CIBC continues to drive the sustainability agenda

Welcome to the second 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.

Climate risk emerging as a key component to financial valuation

The University of Waterloo’s Intact Centre is driving innovative and practical insights on how climate change risk should be factored into portfolio management.  The centre published a report, Factoring Climate Risk Into Financial Valuation (March 2020), which we believe to be notably relevant, particularly as it relates to the management of physical climate risk and identifying means to limit the adverse impacts of extreme weather events on Canada’s financial services industry. The Intact Centre is focusing efforts on identifying the physical risks and mitigation measures to limit financial losses and business disruptions associated with floods, wildfires, extreme heat and other weather-related disasters for a range of industries in Canada. To date, they have completed work for electricity transmission and distribution, as well as commercial real estate sectors vis-à-vis climate risk matrices: They plan to produce similar climate risk matrices for hydro power, wind, mortgages and property and casualty insurance in 2021. In their recent article, ‘It’s time to reveal the hidden value of Canada’s natural assets’, The Globe and Mail recently highlighted some of the work the Intact Centre has done on valuing natural capital, an emerging area, in our opinion. 

OSFI consultation on climate-related risk in the financial sector

The Office of the Superintendent of Financial Institutions (OSFI), which regulates banks, insurance and federally regulated pension plans, launched a consultation in mid January to respond to its discussion paper Navigating Uncertainty in Climate Change: Promoting Preparedness and Resilience to Climate-Related Risks. The paper focuses on the risks arising from climate change that can affect the safety and soundness of the financial institutions.  OSFI is exploring whether there are climate-related considerations beyond what is already reflected in existing inputs that should be considered in the capital framework, as well as other matters.  

Blackrock CEO warns companies to focus on net-zero

On January 26th in his annual letter to CEOs, ‘Net zero: a fiduciary approach’, Larry Fink, chairman and CEO of Blackrock, warned companies that they must develop a 

CIBC & Hinicio virtual workshop: Hydrogen is a global opportunity

On January 15th, 2021, CIBC Capital Markets partnered with Hinicio, a global strategy consulting firm specializing in sustainable energy and transport, to host a two hour virtual workshop exploring the global hydrogen opportunity. Hinicio’s areas of expertise include renewable energies, energy storage, energy efficiency and sustainable transport.  Hinicio has developed a strong competence in the field of hydrogen energy. 

Hydrogen is rapidly gaining consideration as a clean and efficient energy source  and will become increasingly linked to renewable power, in our opinion. The two hour workshop featured in depth discussion on the value chain and the players in the hydrogen market.  

According to our guest panelists, the global hydrogen market will grow by multiple orders of magnitude in the coming 10 years, from its 2016 size of US$108 billion.  More than 75% of hydrogen demand in 2050 will be destined for new applications like energy storage, industrial energy, heat and power for buildings and mobility.

If you are interested in a replay or a summary of the event, please reach out to your CIBC relationship manager.

ISDA provides insight into how derivatives can drive ESG

The International Swaps and Derivatives Associations (ISDA) released its Overview of ESG-related Derivatives Products and Transactions on January 11, 2021. The paper describes how the derivatives markets can play a role in transitioning to a sustainable economy. Derivatives enable more capital to be channeled towards sustainable investments; help market participants hedge risk related to environmental, social and governance (ESG) factors; facilitate transparency, price discovery and market efficiency; and contribute to long-termism.

If you are interested in learning more, please reach out to your CIBC representative.

Davos hosts the world and sustainability plays a key role

In a first for Davos, all sessions are available to the public. There are a number of topics over the weeklong session that are of interest to our sustainability team and the January 27 content is mostly dedicated to transitioning the global economy to one that is low carbon.

Of particular interest to us, the final report on voluntary carbon markets was issued with a presentation at Davos by Bill Gates, Mark Carney, Annette Nazareth and Bill Winters. The notion of carbon credits has been around for decades; what is different this time? Net zero announcements by over 1500 corporations globally, and the stakeholders of corporations are holding them to account. If the global economy succeeds in transition, an important piece of the puzzle is voluntary carbon markets.

Watch and listen to replays of the events at Davos.

OTPP commits to net-zero emissions by 2050

On January 21, 2021, Ontario Teachers Pension Plan (OTPP) said they were committing to net zero by 2050, joining more than 1500 corporations globally in making such an announcement. Over the coming months, OTTP will hold itself accountable by establishing concrete targets for portfolio emissions and for its investments in climate solutions and will report on its progress annually. Jo Taylor spoke at Davos ‘Accelerating Clean Energy Transitions’ and described the need to speak to every investee company and asking how they measure their carbon footprint, and what are they doing concretely to improve its profile. He also mentioned a role OTPP can play as co-investor in projects, in terms of influencing their partners or co-investors. Click on the link above to hear more of his thoughts.

CIBC Related Events

Events:

• Carbon Capture, Utilization and Storage conference, February 23, 1:00pm – 3:30 pm EST
  The conference will feature discussions with North America’s top experts on the following topics: the CCUS need and opportunity, carbon capture applications and technology, CO2 transportation requirements, and Canadian and US governments’ policy momentum for CCUS. If you are interested in registering, please reach out to your CIBC representative.
• Brave New World, February 9, 11:00am -12:00 pm EST
  Our industry-leading experts will share insights and prognostications about how US infrastructure development and investment will be shaped by the Biden Administration’s leadership and the Democratic Congress. If you are interested in registering, please reach out to your CIBC representative.