Parliament adopts law to restore 20% of EU’s land and sea

The EU nature restoration law will support the restoration of degraded ecosystems in all member states, helping to achieve the EU’s climate and biodiversity objectives and enhance food security. It sets a target for the EU to restore at least 20% of the EU’s land and sea areas by 2030 and all ecosystems in need of restoration by 2050. With over 80% of European habitats in poor shape, EU countries must restore at least 30% of habitats in poor condition by 2030, 60% by 2040, and 90% by 2050.

To improve biodiversity in agricultural ecosystems, EU countries will have to make progress in at least two of the following three indicators: the grassland butterfly index, the share of agricultural land with high-diversity landscape features and the stock of organic carbon in cropland mineral soil, and the common farmland bird index. In exceptional circumstances, targets can be suspended for agricultural ecosystems. The law also demands a positive trend in several indicators in forest ecosystems and an additional three billion trees to be planted. Member states will also have to restore at least 25000 km of rivers into free-flowing rivers and ensure there is no net loss in the total national area of urban green space and of urban tree canopy cover. For corporate treasurers there is a crucial case for investment into the preservation and restoration of nature funded for example via biodiversity-focussed thematic financial instruments.

Agreement reached on the regulation of ESG ratings providers

The European Parliament and European Council reached a provisional agreement on a proposal for regulation of ESG ratings providers. You can read more on this, and other latest developments shaping the market, in our regular Sustainable Finance Policy and Regulation round-up.

IBM adds supply chain emissions data capabilities to ESG platform

IBM has launched a new supply chain intelligence module in the IBM Envizi ESG suite, providing capabilities for companies to collect and analyse supply chain emissions for Scope 3 calculation and reporting. Given the Scope 3 emissions’ materiality and reporting challenges, the addition will assist companies in reporting their Scope 3 emissions leveraging the functions of capturing and aggregating supplier and product-level data, alongside being able to identify any opportunities to reduce emissions. 

CDP scores released in February 2024

CDP has released 2023 scoring, including the CDP A List Europe. European businesses are showing leadership, with the region accounting for 38% of the total global CDP A List in 2023, as well as accounting for 6 out of 10 companies globally to receive a triple A. All A list companies are due to be recognised at the CDP Awards Europe 2024 on 26th March.

Primary and Secondary Market

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Higher carbon credit prices could boost UK woodland creation, research finds

Increasing the prices of voluntary carbon credits can significantly incentivise woodland creation in the UK, as current prices make afforestation economically viable on less than 60% of suitable land, according to research by King’s College London, Imperial College Business School, and Foresight Sustainable Forestry Company. Incorporating the UK Woodland Carbon Code (WCC) into the UK Emissions Trading Scheme (UK-ETS) could unlock 26% more land for afforestation and sequester up to 19 million tonnes of carbon emissions.

The UK's progress in meeting its tree-planting targets has been hampered by modest voluntary carbon credit prices, with the country falling short of its goal to plant 30,000 hectares of woodland by March 2025, achieving less than half of this target. This shortfall is attributed to the economic unfeasibility of afforestation on a significant portion of suitable land, especially in England and Wales.

The research suggests that integrating WCC voluntary carbon credits into the UK's ETS could potentially increase the price of forestry carbon credits by up to 67%, elevating the economic viability of woodland creation. This proposal is part of a broader context where the EU is working on a certification framework for carbon removals, aiming to improve the quality and expedite the deployment of carbon removal and soil emission reduction activities within the EU.

abrdn: Does ‘Net Zero 2050’ matter?

There is a significant movement among companies towards setting net zero by 2050 targets, with 41% of companies responding to the CDP having such targets, and 81% having some form of decarbonisation target. However, the presence of a target is not always indicative of actual or immediate action towards reducing emissions, especially in critical areas like Scope 3 emissions.

Despite high ambitions, a significant gap exists in the implementation of these net-zero targets, with 81% of companies that have 2050 targets reporting no capital expenditure aligned to their transition. This highlights a discrepancy between companies’ climate goals and their investment in achieving these goals, raising questions about the reliability of net-zero 2050 targets as indicators of genuine climate action. Investors are encouraged to consider the full spectrum of a company's climate impact, including avoided emissions, rather than focusing solely on net-zero targets. This broader perspective recognises the value of contributions towards decarbonisation through innovative products and services, which may not be captured by traditional net-zero commitments.

T Rowe Price: The blue bond market is at a tipping point

Blue bonds, aimed at financing water conservation efforts, are emerging as a significant sustainable finance instrument, drawing parallels to the early days of the green bond market, with current enthusiasm suggesting they are on the verge of substantial growth from a relatively small base of around $5 billion. T Rowe Price, in partnership with the International Finance Corporation, is pioneering the blue bond strategy, aiming to raise up to $450 million for investments that offer both environmental benefits and competitive returns, highlighting the economic viability of investing in water-related sustainability projects. The concept of blue bonds, supported by early initiatives like The Nature Conservancy's program in the Seychelles, and increasing interest from financial institutions in Asia and beyond, is gaining traction as a crucial tool for marine conservation and in combatting issues like overfishing and plastic pollution; promising growth as sustainability becomes a priority for future generations.

BNPP AM launches two active fixed income ESG ETFs

BNP Paribas Asset Management has introduced the first two funds in its new series of fixed income ETFs, focusing on sustainable corporate and government bonds, trading on Borsa Italiana and Deutsche Börse Xetra since February 20. The new ETFs combine BNPP AM's proprietary sustainability approach with an index-like strategy, aiming to offer investors flexibility and adaptability to future regulatory changes, while ensuring compliance with sustainability criteria. The BNP Paribas Easy Sustainable EUR Corporate Bond (Article 9) and BNP Paribas Easy Sustainable EUR Government Bond (Article 8) funds align with the EU’s SFDR, focusing on sustainable investments and offering enhanced ESG reporting and alignment with MiFID 2 preferences for investors seeking sustainable fixed income options.

Regular articles from us on market-moving themes, and updates on events either upcoming or that’ve recently taken place:

• UK Sustainable Finance event 27 March Event
• Sustainability in the Private Placement market
• Partnering with Team GB – Let’s get going!

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Or, for Corporates looking to discuss any of the above further, please reach out to our authors:

• Dr Arthur Krebbers, Head of Corporate Climate and ESG Capital Markets
• Gustavo Brianza, Head of Debt and ESG Advisory
• Daniel Bressler, Climate and ESG Capital Markets
• James Lander, Credit Trader
• Philippe Bradshaw, Head of European Syndicate
• Rui Zu, ESG Advisory
• Thomas Gidman, ESG Advisory
• Dean Shahfar, Sustainable Finance UK
• Pietro Stimamiglio, Climate and ESG Capital Markets
• Niceasia Mc Perry, Climate and ESG Capital Markets

*For any unfamiliar terms used within this article please refer to our Insights glossary