ANZ Sustainable Finance Insights, Q1 2024

Quarterly highlights  |  Market update  |  Global update  |  Australia  |  New Zealand  |  Asia  |  Europe/The UK  |  USA  |  ANZ news and updates  |  Sustainability reading

Market update

All market data is sourced from BloombergNEF as at 31 March 2024 and includes original and tapped issuance, unless otherwise noted. Below provides an excerpt from the detailed market analysis conducted by ANZ Research. See the full Q1 2024 market update prepared by ANZ Research. 

Graph 1: Q1 2024 sustainable debt issuance highest in almost two years

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Source: BloombergNEF, ANZ Research

Graph 2: Record SSA issuance of green and sustainability bonds

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Source: BloombergNEF, ANZ Research

Graph 3: Sustainability-linked issuance continues to fall as a proportion of sustainable debt issuance

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Source: BloombergNEF, ANZ Research

Global update

• ICMA Paper on Transition Finance in the Debt Capital Market (see full publication): in February 2024, the International Capital Market Association (ICMA) published a paper reviewing the latest guidance and recommendations on transition finance. It also underlined  the progress of international taxonomies to integrate transition, as well as the latest developments on sectoral pathways and industry roadmaps. The key findings include that:
  
  
  • Labelled “climate transition” bonds represented less than 0.4% of the outstanding sustainable bond market and in many cases refer to green or sustainability bonds that have been marketed with an additional climate transition label. This segment may however see significant development in Asia, with Japan notably being at the forefront of an effort to develop labelled transition bonds both in the corporate and sovereign sector and issued ¥1.6tr Japan Climate Transition Bond in February 2024 following the announcement of the Japan Climate Transition Bond Framework in November 2023.
    
    
  • There are currently three different overlapping definitions in general use for transition finance:
    
    
    • Economy-wide transition refers to transformation of the entire economy with the objective of meeting the goals of the Paris Agreement but also wider sustainable objectives (e.g. biodiversity or circular economy) embedded in taxonomies, or with reference to the UN SDGs.
      
    • Climate transition covers the goals of the Paris Agreement and the target of achieving Net Zero but typically with a narrower sectoral or industry focus especially on the energy and high-emissions sectors.
      
    • Hard-to-abate transition emphasises the specific challenges of reducing the emissions of the fossil fuel and hard-to-abate sectors or promoting more sustainable alternatives to their output.
      
• Climate Bond Initiative (CBI) launched the Electrical Utilities Criteria (Criteria) for Climate Bonds Certification, which aims to facilitate the reduction of electricity emissions and support the shift away from unabated fossil fuels towards an increase in renewable generation capacity. The Criteria focus on the generation segment of the electricity value chain and reflect a holistic approach to ensure every aspect of electricity generation and supply aligns with the overarching goal of decarbonisation. CBI stated that as electricity can be produced using a variety of mature or emerging technologies, the Criteria address the need for a balanced mix of electricity generation technologies to meet future demand while adhering to stringent climate restrictions.
  
  
• GRI Standards on Biodiversity: In January 2024, the Global Reporting Initiative (GRI) released its revised biodiversity standard (GRI 101: Biodiversity 2024).
  
  
  • Key changes made to the standard were to try and make it easier for companies and other stakeholders to understand biodiversity impacts, aiming to make companies more accountable for negative effects of their activities. For example:
    
    
    • Supply chain, direct drivers of loss, and effects on society: the 2024 standard introduces new disclosures on the direct drivers of biodiversity loss and how a company’s impacts on biodiversity also affect Indigenous Peoples, local communities, and other groups. In addition, companies must report the “most significant” impacts caused by their own operations and across their supply chain.
      
    • Location-specific disclosures, changes to biodiversity: the 2024 standard focuses on location-specific disclosures and requires companies to explain how they determined which of their products, services, and sites have the most significant impact on biodiversity.
      
  • GRI stated that the standard has many elements that align with the recommendations of the Taskforce on Nature-related Financial Disclosures (TNFD) and the EU’s European Sustainability Reporting Standards (ESRS), including the LEAP (Locate, Evaluate, Assess, Prepare) approach to identifying impacts, report how the company’s impact on biodiversity impacts people and report on the mitigation hierarchy to manage negative impacts.
    
    
  • Looking ahead: in the second quarter of 2024, the GRI and the TNFD are expected to release a document on how the GRI biodiversity standard and the TNFD recommendations align. On 1 January 2026, the GRI 101: Biodiversity 2024 standard will come into effect, replacing GRI 304: Biodiversity 2016.
    
• The Science Based Targets initiative (SBTi) Reports on Beyond Value Chain Mitigation (BVCM):   To support the design and implementation of BVCM strategies and try to mobilize increased action from corporations, SBTi released two new reports Above and Beyond and Raising the Bar on 28 February.
  
  
  • BVCM is defined as mitigation action or investments that fall outside a company’s value chain, including activities that avoid or reduce greenhouse gas (GHG) emissions, or remove and store GHG from the atmosphere.
    
    
  • BVCM provides a mechanism for companies to take responsibility for unabated emissions while they transition towards their net zero target. The SBTi now recommends this as the next step, once a corporate has set a net-zero target.
    
    
  • The reports highlight opportunities available to companies including those in high emitting sectors to scale carbon dioxide removal technologies required to neutralise residual emissions, as well as opportunities for companies dependent on natural capital. The purpose is to enhance resilience across a range of areas including operations and supply chains. See the full release here.
    
    
  • Opportunities for companies including for high emitting sectors to scale carbon dioxide removal technologies required to neutralise residual emissions and for companies dependent on natural capital to enhance resilience across areas including operations and supply chains. See the full release.
    
• International Voluntary Carbon Markets continue to navigate a heightened focus on integrity, particularly following the lack of progress on Article 6 at COP28 in Dubai as suggested by BloombergNEF (BNEF) analysed the long-term outlook for the markets in a report published in February.  BNEF subscribers can download the full report. Key summaries are below:
  
  
  • The potential future scenarios are incredibly diverse and reflect the balancing act of developing new markets and products alongside integrity and best practice tools as the pace to meet climate commitments accelerates.
    
    
  • The most likely scenario is the emergence of a high-quality carbon market with a universal standard that broadly satisfies integrity (additionality and permanence) expectations from investors and the NGO community.
    
    
  • Companies would largely use carbon credits as a last resort and demand is forecast to be inelastic given offsetting will be essential to mitigating residual emissions and meeting net zero commitments.
    
• Net Zero Banking Alliance (NZBA) - United Nations-convened Net-Zero Banking Alliance (NZBA) Members have updated and reinforced their climate commitments by voting to adopt a new version of the Guidelines for Climate Target Setting for Banks. The review and subsequent update of the guidelines follows the Partnership for Carbon Accounting Financials’ (PCAF) Global GHG Accounting and Reporting Standard for Capital Markets (Part B) published in December 2023.
  The main updates to the guidelines included:
  
  
  • Inclusion of member banks capital markets activities: The scope of targets will be extended to banks capital arranging and underwriting services for new debt and equity instruments, which for some banks will cover most of their Scope 3 emissions. In relation to capital market activities, asset class and sectoral level disclosure of scope and boundaries will be required. Further, the emission measurement method(s) and metric(s) used at the portfolios, asset class or sector level will need to be disclosed.
    
    
  • Overall ambition and key principles of original guidelines maintained: Member banks continue to commit to reaching net-zero by 2050 or sooner and science-based intermediate (2030 or sooner) targets, which align with the 1.5°C pathway. It also reiterates the members commitments to sector-level targets for the most carbon-intensive sectors, including agriculture, aluminium, cement, coal, commercial and residential real estate, iron and steel, oil and gas, power generation, and transport. 

Australia

Notable transactions

• New South Wales Treasury Corporation (TCorp) successfully priced a A$1.7b 4.75% on 20 September 2035 Sustainability Bond. TCorp saw a heavily oversubscribed orderbook landing a touch over A$6.495b, which allowed for pricing at EFP+78 from initial price guidance of 78-81bps. With fair value at launch of EFP+79.5, this implies a final greenium on the issue of ~1.5bps. The book saw a broad mix of traditional benchmark bond and ESG specific investors. A number of these were new investors both to Semis and to TCorp. ANZ acted as a Joint Lead Manager on the deal.
  
  
• Queensland Treasury Corporation (QTC) successfully priced a A$2.75b 4.75% on 2 February 2034 Green Bond. A ~A$6b orderbook allowed for pricing at EFP+52 from initial price guidance of 52-55bps. With fair value at launch of EFP+53, this implies a final greenium on issue of ~1bp. ANZ acted as a Joint Lead Manager on the deal.
  
  
• ACEN Australia secured a total of AU$150m green term loan from ANZ and Westpac to support Australia’s energy transition. The green term loan will bolster the company’s efforts to expand its renewable energy project pipeline in Australia beyond its home country, the Philippines. ACEN has grown its Australia portfolio to more than 1 GW capacity of large-scale renewable energy generation with an additional development pipeline of more than 13 GW of solar, wind, battery, and pumped hydro projects across the country.
  

Sustainability developments and updates from the regulatory and legal environment

• Australia’s Strategy for Nature 2019 – 2030 has been updated by the Department of Climate Change, Energy, the Environment and Water to set ambitious targets on nature and will contribute to the goals of the Kunming – Montreal Biodiversity Framework. The stated priority areas for national action under the strategy are:
  
  
  • Protect and conserve 30% of Australia’s land and 30% of Australia’s oceans by 2030
    
  • Work towards zero new extinctions
    
  • Effective restoration of degraded terrestrial, inland water, marine and coastal ecosystems
    
  • Tackle the impact of invasive feral species
    
  • Build a circular economy and reduce the impact of plastics on nature
    
  • Minimise the impact of climate change on nature
    
• The Department of Finance released its Climate-related financial disclosure: exposure draft legislation (Draft), proposing amendments to the Corporations Act 2001 that will establish mandatory disclosure requirements for Commonwealth entities and companies in relation to climate-related risks and opportunities.
  
  
  • The amendments seek to establish mandatory sustainability reporting obligations for financial years commencing between 1 January 2025 and 1 July 2027 with entities subject to the regime and respective reporting year under three categories, based on their consolidated revenue, gross assets, and number of employees.
    
    
  • Limited assurance for Scope 1 and Scope 2 emissions as well as directors' declaration will be required for the reports.  The Auditing and Assurance Standards Board (AUASB) is required to set out a pathway to establish assurance across all climate disclosures as of 1 July 2030.
    
    
  • The proposed regime will be governed by familiar liability frameworks under common law, the Corporations Act and the ASIC Act.  The Draft included a three-year modified liability regime which provides reporting entities with immunity between 1 July 2024 and 30 June 2027 in respect of civil claims made by private litigants.  Noticeably, the immunity is limited to disclosures in respect of Scope 3 GHG emissions and scenario analysis only.
    
• The QLD Government has released its 2023 Sustainability Report which communicates the State’s approach to managing risks and opportunities of transitioning to a low carbon economy. The report outlines the four key areas of management, strategy, risk management, and metrics and target setting which will be utilized to manage sustainability risks. The report also details specific funding programs and projects which will address sustainability related risks and allow the state to capitalize on opportunities arising from the transition towards a low emissions future. The priority areas to address as identified by the QLD Government are listed below:
  
  
  • Environmental
    
    • Climate change (transition and physical)
      
    • Natural capital
      
  • Social
    
    • More jobs in more industries
      
    • Better services
      
    • Protecting Queensland’s lifestyle
      
  • Governance
    
    • Economic and Fiscal Performance
      
• The Environmental Protection and Biodiversity Conservation (EPBC) Act 1999 is being updated to address declining environmental indicators and climate impacts, aiming to rebuild community trust. Key proposed updates include establishing an independent national environment protection agency - Environment Protection Australia and implementing National Environmental Standards which will improve environmental protections and guide decision making. The perspectives and knowledge of First Nations people will also be integrated into the National Environmental Standards by conducting First Nations engagement and participation in the decision making.
  

New Zealand

Notable transactions

• NZD300m Green Bond for Meridian Energy – Meridian Energy issued NZD300m, unsecured, unsubordinated fixed rate green bonds on 13 March. The proceeds intend to finance or refinance renewable energy and energy efficiency projects and assets that meet the eligibility criteria as set out in Meridian’s Green Finance Framework (February 2023). ANZ acted as Joint Lead Manager for this transaction.

Sustainability developments and updates from the regulatory and legal environment

• Fast-Track Approvals Bill – The New Zealand Government introduced the Fast-track Approvals Bill (“the Bill”) on 7 March 2024 to facilitate the delivery of infrastructure and development projects with regional or national benefits. The Bill provides a fast-track consenting option for projects that require one or more of a range of approvals including a resource consent and notice of requirement under the Resource Management Act (“RMA”), authority under the Wildlife Act 1953, approvals under the Conservation Act 1987 or the Reserves Act 1977, and a proclamation under section 26 of the Public Works Act 1981 to take or deal with land. It reduces the power of expert consenting panels, which will now only have the power to draft conditions and provide recommendations, in contrast to its previous ability to decline projects. Ultimate decision authority has shifted to the Ministers of Infrastructure, Regional Development and Transport.
  
  
• Climate Change Commission’s NZ ETS Advice – In its annual advisory report on the “New Zealand Emissions Trading Scheme (NZ ETS) Unit Limits and Price control Settings”, the Commission has recommended a significant reduction in auction volumes to ensure NZ is on-track to meet its national and international climate commitments.
  
  
  • The report contains an analysis highlighting that combined total of units available exceeds the level of allowed emissions from NZ ETS sectors under the NZ ETS emissions cap, with a large portion of the surplus units attributable to a significant increase in units allocated to registered forestry.
    
    
  • The Commission further advised that the Government should issue clear statements about its goals for reducing greenhouse gases and goals for using forestry to absorb some emissions to restore market and investor confidence in the NZ ETS.
    
    
  • On 20 March, the first auction of 2024 partially cleared at the floor price of $64 in the first successful sale of units since December 2022. Just under 3 million units were sold to 16 participants for ~NZD190 million, meaning another 550,000 units went unclaimed, at 2.1% below the most recent secondary market price.
• EPA Ban on “Forever Chemicals” – The Environmental Protection Agency (“EPA”) has banned the use of per– and polyfluoroalkyl substances (“PFAS”) in cosmetic products. From 31 December 2026, cosmetics containing PFAs will no longer be able to be made in, or imported into, New Zealand and after a one-year grace period, they will be banned permanently, making New Zealand one of the first countries to enact a ban on PFAS.  PFAS include about 10,000 synthetic chemicals that are used to repel water or dirt and do not break down in the environment, causing negative flow on effects for both the natural world and human health.
  
  
• Landmark Climate Litigation – The Supreme Court of New Zealand has overturned - on a case brought by climate activist and Māori elder Mike Smith against a group of New Zealand’s largest corporate greenhouse gas emitters. Smith’s claim seeks to establish civil liability for those emitters’ contributions to climate change, arguing that these contributions had a negative impact on his family’s and tribe’s land, water and cultural values. With the Supreme Court decision, Smith has won the right to present his full case before the High Court.
  
  
• The Aotearoa Circle, a public-private sector voluntary initiative to restore NZ’s natural capital, announced its 2024 Rangatahi Advisory Panel (“RAP”) at Parliament on 10 March. The RAP is formed of employees under 30 years old from The Aotearoa Circle’s Leading Partners and has three main objectives:
  
  
  • To hold to account The Aotearoa Circle’s Guardians and Leadership Groups of our workstreams;
    
  • To provide learning and development for Rangatahi employees of Leading Partners, and;
    
  • To advise Leading Partners on a key piece of work each year.

Bella Sigley was appointed to represent ANZ on the RAP for 2024, pictured on the left with the Minister for Climate Change, Simon Watts, and Hinera Parker (RAP representative at Genesis Energy Limited where she works as a Community Engagement Coordinator).

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Asia

Notable transactions

• US$2b The Export-Import Bank of Korea (“KEXIM”) Sustainability Bond: KEXIM priced a USD 2bBN 3/5/10-year Fixed Rate SEC-Registered Senior Unsecured transaction, with the 3-year tranche designated for eligible projects defined under its Sustainable Finance Framework on 5 Jan 2024. Kexim will use the proceeds to finance or refinance new and existing projects or assets related to renewable energy, energy efficiency, clean transportation, pollution prevention and control, sustainable marine transportation, and sustainable water and wastewater management. The proceeds of the 5-year and 10-year conventional bonds are earmarked for general operations, including extending foreign currency loans and repayment of maturing debts and other obligations. ANZ, BNP Paribas, HSBC, J.P. Morgan, MUFG and Standard Chartered are the joint bookrunners and lead managers for the transaction, while Korea Investment & Securities acted as a lead manager.
  
  
• S$800m Housing Development Board Green Bond –  (the “Notes”) under its S$32b Multicurrency Medium Term Note ("MTN") Programme on 23 January. The Notes have a coupon of 2.977% per annum, payable semi-annually in arrears and are rated AAA by Fitch. The net proceeds of the Notes will be used to finance or refinance Eligible Green Projects under the Project Category of Green Buildings as set out in HDB’s Green Finance Framework. The Joint Lead Managers and Bookrunners are Australia and New Zealand Banking Group Limited, Bank of China Limited, Singapore Branch, The Hongkong and Shanghai Banking Corporation Limited, Singapore Branch and Standard Chartered Bank (Singapore) Limited.
  
  
• US$400m Rizal Commercial Banking Corporation Sustainability Bond – Rizal Commercial Banking Corp. (RCBC) raised on Jan. 10 a fresh issue of sustainability bonds worth $400m, amid overwhelming demand from overseas investors. Bond holders were comprised of asset managers (78 percent), banks (13 percent), official institutions, insurance and pension funds (6 percent) and private banks, security firms and brokers (3 percent). Australia and New Zealand Banking Group Ltd., Citigroup Global Markets Ltd. and SMBC Nikko Securities (Hong Kong) Ltd. acted as joint bookrunners for the deal.
  

Sustainability developments and updates from the regulatory and legal environment

• Singapore:
  
  
  • Singapore to Introduce Mandatory Climate Reporting Beginning 2025 – Singapore will implement mandatory climate-related reporting requirements for listed and large non-listed companies, with obligations for some to begin disclosing in line with the IFRS’ International Sustainability Standards Board (ISSB) standards.
    
    
    • The new climate reporting obligations will be implemented in a phased approach, beginning with listed companies in 2025, followed by large, non-listed companies, defined as those with at least $1 billion in revenue and $500 million in assets in 2027.
      
    • The specific obligations for each group will also be phased in over time, with listed companies required to report on Scope 1 and 2 emissions in the first year, and on Scope 3, or value chain emissions, in 2026, and to obtain external limited assurance on Scope 1 and 2 GHG emissions two years after beginning reporting. Large non-listed companies will follow a similar timeline, although Scope 3 reporting will begin for these companies no earlier than 2029.
      
• Philippines:
  
  
  • Philippine central bank launches sustainable finance taxonomy – The central bank of the Philippines has published a sustainable finance taxonomy that excludes fossil fuels but includes the use of carbon capture, utilisation and storage as an ‘enabling’ activity. The ‘guidelines’ cover priority sectors including energy, transport, waste, industry, agriculture, forestry and other land use, and coastal and marine resources.
    
    
  • A ‘traffic-light system’ is used to denote whether an activity is aligned (green) with the taxonomy’s objectives of climate change mitigation and adaptation, partially aligned (amber) or not aligned (red). The taxonomy is consistent with the regional ASEAN Taxonomy for Sustainable Finance. 
    
    
  • The Bangko Sentral NG Pilipinas said its Monetary Board approved the adoption of the taxonomy following consultation last year. It has opened an ‘observation period’ until the end of this year to give banks ample time to adopt the framework.
• Indonesia:
  
  
  • On 20 February 2024, the Indonesian Financial Services Authority (OJK) updated its “Indonesian Taxonomy for Sustainable Finance” (TKBI) with the aim to be “interoperable with other taxonomies” while “supporting national interests”.
    
    
  • The TKBI aligns with the ASEAN taxonomy, which was updated in March to include technical screening criteria for two more sectors - Transportation & Storage and Construction & Real Estate. The TKBI categorizes activities according to four broad Environmental Objectives – climate change mitigation, adaptation, ecosystem and biodiversity protection, and transition to a circular economy. Like the Singapore taxonomy, the TKBI includes provisions for financing aimed at accelerating the closure of coal-fired power plants (CFPP). This approach is designed to support Indonesia’s efforts to retire coal plants in line with the Just Energy Transition Partnership (JETP) and Energy Transition Mechanism (ETM) plans, despite their limited progress to date.
    
    
  • Under the new taxonomy, an investment in so-called captive coal power plants, off-grid systems developed and managed by industries for their use, is labelled “Amber” as long as it meets certain criteria: The captive plants must be built before 2031, be shut down before 2050, and commit to cut their GHG emissions by 35% within 10 years since operation from 2021's average.  It marks an improvement over the previous Indonesia Green Taxonomy by clearly demarcating activities into three categories: “green,” “transitional,” and “doesn’t meet criteria” for activities that do not meet the standards.
    
• Hong Kong:
  
  
  • Hong Kong regulators to develop roadmap for adopting ISSB standards: The Green and Sustainable Finance Cross-Agency Steering Group, led by the Hong Kong Monetary Authority and the Securities and Futures Commission, announced on 8 January 2024 that it would develop a roadmap for adopting the sustainability disclosure standards from the International Sustainability Standards Board (“ISSB”) for the Hong Kong market. The roadmap will focus on sustainability reporting, assurance, data and technology, and capacity building.
    
• Mainland China:
  
  
  • Three major stock exchanges in China — the Shanghai Stock Exchange, the Shenzhen Stock Exchange and the Beijing Stock Exchange — have announced new draft sustainability reporting guidelines. Under the draft guidelines, large listed companies would be required to report on ESG matters, including initiatives to mitigate climate risks, protect biodiversity, use energy efficiently, and to ensure the integrity and resilience of supply chains. The relevant companies are expected to submit their sustainability reports for the first time in 2026.
• Taiwan:
  
  
  • Taiwan Stock Exchange revises sustainability regulations for listed companies in response to the publication of a roadmap in August 2023 by Taiwan's Financial Supervisory Commission. The Exchange requires listed companies with a paid-in capital of less than NT$2b (~USD 62.8b) to publish their sustainability report that aligned with ISSB disclosure standards starting from 2025. Over the next three years, companies of various sizes will be obligated to disclose their carbon reduction goals, strategies, and action plans in order to enhance the transparency of their climate-related information, following a predetermined schedule.
    
• Japan and South Korea:
  
  
  • Japan and Korea will be releasing draft sustainability disclosures standards in the coming months, which are expected to be aligned with the ISSB standards. Japan’s standards are expected by the end of March 2024, and Korea’s standards are expected by the end of April 2024.

Europe/The UK

Sustainability developments and updates from the regulatory and legal environment

• The Corporate Sustainability Reporting Directive (CSRD) has taken effect this quarter, requiring all large companies falling under CSRD to comply for financial years starting from 1 January 2024. EU and non-EU companies meeting certain thresholds are required to file annual sustainability reports alongside their financial statements.
  
  
  • Although the CSRD includes provisions for adopting sector-specific European Sustainability Reporting Standards (ESRS), the decision to postpone the ESRS adoption was reached by the European Parliament and the Council in February 2024.
    
    
  • Consequently, the deadline for adopting these standards has been extended from mid-2024 to mid-2026, granting companies additional time to adhere to the overarching CSRD standards and alleviating administrative reporting burdens.
    
• The EU has agreed the text for regulating providers of ESG ratings and will review whether to extend the regulation to cover providers of ESG data products. The regulation will require organisations wanting to provide ESG ratings to become authorised and supervised by the European Securities and Markets Authority (ESMA). The new rules aim to strengthen the reliability and comparability of ESG ratings by improving the transparency and integrity of the operations of ESG ratings providers and preventing potential conflicts of interests.
  
  
• The UK announced that the government intends to regulate the provision of ESG Ratings, where these assessments of ESG factors are used for investment decisions and influence capital allocation. A full consultation response and legislative steps are expected to follow later in 2024.
  
  
• France revised its Socially Responsible Investment (SRI) label to strengthen environmental criteria effective from 1 March 2024, excluding entities engaged in certain sectors to ensure that Paris Agreement aligned transition plans are in place. The French Ministry of Economy and Finance believes that the new version of the SRI label will be simpler and more effective, help investors consider environmental transformation, and provide entities with opportunities for decarbonization financing.
  
  
• In the UK, Biodiversity Net Gain (BNG) requirements became law under the Town and Country Planning Act on 12 February for larger sites and on 2 April for smaller sites. The regulation requires all new building projects to deliver at least a 10% improvement in biodiversity or habitat, ensuring a measurably positive impact (‘net gain’), compared to what was there before development. Within the biodiversity gain hierarchy, if developers cannot preserve or create habitats on-site, or off-site, they can instead buy biodiversity credits.
  
  
• The UK Financial Conduct Authority’s consultation process in relation to the anti-greenwashing rule has closed in January 2024. The rule comes into effect from 31 May 2024, with finalised guidance expected to be published in early 2024. The rule will require that all FCA-authorised firms ensure sustainability-related claims about their products and services are fair, clear and not misleading. 

USA

Notable transactions

• US$649m Green Project Finance Loan for Longroad Energy – ANZ committed to the loan, which is supporting the development of a renewable energy project in Arizona (“Serrano”).  Net proceeds of the green loan will be used to finance the construction and operations of a 220MW solar farm and 214MW battery storage facility in Pinal and Pima Counties. One hundred per cent of the project’s total output will be purchased by Arizona Public Service (APS) via a long-term Power Purchase Agreement (PPA), which is enough to power 61,000 homes.  Key sponsors behind Longroad Energy include New Zealand Superannuation Fund, Infratil Limited, MEAG (the asset management arm of Munich Re) and Longroad Management.

Sustainability developments and updates from the regulatory and legal environment

• On 6 March 2024, the SEC finalised its long-awaited climate-related disclosure rule, which required publicly-traded companies to report on certain climate-related information within registration statements and periodic filings, inclusive of GHG emissions, climate-related risks, risk management processes and transition plans.  Subsequently, on 4 April 2024, the SEC used its discretion to pause the implementation of the rule, given a pending judicial review by the US Court of Appeals to focus on deciding the merits.  The SEC advises it will continue to “vigorously defend” the validity of the rule and believes the rule is consistent with applicable laws and within its authority.

ANZ news and updates

As a global bank committed to supporting sustainable finance market growth, ANZ is working with customers to help them transition to net zero emissions by 2050. ANZ’s sustainability highlights for the quarter include:

ANZ Research and publications

• ANZ Modern Slavery Statement 2023.
  
  
• ANZ Hydrogen Handbook 2.0.
  
  
• ANZ Institutional released “The Future of the Global Supply Chain: More Sustainable, Responsible and Resilient”, an update on the version shared in early 2022. This report focusses on the new drivers of change for global supply chains, including technology and digital transformation, macroeconomic and geopolitical considerations, climate change and the global push to decarbonize, changing regulatory developments and importantly the evolving client requirements in this space.
  
  
• ANZ Research published Commodity Call: year ahead for ACCU market and Commodity Call: Carbon Compliance.
  
  
• ANZ Research published NZ carbon market: NZU auction Q1 2024.
  
  
• ANZ Research published Commodity Call: out with old commodities, in with new.
  
  
• ANZ Research’s “Australian Macro Weekly” on 8 March 2024 included Australia’s quarterly greenhouse gas emissions report (page 3 and 4).

ANZ Sustainability news

• ANZ wins IFR Asia 2023 Awards for ESG House as well as Australia/New Zealand Bond House.
  
  
• ANZ bluenotes published “Break Down the Barriers” in relation to gender pay gap, featuring stories shared by Deborah Garnier, CFO at Built Complete as well as ANZ’s initiatives to close the gaps.
  
  
• The LPx Asia 2024 - Private Markets Summit took place in Singapore bringing together institutional investors and family office representatives looking to private markets investing. Stella Saris Chow, Head of Sustainable Finance International at ANZ, moderated a panel discussion on topics around building climate-conscious investment strategies that contribute to global sustainability while pursuing returns.

Sustainability reading

• The NSW Productivity Commission released a report on the societal impacts of Sydney’s Housing Affordability challenges.
  
  
• In the UK, the Climate Change Committee’s (CCC) verdict on the third national adaptation programme (Nap3) highlighted a lack of credible plans to bolster resilience against extreme weather events. Despite being an improvement over previous efforts, Nap3 was deemed inadequate, with the government failing to prioritize adaptation and to coordinate efforts between departments.
  
  
• The European Environment Agency (EEA) has published the first ever European Climate Risk Assessment (EUCRA) to help identify policy priorities for climate change adaptation and for climate-sensitive sectors. According to the assessment, Europe’s policies and adaptation actions are not keeping pace with the rapidly growing risks. The assessment identified gaps in knowledge and policy implementation, emphasizing the necessity for closer cooperation among EU member states to address climate risks effectively.