NatWest Sustainable Finance Leadership Toolkit series module 5: transition planning – 14:00-15:00 GMT, Tuesday 3 December 2024 on Zoom

As part of the NatWest Sustainable Finance Leadership Toolkit series for corporate treasurers, we’re delighted to invite you to our webinar ‘How treasury teams can embed and promote their company’s transition plan’.

This training session will explore pertinent questions facing treasury teams, including: What is a credible transition plan? What benchmarks do investors use when assessing these plans? How can companies link their financing and lending strategy to transition goals? – register here.

NatWest recap: Climate Week NYC 2024 – transition plans gain momentum

The recent Climate Week NYC 2024 summit brought together global leaders to drive climate action.

Several of our US colleagues joined the summit this year, participating in roundtables and discussing crucial issues like financed emissions, transition finance, ocean investments, and increasing funding for nature.

In our recap of the week, we summarise key themes and takeaways from the sessions we attended including how transition plans are gaining momentum, the role of AI in supporting decarbonisation, and how sustainability disclosure standards are converging – read more.

NatWest strategists: overcoming four barriers to social bond market growth

Social bond issuance has stagnated since 2021, which can be attributed to the likes of its high geographical and issuer concentration and the difficulty of measuring social performance. Yet, as demand still exists for social bonds, standards and regulations could help unlock the market – read more.

Public funding for nature conservation stalls at COP16

At the COP16 biodiversity summit in Cali, Colombia, efforts to secure $200bn annually for conservation by 2030 have stalled, with no consensus on mobilising the funds.

Developed nations, including Germany, the Netherlands, France, and the UK, signalled they were unwilling to commit more funding, due in part to reduced foreign aid budgets.

In response, delegates are exploring private investment strategies, such as charging companies for genetic information use, which could generate $1bn annually, and considering green bonds and debt-for-nature swaps to support ecosystem conservation, find out more in our Corporate ESG 5 in 5 – read more.

Over 500 companies commit to report on nature and biodiversity risk using TNFD framework

At the COP16 Biodiversity Conference, the Taskforce on TNFD[1] announced that over 500 companies and financial institutions have committed to begin reporting on nature and biodiversity risks using the TNFD framework.

This marks a significant increase from 320 companies earlier this year, advancing efforts to standardise reporting on nature-related governance, risk management, strategy, and targets.

The increased commitments follow the TNFD’s publication of its final recommendations for nature-related risk management and disclosure in September 2023, following a two year process – read more.

IPSASB issues draft of groundbreaking climate-related disclosures standard for the public sector

The IPSASB[2] has released its inaugural Sustainability Reporting Standard Exposure Draft (SRS ED 1), titled “climate-related disclosures”, for public comment until 28 February 2025.

This draft aims to provide public sector entities with specific guidance on reporting climate-related risks and opportunities, aligning with the International Sustainability Standards Board’s global baseline.

The IPSASB encourages stakeholders, including public sector report preparers, standard setters, accountants, and the public, to review and comment on the proposed standard to enhance transparency and accountability in addressing climate change – read more.

ESMA to focus enforcement actions on CSRD’s double materiality and sustainability statement compliance

The ESMA[3] has set enforcement priorities focused on compliance with the CSRD[4], particularly regarding double materiality and sustainability statements.

Double materiality requires companies to disclose both how sustainability issues impact them financially and how their activities affect society and the environment.

Regarding sustainability statements, ESMA has highlighted the importance of connectivity between financial and sustainability statements, and that the sustainability statement must cover risks, opportunities and impacts linked to a company’s value chain.

ESMA will also scrutinise the clarity and comparability of sustainability statements, urging companies to use EU taxonomy templates for consistent reporting – read more.

Bloomberg: launch of nature and biodiversity risk exposure tool

Bloomberg have launched a tool to help investors assess their exposure to nature and biodiversity risks, using data from up to 45,000 companies and sources like the Natural History Museum and World Resources Institute.

The tool evaluates factors including revenue in high nature-risk sectors, deforestation-linked commodities and water-stress exposure to determine financial impacts related to biodiversity.

This supports alignment with the TNFD guidelines, addressing increased demand for evaluating biodiversity-related economic risks – read more.

Morningstar: new CSRD reporting solutions

Morningstar has expanded its EU Sustainable Finance Action Plan suite with new tools supporting compliance with EU regulations like the CRSD and new fund-naming requirements.

The suite includes enhanced CRSD-compliant data, mapping Sustainalytics data to emerging regulatory reporting requirements, covering 25,000 companies. This dataset can support portfolio analysis, assess the impact and financial materiality of ESG factors and compliance with regulatory standards, as well as simplify CRSD reporting requirements.

Updates to the EU taxonomy solution also allow clearer classification of sustainable investments, offering better insights for investors focused on regulatory alignment and transparency – read more.

For analysis and information on the Primary Market, along with updates on the Secondary Market, please take a look at the full monthly newsletter on Market Insights. If you do not have access to Agile Markets, please contact us here.

Marsh launches insurance to combat fraud in carbon credit market

Marsh, in partnership with We2Sure, has launched a new insurance facility aimed at helping organisations in the UK, EU, and US manage the increasing risks of fraud in the carbon credit market.

This facility provides coverage against purchasing counterfeit carbon credits, certificates linked to non-existent projects, and theft. Backed by insurers such as Sompo, Brit, and Talbot, the facility also grants access to We2Sure’s technology, which assesses the validity of carbon credits before purchase.

With the carbon credit industry facing rising fraud incidents, this initiative aims to enhance business confidence and support the integrity of the carbon credit ecosystem – read more.

Launch of Fidelity ocean and freshwater focused transition bond fund

Investment management firm Fidelity international launched the Fidelity Funds 2 – Blue Transition Bond Fund aimed at supporting the transition towards ocean and freshwater health. This marks the first blue transition fixed income fund globally and comes as ocean and freshwater-related UN SDGs[1] are among the least funded.

The new fund will focus on supporting the transition towards improved ocean and freshwater health and will invest in bonds of issuers that contribute to ocean and freshwater objectives aligned with one or more SDGs. It will use bond proceeds, especially of blue bonds, to improve management of water-related risks and opportunities, and reduce the negative impact of climate change on the oceans and freshwater – read more.

APG asset management: use of proceeds for sustainable bond clarity

Sustainable bond issuers are encouraged to clearly “signal” the area of focus for their bond proceeds allocation, especially where an issuer has an extensive number of eligible use-of-proceeds categories.

For example, there are cases where a sustainable bond framework includes 10 potential spend categories, but an issuer only intends to allocate to one or two of these categories with a specific bond transaction.

It’s “fine” for issuers to include all the eligible use-of-proceeds categories in these frameworks and discussions as there is “informational value” in knowing the different sustainability focus areas. However, improving transparency by providing clearer guidance on intended spend for each deal “improves outcomes on all sides”.

“Ultimately, we want to know where the focus is going to be for this [specific] bond proceeds”, says Joshua Linder, Senior Credit Analyst at APG. However, Linder emphasised that issuers do not have to provide specific financial spend breakdowns by category for this information to be valuable for investors like APG.

MAN Group: looking at alternative ESG data to human capital

Human capital represents a potentially novel source of alpha, an intangible asset not fully priced in the market. The S in ESG has been often overlooked as investors only typically think of human rights or gender diversity. One of the biggest issues is that social factors are hard to quantify which leaves human capital largely unmeasured by a key traditional dataset.

If investors widen their scope and consider alternative data points, this can represent a potentially novel source of alpha. The human capital framework looks at the three most important factors to consider in terms of how human capital can drive stock performance. These include investment in talent, management of human capital and firm culture – read more.

NatWest completes £2.8bn of lending to UK social housing sector in 2024

As part of our ambition to provide £5bn lending to the UK social housing sector between 2024 and 2026, we have now provided £2.8bn since the beginning of 2024 to support more delivery and maintenance of housing and improve the supply chain skills which our customers may need to help retrofit projects across the UK. Read more about our efforts here.

NatWest continues to support the European energy transition with €450m financing of solar power projects in Southern Europe

Continuing our support for the European energy transition, NatWest has provided Glennmont Partners with a flexible and innovative power purchase agreement strategy. This has allowed independent power producer BNZ to construct a 710 MW solar photovoltaic portfolio. BNZ develops, builds and operates solar PV projects in Southern Europe, particularly in Spain, Portugal and Italy and supports local aims of producing over 80% of clean electricity – read more.

Regular articles from us on market-moving themes, and updates on what we are doing to further our ESG commitment.

• State of play of key sustainable finance legislation in the US after the US election
• What’s next for the social debt market? | NatWest Corporates and Institutions
• Structuring the inaugural green NAV line for Clarion Partners | NatWest Corporates and Institutions

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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 & ESG Capital Markets
• Gustavo Brianza, Head of Debt and ESG Advisory
• Rui Zu, ESG Advisory
• Thomas Gidman, ESG Advisory
• Daniel Bressler, Climate & ESG Capital Markets
• Jaspreet Singh, US climate & ESG Capital Markets
• Niceasia Mc Perry, Climate & ESG Capital Markets
• Isabella Crack, ESG Advisory

[1] TNFD Taskforce on Nature-related Financial Disclosures
[2] IPSASB International Public Sector Accounting Standards Board
[3] RSMA European Securities and Markets Authority
[4] CSRD Corporate Sustainability Reporting Directive
[5] SDG Sustainable Development Goal