CIBC drives the sustainability agenda

Welcome to the sixth 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. Our bank is committed to supporting $150 billion in environmental and sustainable finance activities by 2027 to support clients in transitioning to a lower carbon economy, and we’re well on our way to achieving this target.

People are our most important assets – Human Capital Index

‘People are our most important assets.’ This is a phrase often said but difficult to quantify. Working with renowned behavioral economist, Professor Dan Ariely and his team at Irrational Capital, CIBC has developed the Human Capital Index (HCI). The investment thesis is quite simple, companies that engage well with their employees perform better overtime. As opposed to using traditional valuation metrics like earnings or revenue growth the HCI utilizes an investable factor based on the relationship between employees and the companies they work for, which incorporates a broad range of cultural characteristics. Ariely’s research examines how corporate culture drives goodwill and impacts both fundamental and financial performance, creating equity value.

The CIBC Human Capital Index leverages these statistically significant links between corporate culture and stock performance in an effort to generate long-term value. The HCI can be found on Bloomberg under the symbol “CIBCHCT Index”.

For more information, please contact your CIBC Capital Markets relationship manager.

Project Drawdown – Climate solutions

Project Drawdown whose mission is to help the world drawdown greenhouse gases as quickly, safely, and equitably as possible recently posted a series of courses called Climate Solutions 101. It is the first major educational effort focused solely on solutions. As these solutions take shape, our economy is likely to be influenced by this work – so it is worth a listen. Now is better than new.

Early adopter of sustainable finance generation – net zero asset managers initiative

Generation Investment Management, one of the pre-eminent and early investors in ‘sustainable capitalism’ and founded in 2004 by Al Gore, recently issued a research report ‘Race to Zero’. The paper discusses the Net Zero Asset Managers Initiative (NZAM), launched in December 2020. NZAM is a coalition of like-minded managers committed to investing in line with net zero emissions by mid-century, and includes 30 founding signatories with combined $9 trillion of assets under management.

ECB stress test reveals economic impact of climate change

The ECB has identified “a major source of systemic risk” in the preliminary results of its economic stress test to measure the impact of climate change on 4 million businesses and 2,000 banks over 30 years.

There are two main types of climate risk for banks: one is physical risk, such as floods and forest fires; the other is the transition risk that policies to reduce carbon emissions lead to a sharp increase in the costs of companies and affect their profits. The final results of the test are expected to be released in July at which point it will be used to model how banks might react by diverting their exposure from riskier companies, what impact this might have on the economy as a whole, and how it will affect insurers and non-bank finance companies.

The final results of the test are expected to be released in July at which point it will be used to model how banks might react by diverting their exposure from riskier companies, what impact this might have on the economy as a whole, and how it will affect insurers and non-bank finance companies.

Asia trending in hydrogen

There is a trend among large Asian companies, including Japanese conglomerates, Korean conglomerates and Chinese SOEs, to establish hydrogen business units within their current energy investment groups. Asian companies are increasingly looking to invest in hydrogen opportunities as part of their future energy mix as they commit to the circular economy, with a desire to be closer to home market. Examples of companies that have recently announced the creation of a hydrogen-focused investment team include Sinopec, Mitsubishi, Itochu, Korea Gas (KoGas). In a related trend, we are also seeing instances of Asian companies from different industries developing consortia to examine international transport and import opportunities for hydrogen.

BP is working on a huge ‘blue hydrogen’ facility in the UK

BP recently announced plans for the development of a new hydrogen project in the UK. The proposed development would be based in Teesside, North East England and could generate as much as 1 gigawatt of “blue hydrogen” by 2030.

The facility would be able to “capture and send for storage” as much as two million metric tons of carbon dioxide every year. The UK government wants to have 5 GW of low-carbon hydrogen capacity by 2030.

A final investment decision on the development will be taken in 2024. If all goes to plan, 500 megawatts of capacity could be in production by 2027 or earlier.

In addition, BP has begun a feasibility study into the project to explore technologies that could capture up to 98% of carbon emissions from the hydrogen production process.

CIBC related events and publications

Upcoming events

‘Carbon Capture and Hydrogen’
Tuesday April 20, 8:30 am EST / 1:30 pm GMT
The event will feature a focus on UK and European developments with CCUS, following our successful North American CCUS conference, February 23. We will also be adding hydrogen as a topic to our UK conference.

Publications

New Podcast: ‘The Sustainability Agenda’
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.