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. Our bank is committed to mobilizing $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.
Natural Capital
The Public Sector Accounting Board has revised “The Conceptual Framework for Financial Reporting in the Public Sector” and “Financial Statement Presentation, Proposed Section PS 1202”.
The consultation focuses on the proposed PSAB changes as they relate to valuing natural assets (natural capital).
We believe that natural capital such as carbon sequestration and storage, flood protection and biodiversity benefits will take greater prominence in the capital markets going forward. We will continue to monitor this space closely and report on any significant developments.
How Energy Intensive is Bitcoin?
Bitcoin mining is a power-intensive process – it is estimated to use 129 terawatt-hours (TWh) annually. To put that into perspective, if Bitcoin was a country it would consume more power than the whole country of Norway (124 TWh) or roughly 80% of what the state of New York uses with over 19 million people.
Bitcoin miners are opening warehouses filled with computers that operate around the clock; around 76% of these cryptominers rely on some degree of renewable energy to power their operations. However, there is a lot of room for improvement as renewables account for only 39% of cryptomining’s total energy consumption. Therefore, with the rising popularity of cryptocurrencies it is important to consider the by-product that comes with powering the network that miners use to mine Bitcoin and whether crypto can move to a greener future. We expect to see increased scrutiny and debate over the energy usage (and carbon footprint) of bitcoin, including from governments and other stakeholders.
Ontario Securities Commission and the BC Securities Commission Reviewing ESG Claims
Similar initiatives are taking place at the Securities Exchange Commission. The SEC has examined whether U.S.-based investment firms are accurately disclosing their ESG investing approaches and whether they have implemented policies, procedures and practices that align with their ESG-related disclosure. The SEC has also opened a consultation to determine adequacy of climate disclosure.
Impact!
There is more and more discussion on impact measurement, and impact disclosure, in the capital markets. Thinkific recently completed an initial public offering and for the first time that we are aware, the prospectus document included information on social impact – with its own segment reference in the table of contents. We believe impact measurement and disclosure will gain more momentum and prominence in the coming year, as 1) investors demand it; 2) Principles of Responsible Investing (PRI) signatories must report on it in the coming year.
It is notable that Dream Asset Management put out its own impact report. We see Dream as a first mover in this space.
Note: both Thinkific and Dream Asset Management are clients of CIBC Capital Markets.
‘World first’ industrial decarbonization strategy developed in the UK
The UK’s Industrial decarbonization strategy is the first published by a major economy which sets out how industry can decarbonize in line with net zero, while remaining competitive and without pushing emissions abroad.
Building on the 10 Point Plan, the strategy sets out the government’s vision for a prosperous, low carbon UK industrial sector in 2050 and provides industry with the long-term certainty it needs to invest in decarbonization.
The strategy acknowledges that the transition to a low carbon economy will create challenges for the industrial sector, since it is likely to increase their costs and therefore potentially risk placing UK industry at a competitive disadvantage compared to rivals elsewhere in the world where decarbonization is less of a priority.
Germany unveils plan to become a leading hub for sustainable finance
The German government is planning to introduce a new Sustainable Finance Strategy to help steer capital towards environmental projects and transform Germany into a leading hub for sustainable finance.
The plan aims to support the EU becoming carbon neutral by 2050 – a target the EU estimates will require €350bn to be invested annually. A 30-year green bond is planned for May, with a 10-year issue to follow later this year.
The plan also responds to investor demand that more companies comply with ESG criteria. To assist investors, the plan envisages a sustainability “traffic light” system that makes it easier to identify green investment opportunities.
The German government also plans to increase guarantees and export credit assistance for green projects, and to reallocate €9bn in equities it holds in pension and welfare funds into green investments.
Germany sets tougher CO2 emissions reduction targets after top court ruling
A German court claims the government failed to set out how it would reduce carbon emissions beyond 2030 after a group of plaintiffs, including North Sea islanders fearing inundation from climate change, challenged the 2019 climate law as unfit for purpose.
In response, Finance Minister Olaf Scholz said Germany would aim for a 65% cut in carbon emissions by 2030 (previously 55%) and increasing to 88% by 2040. Under the new targets, Germany will also aim for nearly net zero emissions by 2045, rather than 2050 as initially planned.
Although Germany’s CO2 emissions are already 40% below the 1990 level, the new targets will mean further reductions by 25% in the 2020s, 23% the in 2030s and 12% in the 2040s.
The required change in legislation is slated to go to the cabinet for formal approval next week.
EU countries could face national renewable energy goals, official says
EU policy makers are likely to propose national targets on expanding renewable energy to try to ensure the bloc achieves its goals on cutting emissions.
A major package of climate change policies, to be unveiled in July, is aimed at cutting GHG emissions faster across all sectors of the economy.
Currently the EU’s target is for a 32% share of renewable energy across the bloc by 2030, up from just under 20% in 2019. That goal needs raising to put the EU on track to cut economy-wide net emissions by at least 55% by 2030 (from 1990 levels).
Renewables provided more than 50% of Sweden’s gross energy consumption in 2019, while the share was below 10% in Luxembourg, Malta and the Netherlands.
National targets could address that imbalance and may be easier to agree now given many countries are planning to expand the use of renewable power.
CIBC related events and publications
Upcoming events
‘Sustainable Finance – A View From the Thought Leaders’
Wednesday June 9, 2021
Listen to the perspectives on sustainable finance from Principles of Responsible Investing (PRI), Rocky Mountain Institute’s Center for Climate-Aligned Finance and the Institute for Sustainable Finance (Canada).
To learn more about this event, talk to your CIBC representative or visit the conference page and register directly.
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.
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