable us to meet the ambitious targets we have set ourselves. This is a necessity dictated by our current living conditions as well as those of future generations. This is the time that we must act together for the planet. Tomorrow will be too late.”

The European Commission released its 10 item Action Plan for the Planet, consisting of: putting the financial sector at the Service of the Climate, investment in Africa and the EU Neighbourhood region, urban investment support, clean energy for islands, support for the transition of coal and carbon intensive regions, youth, smart buildings, clean industrial technology and clean, connected and competitive mobility.

Prime Minister May announced a big increase in UK aid for Caribbean countries devastated by hurricanes as part of a £140 million climate change grant for the world’s least developed countries.

“Tackling climate change and mitigating its effects for the world’s poorest are among the most critical challenges that we face,” said May.

“And by redoubling our efforts to phase out coal, as well as build on our world leading electric car production, we are showing we can cut emissions in a way that supports economic growth,” she said.

U.S. President Donald Trump was not invited to the summit, as he is streamlining fossil fuel exploration and development, even removing U.S. public lands from federal protection so industry can have at them.

Trump has vowed to withdraw the United States from the Paris Agreement, a lengthy process that cannot begin until 2020, after that year’s presidential election. Countries cannot withdraw until three years after the Paris Agreement took effect on November 4, 2016. After that, the rules mandate a one-year notice period. Still, because the accord is non-binding, Trump could choose to just ignore the accord’s terms.

President Macron told NBC News in an interview in June, “I’m pretty sure that my friend President Trump will change his mind in the coming months or years, I do hope. It’s extremely aggressive to decide on its own just to leave, and no way to push the others to renegotiate because one decided to leave the floor.”

Syria last month ratified the Paris Agreement, leaving the United States as the only country to reject the accord.

President Macron unveiled the winners of the first “Make Our Planet Great Again” climate research grants established after Trump announced his intention to pull out of the Paris accord. The French president said that Trump’s decision was a “deep wake-up call for the private sector” to take action.

Thirteen of the 18 multi-year award winners are American scientists; all winners will conduct climate research in France. The three-year to five-year grants are worth up to €1.5 million each. Overall, the program totals about €60 million in direct funding and in-kind support.

Macron told the winners Monday night, “What you are showing here this evening, with your commitment, with the projects that have been chosen … is that we do not want climate change, and we can produce, create jobs, do things differently if we decide to.”

In any case, the One Planet Summit featured dire warnings, rich pledges and actions that two years ago were not even on the horizon.

“Those who fail to bet on a green economy will be living in a grey future,” United Nations Secretary-General António Guterres warned today, calling for greater ambition by governments, civil society, the private sector and finance partners to help tackle the global climate challenge.

“Green business is good business,” the UN chief said, speaking at the opening of the One Planet Summit. “Renewables are now cheaper than coal-powered energy in dozens of developed and developing countries.”

Guterres stressed that for climate action, it is not funding but trust that is lacking. To fix it, he said, first and foremost, rich countries must honor their commitment and provide US$100 billion a year through 2020 for developing countries to mitigate and adapt to the already-changing climate.

It also means that the Green Climate Fund must become an effective and flexible instrument, especially for the most vulnerable countries such as small island states and least developed countries.

“These two conditions are essential for trust between developed and developing countries,” said Guterres.

“Everyone is looking for paths to economic growth that are low carbon,” said World Bank President Jim Yong Kim, as he announced that the World Bank <worldbank.org> will no longer finance upstream oil and gas, after 2019.

In exceptional circumstances, said Kim, consideration will be given to financing upstream gas in the poorest countries where there is a clear benefit in terms of energy access for the poor and the project fits within a country’s Paris Agreement commitments.

Alex Doukas, director of the Stop Funding Fossils Program at Oil Change International, said, “The World Bank’s monumental announcement that they are moving out of upstream oil and gas finance after 2019 stole the show in Paris. This move from the World Bank demonstrates real climate leadership, and could help signal a broader shift away from the tens of billions of dollars in public finance that G20 governments and multilateral development banks dump into fossil fuels each year.”

“These institutions still provide $72 billion in public finance to fossil fuels annually,” said Doukas, “which is why a shift away from fossil fuel finance is crucial if we hope to meet the aims of the Paris Agreement.”

“Government commitments to scale up climate finance are important, but they’re not enough. Others need to follow the lead of the World Bank and signal that they will stop funding fossils,” said Doukas.

Kim said that the World Bank Group is on track to meet its target of 28 percent of its lending going to climate action by 2020 and to meeting the goals of its Climate Change Action Plan, developed following the Paris Agreement.

For instance, last week, the World Bank and the Government of Egypt signed a US$1.15 billion development policy loan aimed at reducing fossil fuel subsidies and creating the environment for low-carbon energy development.

The World Bank Group will accelerate energy efficiency in India; scale up solar energy in Ethiopia, Pakistan and Senegal; establish a West Africa Coastal Areas investment platform to build resilience for coastlines there; and introduce the City Resilience Platform with the Global Covenant of Mayors so that up to 500 cities will have access to finance for climate change resilience.

The International Finance Corporation (IFC), a subsidiary of the World Bank Group has pledged invest up to US$325 million in the Green Cornerstone Bond Fund, a partnership with the European asset management company, Amundi, to create the largest-ever green bond fund exclusively dedicated to emerging markets.

“This is a $2 billion initiative aiming to deepen local capital markets, and expand and unlock private funding for climate-related projects. The fund is already subscribed at over $1 billion,” the IFC announced.

European Bank for Reconstruction and Development (EBRD) President Sir Suma Chakrabarti said his bank intends to invest up to US$100 million in “Amundi Planet – Emerging Green One.”

The EBRD joined other global development organizations in stepping up the momentum for global climate action.

Chakrabarti told summit participants that the bank expects to meet its ambitious climate finance goals set at the 2015 Paris Climate Agreement three years ahead of time. The EBRD is already dedicating close to 40 percent of its annual investments to climate finance, a target it had initially set for 2020.

In Paris, Chakrabarti unveiled plans to step up EBRD support for the promotion of green cities, launching the Green Cities Climate Finance Accelerator with the Global Covenant of Mayors for Climate and Energy (GCoM), an international alliance of 7,498 cities and local governments moving towards a low-emission and climate-resilient society.

Under the new partnership, the EBRD and the GCoM are seeking to drive climate action in up to 60 cities, including many that to date have not been a focus for climate support.

At the One Planet Summit, from left, President of Mexico Enrique Peña Nieto, United Nations Secretary-General António Guterres, World Bank President Jim Yong Kim. December 12, 2017 (Photo courtesy Office of President Peña Nieto) Posted for media use

At the One Planet Summit, from left, President of Mexico Enrique Peña Nieto, United Nations Secretary-General António Guterres, World Bank President Jim Yong Kim. December 12, 2017 (Photo courtesy Office of President Peña Nieto) Posted for media use

The World Bank, too, is partnering with the Global Covenant of Mayors and will lend US$4.5 billion to ensure 150 cities have the funds to implement initiatives to increase sustainability and resilience and fight climate change.

Marking the two-year anniversary of COP21 where the Paris Agreement was signed, the Global Covenant of Mayors joined with C40 Cities Climate Leadership Group, ICLEI, and various regional covenant partners, to announce the One Planet Charter – a new commitment campaign that will help cities swiftly implement actions to ensure Paris Agreement goals are met.

Through the One Planet Charter, cities will commit to specific climate action that drives investments, green public procurement, and policy decisions in renewable energy, energy efficiency, electric vehicles, and efforts for zero emission buildings and zero waste.

Cities will bring detailed descriptions of their commitments to the 2018 Global Action Summit in California.

Chakrabarti said, “We are delighted by our new financing initiative and partnership with the Global Covenant of Mayors

for Climate and Energy. … As cities around the world drive climate leadership, we are pleased that this investment will ultimately support the quality of life at the local level and contribute to addressing the global climate challenge.”

Paris Mayor Anne Hidalgo, board member of the Global Covenant of Mayors for Climate and Energy, who also chairs C40 Cities: “C40’s Deadline 2020 research revealed precisely what needs to be delivered by the cities of more than 100,000 citizens around the world, to deliver on the ambition of the Paris Agreement. The decisions being made by mayors right now on investments for sustainable and resilient infrastructure will determine the future of generations to come. The One Planet Charter will make it easier to build the argument for bold climate action and investment in these crucial months and years ahead.”

In a separate initiative, nine of Europe’s largest industrial issuers of green bonds – EDF, Enel, ENGIE, Iberdrola, Icade, Paprec, SNCF Réseau, SSE and TenneT – announced their joint pledge to further develop “one of the most dynamic segments of sustainable finance today, the green bond market.”

Their pledge came on Monday, Paris 2017 Climate Finance Day, the day before the One Planet Summit.

Ten years after the first green bond was issued, this market has turned into “an exciting place,” said the nine companies, who say they are committed to tackling climate change, to a growing awareness to environmental protection, low carbon

transport and buildings, as well as energy efficiency.

Said José Sainz Armada, chief financial officer of the Spanish public multinational electric utility Iberdrola, “Ever since incorporating Sustainable Development Goals to the company’s strategy, Iberdrola has become the largest European issuer of green bonds, the perfect source of long-term finance for projects making an environmental difference. Through independent certification, private investors guided by ethical principles ensure their funds are managed with a sustainable perspective and the strictest social criteria.”

To date, all nine companies have issued a total of €26 billion in green bonds, which accounts for over 10 percent of all the world’s outstanding green bonds.

The nine signatories of Monday’s pledge commit to a long-term presence in the market. They say that green bonds will be at the heart of their project financing and business lines, and that they will implement stringent reporting procedures. The pledge also calls upon other industrial corporations to consider issuing green bonds.

Also announced at the One Planet Summit is Climate Action 100+, a new initiative backed by 225 investors, including nearly 70 North American investors, with $26.3 trillion in assets under management.

Climate Action 100+ is a five-year global effort led by investors to scale up engagement with the world’s largest corporate greenhouse gas emitters to improve governance on climate change, curb emissions and strengthen climate-related financial disclosures.

“Moving 100 of the world’s largest corporate greenhouse gas emitters to align their business plans with the goals of the Paris Agreement will have considerable ripple effects,” said Anne Simpson, member of the Climate Action 100+ Steering Committee and investment director of sustainability at the California Public Employees’ Retirement System, the largest U.S. public pension fund.

“Our collaborative engagements with the largest emitters will spur actions across all sectors as companies work to avoid being vulnerable to climate risk and left behind,” said Simpson.

As part of today’s launch, investors released the list of the first 100 companies that they plan to engage as part of the initiative. The list includes companies in the oil and gas, electric power and transportation sectors that have been identified as the world’s largest greenhouse gas emitters.

But all these actions and promises did not go far enough for the conservationists in the Climate Action Network, a global group of over 1,200 NGOs working to promote government and individual action to limit human-induced climate change to ecologically sustainable levels.

Pointing out that 2017 is likely to be among the five-warmest years since the Industrial Revolution, and that the planet has suffered massive hurricanes in the Atlantic and the Caribbean, devastating floods in south Asia, and out of control wildfires in California, the Climate Action Network is pressing for even more urgent action.

Brett Fleishman, 350.org senior finance campaigner, said, “President Macron and other world leaders, are meeting right now to supposedly discuss shifting capital to climate solutions. But we are here to ring the alarm by bringing attention to the unabated support of the fossil fuel industry. We have research that clearly demonstrates that the French government, through its many agencies, is still invested in the energies sources of the past. This acts as a drag on the climate finance summit. This charade of caring about the planet can’t go on. Every euro and dollar spent on adaptation and mitigation is undercut by even more money spent on the fossil fuel industry.”

“Whatever the outcomes from this summit,” said Fleishman, “the global climate movement will keep on pushing through 2018 to accelerate the transition away from fossil fuels to 100 percent renewable energy for all.”

MOre than 1,000 delegates participated the summit, which will continue Wednesday with various side events.

The One Planet Summit is organized jointly by France, the United Nations and the World Bank, in partnership with the United Nations Framework Convention on Climate Change, the We Mean Business Coalition, the Global Covenant of Mayors for Climate and Energy, the European Commission, the C40 Cities Network, the OECD and Bloomberg Philanthropies.


Featured Image: President of France Emmanual Macron and British Prime Minister Theresa May at the One Planet Summit, Paris, France, December 12, 2017 (Photo courtesy #10 Downing Street) Creative Commons license via Flickr

Maximpact_co

China Seizes Global Green Finance Leadership

ChinaFloatingSolar

In May 2017, Sungrow Power Supply China switched on the world’s largest floating solar energy plant. The solar panels float on water that flooded a defunct coal mine near the city of Huainan in China’s eastern Anhui province. China has pledged to invest hundreds of billions of dollars in renewable energy by the year 2020. (Photo courtesy Sungrow Power Supply) Posted for media use.

By Sunny Lewis

SINGAPORE, November 17, 2017 (Maximpact.com News) – Trillions of dollars will need to be deployed each year to finance climate action and sustainability, and China is leading the way toward raising these funds, finds new research released Thursday. “China has become a new growth driver in the global green bonds market,” states the report by the United Nations‘ environment agency and the Beijing-based International Institute of Green Finance.

The report, “Establishing China’s Green Financial System: Progress Report,” reviews China’s development in green finance, and makes recommendations for future development.

The researchers found that China has established itself as a “global leader on green finance,” both domestically and internationally, but the country still faces serious challenges to mobilize its full potential.

The country’s leaders have acknowledged that the rapid growth of their economy, second-largest in the world after the United States, has brought expensive health and environmental problems to China – outdoor and indoor air pollution, water scarcity and pollution, desertification, soil pollution and biodiversity loss.

Speaking at the 19th National Congress of the Communist Party of China in October, President Xi Jinping said the construction of “ecological civilization” and the maintenance of ecological security are the keys to China achieving stable and sustainable development.

“Green finance is essential to realizing China’s national strategic objectives in green development and ‘ecological civilization,'” said co-author Wang Yao, professor and director-general at the International Institute of Green Finance, a think tank established at China’s Central University of Finance and Economics in September 2016.

“Through approaches in practicing green credit, green bonds, green insurance and industrial funds, as well as implementation at local levels, China’s green finance development has contributed significantly to social and economic structural reforms and gained widespread recognition internationally,” said Wang.

The report finds that China, which put green finance on the G20 agenda during its 2016 presidency, is following through on its political commitment to boost the financing required to do this.

Ratings agency Moody’s predicts that, globally, green bonds could exceed US$200 billion this year, driven by the Paris Agreement and reform in China.

Let’s look at China’s recent activities as a way of gauging the country’s progress.

In the first half of 2017, China issued 36 green bonds worth RMB77.67 billion (US$11.7 billion).

In one year, China’s green bonds grew in number by 278 percent and in value by 28 percent, according to the report.

There are 7,826 green and low-carbon projects, at investment of RMB6.4 trillion (US$0.96 trillion), are listed in the public-private partnerships catalogue, and 121 new green regional development funds were set up in 2016, the report states.

The green and low-carbon projects account for 57.7 percent of all the projects and 39.3 percent of the investments in that catalogue.

In addition, many Chinese provinces and cities have established regional green development funds.

By the end of 2016, 265 green funds were registered with the Asset Management Association of China; of these 215 were green industry funds, and 121 of these were established in 2016.

China has demarcated five distinct green finance pilot zones to explore different development models for the local green financial system against different backgrounds.

The Chinese government and the business community have started to attach great importance to developing a green industry chain for outbound investment.

With the Guidelines on Promoting Green Belt and Road, the APEC Green Supply Chain Network, and the Initiative on Environmental Risk Management for China’s Outbound Investment, China is going global in its green investment practices, according to the report.

The Bank of China plans to issue its third set of green bonds in the offshore markets in the near term. The bank states, “…all the net proceeds of its offshore Green Bonds issuances will be used to fund new and existing green projects with environmental benefits.”

Dr. Ma Jun, who chairs China’s Green Finance Committee and serves as special advisor to UN Environment on sustainable finance, said, “China has made huge strides through government leadership to create a domestic green finance market, and has inspired many other countries in developing a green finance policy roadmap. However, to keep this momentum going, China still needs to overcome some challenges.”

The green finance progress report pinpoints where the work needs to be done for China to establish a fully functioning green financial system.

It recommends that China clearly define the term “green.” This would lower the costs of identifying truly green projects and preventing “greenwashing,” the report states.

In this critical recommendation, the report says authorities should clarify lenders’ responsibilities, litigation eligibility, and liabilities by improving laws and regulations on environmental protection. The authors say this would urge commercial banks to incorporate environmental risk analysis into the loan application process.

The authors recommend that China set up statistical systems for green finance, and construct performance evaluation systems for local green development.

Efforts should be made to improve the green finance database and expand channels for international investors to access information about China’s green finance market to help boost their confidence, the authors recommend.

And finally, they recommend that green indexes aligned with the international market should be developed as benchmarks to attract international investors to invest in green bonds and stocks in China.

The report is coauthored by the International Institute of Green Finance of the Beijing-based Central University of Finance and Economics, and UN Environment’s Inquiry into the Design of a Sustainable Financial System.

The Inquiry was launched by UN Environment in January 2014 to improve the financial system’s effectiveness in mobilizing capital for sustainable development.

In October 2015, the Inquiry published the first edition of “The Financial System We Need,” with the second edition launched in October 2016.

The Inquiry has worked in over 20 countries and produced many briefings and reports on sustainable finance. It serves as secretariat for the G20 Green Finance Study Group, co-chaired by China and the United Kingdom, as well as for the Sustainable Insurance Forum of regulators.

In its 2017 Leaders Declaration, the G20 countries committed themselves to sustainable development, declaring, “A strong economy and a healthy planet are mutually reinforcing. We recognise the opportunities for innovation, sustainable growth, competitiveness, and job creation of increased investment into sustainable energy sources and clean energy technologies and infrastructure. We remain collectively committed to mitigate greenhouse gas emissions through, among others, increased innovation on sustainable and clean energies and energy efficiency, and work towards low greenhouse-gas emission energy systems.”

The UN Environment Inquiry and its partners this week launched another report on the state of play in green finance and upcoming investment opportunities.

On November 13, at the UN climate negotiations in Bonn, they issued “Roadmap for a Sustainable Financial System,” with the World Bank Group. This report is aimed at helping governments and the private sector design a global financial system for the era of sustainable development.

It finds that the transition toward a sustainable financial system is already taking place through the interaction of market-based, national and international initiatives.

“Sustainable growth must be the only growth option for the planet and will require sustainable financial systems that are inclusive, deep, and sound,” said Hartwig Schafer, World Bank vice president for Global Themes.

This report makes three key points:

  • Policy and regulatory measures targeting sustainability have grown 20 percent year on year since 2010
  • Climate action has opened up initial investment opportunity of US$22.6 trillion from 2016 to 2030
  • The next 24 months are crucial to build on existing initiatives and finance sustainable development

“The financial system has enormous transformative power, and has the potential to serve as an engine for the global economy’s transition to sustainable development,” said UN Environment head Erik Solheim. “The roadmap tells us who needs to do what, and when, for this to happen. Here we can see the very real potential to improve the lives of billions of people around the world.”


Featured Image: All three Chinese note-issuing banks are in this shot: Bank of China, HSBC (Hongkong and Shanghai Banking Corporation), and Standard Chartered Bank, at dusk in Hong Kong, July 27, 2010 (Photo by Brian Sterling) Creative Commons license via Flickr

Green Bond Surge Expands

SolarPowerChina

Solar photovoltaic power generation in Hong Kong, China. (Photo by WING / Electrical and Mechanical Services Department Headquarters) Creative commons license via Wikipedia.


By Sunny Lewis

LONDON, UK, April 18, 2017 (Maximpact.com News) – The market for Green Bonds is developing rapidly, proving effective at channeling money into environmental projects. Offering insights into this fledgling, but fast-growing, market, “Environmental Finance,”the London-based online news and analysis service, has just announced its latest Green Bond Award winners.

The 25 awards recognize best practices, or significant issues in the development of the green bond market, during 2016. The winners were selected by a panel of judges made up of some of the world’s biggest green bond investors.

Poland was honored for the first ever issuance of Green Bonds by a national government. The world’s first sovereign green bonds, issued in December, will finance environmental projects in the country. Poland has been heavily reliant on coal as its energy source; its green bond auction represents a shift to more sustainable energy production.

Deputy Finance Minister Piotr Nowak said the green bonds would allow Poland to further diversify its investor base.

Global law firm White & Case, which advised the Polish Ministry of Finance on the €750 million issuance of its Green Bonds, took the award for best law firm.

Winners include the Dutch mortgage corporation Obvion, which won the title of best asset-based bond for its landmark green residential mortgage-backed security.

The Dutch bank Rabobank took the top spot for the second year running as the best bank issuer of green bonds. Rabobank is a major financier of both onshore and offshore wind farms, holding a Top 10 position worldwide and is the market leader in the United States, Canada and the Netherlands.

Rabobank has developed a Green and Sustainability Bond Framework for the two different types of bonds. Green bonds fund environmental projects, while sustainability bonds fund projects with a social impact that may or may not have environmental benefits.

Rabobank Green Bonds fund renewable energy projects such as solar and wind, while Rabobank Sustainability Bonds fund loans provided to small and medium-sized enterprises with sustainability certifications on products, processes or buildings.

Industrial Bank of China was named as the biggest bank issuer, and Bank of America Merrill Lynch as the biggest underwriter.

Green Bonds enable capital-raising and investment for new and existing projects with environmental benefits. In the past, most green bond issuers have been development banks and financial services firms.

In the United States green bonds have been issued by municipalities, power companies and a few other corporate entities.

Now this year, Environmental Finance Bond of the Year winners are U.S. corporate giants Starbucks and Apple.

In February 2016, Apple, headquartered in California’s Silicon Valley, issued a $1.5 billion green bond, boosting the young market’s prospects for attracting corporate issuers.

In May 2016, the Seattle-based coffee chain Starbucks issued a first-of-its-kind $500 million U.S. corporate sustainability bond. The funding will enhance sustainable coffee supply chain management and the operation of farmer support centers in eight coffee growing regions, as well as loans to farmers made through Starbucks Global Farmer Fund.

Bank of America Merrill Lynch was named again this year as the winner of both Best underwriter: corporate, and Best underwriter: municipality.

Click here to read about all the winners.

Environmental Finance also publishes the Green Bond Database, a table listing the 25 most recently issued green bonds.

Meanwhile, Canada is emerging as a green bond market force.

The Royal Bank of Canada (RBC) Capital Markets Green Bond Conference in Toronto on April 10 saw release of a report showing Canada’s capacity for green bond issues will be at least $56.3 billion in fiscal 2017/18.

The figures reported by the award-winning “clean capitalism” magazine “Corporate Knights,” are based on an analysis of the capital requirements, debt-raising capacity, and intended uses of proceeds on the part of 21 of Canada’s largest public and private bond issuers.

There’s clear momentum in green bond markets, but it’s still seen as a niche and perhaps even challenging financing tool,” says “Corporate Knights” CEO Toby Heaps. “A billion dollars worth of bonds formally labeled as green are currently being issued in Canada annually. This analysis shows there’s potential for exponential growth.

The analysis took a bottom-up approach to quantifying potential bond issues and is the first of its kind in Canada.

The report shows that in 2017/18, the 21 potential bond issuers have a need and capacity to fund $23.60 billion worth of “explicitly green projects” such as public transit, renewable energy, and loans for electric vehicle purchases and green power projects.

The Canadian potential bond issuers have a further need and capacity to fund $32.7 billion worth of “potentially green projects” such as energy efficient construction or retrofitting of public buildings and installation of broadband.

In Latin America, the Mexican government’s development bank Nacional Financiera, or Nafin, has tapped the green bond market with a issuance of $500 million in a deal that was five times oversubscribed.

China, too, is busily developing its green bond market.

More than 500 green finance experts from regulators and industry gathered at the annual Green Finance Summit in Beijing on April 15, the surging number of attendees reflecting the increased attention being placed on greening the financial system, reports Andrew Whiley, writing for Climate Bonds Initiative, an investor-focused not-for-profit based in London.

The Green Finance Summit has been held annually since 2015 by the China Financial Society’s Green Finance Committee which operates under the auspices of the People’s Bank of China.

Major issues on the summit’s agenda this year included:

  • opportunities and challenges facing green credit and green bond markets
  • establishment of green financial systems at a local level
  • innovation in green financial products

The summit saw the debut of the “Study of China’s Local Government Policy Instruments for Green Bonds” report.

Prepared by Climate Bonds & Syntao Green Finance, the new report examines green bond developments at a local government level and sets policy recommendations for growth.

Tracking the rapid growth in Chinese green bond issuance from almost zero in 2015 to RMB 238 billion (US$36.2 billion) or 39 percent of all green bonds issued around the world in 2016, the report outlines the policy steps taken by government regulators and stock exchanges in supporting such rapid growth.

China’s new Guidelines, issued by seven Chinese government ministries last September, call for government ministries and financial institutions to collaborate on the development of a wide range of financial instruments to move money from high-polluting to low-polluting sectors, including green credits, green bonds, green insurance, green equity indices, green development funds and carbon finance.

The guidelines are contained in the report “Establishing China’s Green Financial System” written by the Green Finance Task Force of the People’s Bank of China.

Two recommendations are particularly relevant to the international community’s current concerns about China’s financial system, wrote the World Resources Institute’s Shouqing Zhu last September.

The first relates to green bonds. Since the People’s Bank of China and the National Development and Reform Commission separately issued their directives on green bonds at the end of 2015, the market has witnessed exponential growth.

Following this rapid growth, there have been concerns about “greenwashing,” or businesses using green bonds to finance polluting projects instead of green ones due to a lack of a solid reporting and verification system.

Zhu writes, “The Guidelines call for harmonization of the two domestic green bond standards and development of third-party verification bodies in line with international practices.

International best practices are defined by the International Capital Market Association (ICMA) a UK-based industry membership association that publishes the Green Bond Principles .

Updated as of June 2016, the Green Bond Principles (GBP) are voluntary process guidelines that recommend transparency and disclosure and promote integrity in the development of the Green Bond market by clarifying the approach for issuance of a Green Bond.

The Green Bond Principles provide issuers guidance on the key components involved in launching a credible Green Bond. They are intended to aid investors by ensuring availability of information necessary to evaluate the environmental impact of their Green Bond investments. They assist underwriters by moving the market towards standard disclosures which will facilitate transactions.


Featured image: Trianel Windpark Borkum is an offshore wind farm of 40 turbines in the North Sea off the north coast of The Netherlands near the German border. A second stage of development is planned to start delivering power in 2019. It was financed in part by Rabobank. (Photo courtesy Trianel.com) Posted for media use. 

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Green Grow the Climate Awareness Bonds

By Sunny Lewis

LUXEMBOURG, October 29, 2015 (Maximpact News) – The European Investment Bank is the first issuer to link its individual green bonds to the projects they finance for the sake of transparency and accountability ahead of the Paris climate talks.

As the planet warms, growing cities and developing countries need airports, roads, buildings, water systems and energy generation that can withstand rising temperatures and extreme weather.

Green bonds, called Climate Awareness Bonds or CABs, are a new and increasingly popular source of climate-friendly funding for these expensive projects.

Green bonds were created to increase funding by accessing the $80 trillion bond market and expanding the investor base for sustainable projects. They are dedicated exclusively to climate mitigation and adaption projects, and other environmentally beneficial activities.

The EU’s nonprofit long-term lending institution, the European Investment Bank (EIB), the world’s largest issuer of green bonds, has just announced that it is enhancing the transparency of its reporting on Green Bonds by showing bondholders precisely what their money does.

The bank is going this direction to be in step with the Paris Climate Summit set for November 30 through December 11. There, world leaders will sign a legally-binding universal agreement to limit global warming to 2 degrees Celsius above pre-industrial levels.

Bertrand de Mazières, director general of finance, European Investment Bank, said, “Ahead of the Paris climate conference, COP 21, EIB is supporting EU’s leadership in climate policy through innovation in the green bond market.”

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“Green bond issuance has grown substantially, and has the potential to contribute significantly to addressing the 2 degree Celsius target,” said de Mazières.

Transparency and accountability are key themes of the European Union’s position for the Paris climate conference, as adopted by the EU Council on September 18.

“The Paris Agreement must provide for a robust common rules-based regime, including transparency and accountability rules applicable to all Parties…” the EU Council declared.

In harmony with this declaration, earlier this month the EIB extended its transparency effort by reporting on the allocations of proceeds from individual CABs to individual projects, beginning with allocations made in the first half of 2015.

De Mazières explained why, saying, “Granular transparency on the allocation of the CAB-proceeds helps this process by bringing investors more precise insights and promoting best practice.”

The disclosure of the allocation of individual CAB-proceeds to individual projects establishes a direct link between the two.

EIB can deliver this level of information due to an upgrade of its internal procedures and IT-infrastructure following extensive due diligence in 2014 and 2015.

Today, the bank records CAB-eligible disbursements and allocates CAB-proceeds to them on a daily, first-in first-out basis.

This enables detailed monitoring and reporting of allocations, and helps to complete the set of information available to investors.

Eila Kreivi, EIB’s director and head of Capital Markets, said, “Investors are increasingly eager to receive clear information on the use of proceeds and the impact of eligible projects. EIB’s launch of detailed reporting in these areas this year has established an important reference.”

“Transparent management and reporting are essential to further grow the green bond market,” she said. “At the same time, one must be careful not to overload issuers with administrative hurdles. Striking the right balance will be a key challenge for the market.”

EIB’s first Climate Awareness Bond pioneered the green bond segment in 2007 and the EIB is the largest issuer of Green Bonds to date.

In September 2014, together with other multi-lateral development banks, the EIB committed to maintaining a developmental role to spur further sustainable growth of the green bond market.

In response to a recommendation in the Green Bond Principles “to help establish a model for impact reporting that others can adopt and/or adapt to their needs,” the African Development Bank, International Bank for Reconstruction and Development and the International Finance Corporation (IBRD) have joined EIB in a first harmonization proposal for bonds that fund renewable energy and energy efficiency projects. It is now being circulated for discussion.

Meanwhile, the EIB is popularizing its CABs across the world, entering the Canadian market for the first-time this week.

The Climate Change Support Team, working for United Nations Secretary General Ban Ki-moon has described green bonds as very attractive to institutional investors, with demand for green bonds much larger than the supply.

EIB’s issuance of €2.7 billion equivalent in Green Bonds this year to date has brought total CAB issuance to over €10 billion and confirms EIB’s position as the world’s largest issuer of Green Bonds.


Award-winning journalist Sunny Lewis is founding editor in chief of the Environment News Service (ENS), the original daily wire service of the environment, publishing since 1990.

Featured image: shutterstock – royalty-free stock images
Slide Show images: a) Gemasolar, a 15 MW solar power tower that uses molten salt for receiving and storing energy, is located in the city of Fuentes de Andalucia, Seville, Spain. (Photo by Markel Redondo/Greenpeace under creative commons license via Flickr). b) Wind turbines generate electricity at Europoort, an area of the Port of Rotterdam and the adjoining industrial area in The Netherlands.  (Photo by Frans de Wit under creative commons license via Flickr)
Image 01: Bertrand de Mazières, director general of finance, European Investment Bank (Photo by Crédit Agricole, sometimes called the Green Bank, a French network of cooperative and mutual banks)