CIBC drives the sustainability agenda
Welcome to the next edition of the CIBC Capital Markets sustainability newsletter.
At CIBC, we are committed to making sustainability a reality for our clients and the communities we serve. We have built a market-leading renewables franchise to provide our clients with expert advice, capital and access to capital markets in this important sector. Whether through greening your balance sheet or providing sustainability advisory services, our objective is to help our clients become global leaders in environmental stewardship and sustainability.
CIBC announces the launch of Project Carbon
As part of CIBC’s ongoing sustainability efforts and alongside international partners Itaú Unibanco, National Australia Bank, and NatWest Group, CIBC announced Project Carbon, a Voluntary Carbon Marketplace pilot bringing efficiency, liquidity and global standards to the carbon offset ecosystem. Project Carbon aims to support a thriving global marketplace for quality carbon offsets with clear and consistent pricing and standards and will provide a valuable pathway for our clients in their efforts to achieve a net zero goal.
Furthermore, the Taskforce on Scaling Voluntary Carbon Markets (TSVCM) released its Phase II report, outlining an accelerated roadmap to a scaled voluntary market for the trading of carbon credits. In alignment with the TSVCM, established by Mark Carney, UN Special Envoy for Climate Action and Finance, Project Carbon helps to remove current barriers to voluntary carbon offset purchasing.
Project Carbon will help facilitate:
- Increased delivery of high-quality carbon offset projects
- A liquid carbon credit marketplace with price certainty and transparency
- The creation of a strong ecosystem to support the offset market
- The development of tools to help clients manage climate risk
Project Carbon will initially be launched as a pilot in August 2021 to demonstrate the operational, legal and technical capability of the platform.
The partners are keen to invite like-minded institutions to join the cohort to help deliver a shared service platform that the group believes will be fundamental to the scaling of the Voluntary Carbon Market.
Summary of the CIBC-hosted Sustainable Finance Roundtable
The CIBC Sustainable Finance Thought Leaders Roundtable held on Wednesday, June 9, 2021, featured guest speakers including Fiona Reynolds, CEO of Principles for Responsible Investment (PRI), Brian O’Hanlon, from the Rocky Mountain Institute’s Centre for Climate Aligned Finance and Sean Cleary, Chair of the Institute for Sustainable Finance. They discussed wide ranging topics from global trends around impact, to ensuring a just transition and how we should collectively align to the Paris Agreement’s 1.5 degree goal.
According to Fiona, impact investing has come a long way since 2006, however investors are becoming a lot more focused on the real world outcomes that their funds are having. The focus is shifting from making statements to making an impact and investors are asking for proof. Therefore, it will be important for investors to measure outcomes to share with stakeholders.
Brian spoke about finance as an enabler for climate change and some key trends in climate finance. Trillions of dollars have been committed to sustainable goals as climate risk has gone mainstream over the last few years. However, we are now moving from making net-zero statements to driving and measuring change, which will include increased regulation in disclosures like the EU Sustainable Finance Disclosure Regulation (SFDR) which describes sustainability disclosure requirements for the EU financial sector.
Sean Cleary spoke about the need for a $130 billion investment to fund Canada’s transition and the need to measure and disclose the progress. In particular, Professor Cleary cited the lack of disclosures by Canada’s corporations as they related to GHG emissions and mentioned that net-zero disclosures are even more disappointing, only 27% of companies in the S&P/TSX Composite Index have emission reduction targets. Cleary provided guidance on the steps to take to mobilize net-zero plans. First, it is important to measure and disclose targets and then start making plans to reduce emissions intensity like investing in low emissions businesses, then tie this together to the capital expenditure plan. Lastly, it is also important to set targets tied to incentives while also setting interim targets and taking a leadership role in the move towards net-zero.
Listen to the replay of the discussions here
IMF proposes an ‘international carbon price floor’ – and Canada could be the model
The International Monetary Fund (IMF) recently put forth a proposal to help meet the goals of the Paris Agreement and it took a page out of Canada’s carbon reduction playbook. The proposal suggests an ‘international carbon price floor’ amongst a “core group” of the world’s biggest emitting countries, which is very similar to Canada’s current model, in that there is a common national minimum carbon price and provinces can pursue their own carbon-pricing mechanisms. The advantages of what the IMF recommends are two-fold. Firstly, it suggests a common price for carbon and allowing each country to set policy on ways to impose the price target. Secondly, the focus would be on the largest emitting nations to set a carbon pricing agreement making it more likely a mutual commitment can be achieved. The timing of the proposal comes in advance of COP26 in November 2021 which lends itself to a possibility of this “mini-lateral” agreement.
Cryptocurrency exchange offsets Bitcoin emissions
Given the energy intensive nature of bitcoin, in June 2021, Gemini, one of the largest cryptocurrency exchanges in the world announced a program to buy carbon credits to offset bitcoin emissions, starting with a $4 million purchase.
ICMA updates Green Bond Principles; releases updated harmonized Framework for Impact Reporting
- The International Capital Market Association (ICMA) released updates to the Green Bond Principles (GBP); adding two key recommendations with the intention of increasing transparency, through (1) use of Green Bond Frameworks, and (2) incorporating external reviews (pre-issuance and/or post-issuance).
- The updated Principles will be effective for new issuances going forward; bonds issued prior to this update that were in compliance with the 2018 version of the GBP are deemed consistent with GBP still. Social Bond Principles are aligned with the GBP and therefore these standards would also be applicable to social bonds.
- ICMA also released an updated Harmonized Framework for Impact Reporting
FTSE Russell threatens to expel 208 ESG offenders from FTSE4Good
- More than 200 companies are in danger of being thrown out of a family of FTSE Russell stock indices for failing to meet more stringent environmental standards.
- The 208 companies represent 13.5% of the 1,546 stocks in the FTSE 4Good index series — designed to measure the performance of businesses with strong ESG practices — which is tracked by a range of exchange traded funds and investors such as the Japanese Government Pension Investment Fund, the world’s largest pension fund.
- FTSE Russell has given the companies 12 months to meet its tighter climate-performance standards or face deletion from the indices. The new climate standards are based on parameters drawn up by the Transition Pathway Initiative (TPI), which is backed by more than 100 investors collectively managing nearly $25tn in assets.
- This is the first time FTSE Russell has applied a specific climate criteria to its 4Good series. At present, companies only need to meet minimum broad ESG standards.
Read the full article here.
Climate risk and the Fed: Preparing for an uncertain certainty
In recent remarks, Mary C. Daly, President and Chief Executive Officer of the Federal Reserve Bank of San Francisco, outlined how the Fed is thinking about climate risk and its potential broad implications on the economy. According to Mary, the Federal Reserve understands the need to think about climate risk and more so about the actions to take to mitigate the collateral damage of our uncertain future. Read the full text here.
Climate change – a visual representation
Professor Ed Hawkins of the University of Reading developed the below ‘warming stripes’ which are a visual representation of the change in temperature as measured across the globe over the past 170+ years. The Project Carbon aims to help address climate change by enabling a more efficient marketplace for quality carbon offsets.
Warming stripes for the globe from 1850-2020
EU adopts 2050 climate neutrality into law
The European Council announced the adoption of the European climate law, setting into legislation the EU’s goal to reach climate neutrality by 2050. The climate law is a centrepiece of the European Green Deal, the EU’s strategy to transform the region into a modern, resource-efficient and competitive economy.
In addition to the 2050 target, the new legislation sets a binding EU climate goal to reduce net greenhouse gas by at least 55% by 2030 compared to 1990. The 2030 target raises the EU’s ambition from its prior 40% by 2030 goal, with the new level putting the region on track for 2050 climate neutrality.
The new law also establishes a European Scientific Advisory Board on Climate Change, which will provide independent scientific advice and produce reports on EU measures, climate targets and indicative GHG budgets and their coherence with the European climate law and the EU’s international commitments under the Paris Agreement.
CIBC events and publications
Past event
CIBC Sustainability Conference – The view from Asia
Wednesday, June 30, 2021
The Conference featured a keynote address on China’s road to carbon neutrality with His Excellency Ambassador Dominic Barton along with a Global Investor panel focusing on the role of Asia-based investment companies in global sustainable finance and a Disruption and Transition in the Making panel on shifting current business models and how incumbents are adapting.
Publications
‘The Sustainability Agenda’ – Podcast Series
CIBC Capital Markets’ latest podcast series focusing on the evolving complexities of the sustainability landscape – with a view on addressing current issues in a concise format to help you navigate and take action.
Did you know
The British Standards Institute (BSI) has published the world’s first guidance for preparing natural capital accounts
Australia’s richest man, Andrew Forrest, is developing the world’s largest hydro power project and associated port, green hydrogen and green ammonia capability. The project would produce more than 42,000 megawatts of electricity; that is, more electricity produced than the world’s two biggest hydro power plants combined
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