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Sustainability

ANZ Sustainable Finance Insights, Q4 2023

Sustainable finance

2024-02-08 05:30

In this issue:

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

Quarterly highlights: Q4 2023

  1. 2023 issuance: A story of two halves

    Q1 and Q2 volumes were supported by strong green bond issuance globally (green bonds being a sub-category of GSSSdisclaimer). Overall, GSSSdisclaimer issuances in Q3 and Q4 were softer when compared to Q1 and Q2 in 2023, with volumes for 2H23 weaker by 27.7% versus 1H23. This drop in 2H volume was mainly driven by reduction in green bond issuance, but all labels bar green loans saw steep drops in H2 compared with H1.

  2. COP 28 outcome the UAE consensus

    The latest Conference of the Parties of the United Nations Framework Climate Change Conference (UNFCCC) or COP28 (COP 28) took place in Dubai from 30 November to 12 December 2023. The UAE Consensus included agreement to transition away from fossil fuels and to establish a new fund to pay for loss and damage from climate change. Included were international pledges to triple renewable energy, to double energy efficiency by 2030 and an oil and gas company decarbonisation charter. The oil and gas company decarbonisation charter was net zero scope 1 & 2 on or before 2050, near zero methane leakage by 2030 in oil and gas production and zero routine flaring of excess gas by 2030.

  3. Maturing of global regulatory systems

    Globally, regulatory systems continue to develop in line with the phased introduction of climate-related mandatory reporting. An increasing number of corporates are preparing for mandatory climate risk reporting in a growing number of jurisdictions. The International Organisation of Securities Commissions (IOSCO) released a list of good practices in the carbon market that can be adopted by regulators; the European Parliament adopted EU Green Bond Regulation, the Australian parliament passed a Nature Repair Bill, and the Monetary Authority of Singapore (MAS) released the Singapore Asia Taxonomy for Sustainable Finance.

  4. Transition financing market developing at pace

    The market for transition finance continues to take shape with the ASEAN Capital Markets Forum, MAS, the European Bank for Reconstruction and Development (EBRD) and the UK Transition Plan Taskforce all releasing further guidance/ frameworks. In Asia, several noteworthy developments are underway to promote credibility and transparency with regards to transition finance across the region, such as the Singapore and ASEAN Taxonomies encompassing a wide range of transition activities. The People’s Bank of China (PBOC) announced it was developing a transition finance taxonomy expected to be in line with the G20 Transition Finance Framework and Shanghai began trialling China’s first transition finance taxonomy on 1 January 2024. Lastly, the Hong Kong Monetary Authority (HKMA) launched a consultation on its own green taxonomy, which is expected to be expanded to include transition activities.

  5. Tackling greenwashing

    Mitigating greenwashing continues to be a key issue again for 2024, as further guidance from regulators is released to help protect market integrity in response to growing public and market participant discourse. In November 2023 the Australian Securities and Investments Commission (ASIC) announced that greenwashing is one of their enforcement priorities for 2024. Additionally, an Australian Senate Inquiry on Greenwashing is due to report by 28 June 2024, after an extension was granted to issue the final report by 31 December 2023. The Australia Competition and Consumer Commission (ACCC) released its final guidance for businesses that make claims about the environmental impact of their business, products or services, providing clarifying regulatory guidance to assist them in complying with the Australian Consumer Law (ACL). Similarly, the European Parliament and the UK Regulator FCA have both made announcements aimed at helping to stamp out greenwashing during the last quarter of 2023.

  6. Focus on nature and biodiversity

    Momentum towards capacity building on reporting and acting on evolving nature-related dependencies, impacts, risks and opportunities. The Taskforce on Nature-related Disclosures (TNFD) released guidance via TNFD In A Box, the first of three modules covering key aspects of nature-related issues.

    During early January 2024, the TNFD announced that more than 320 early adopters (comprising corporates and financial institutions) across more than 46 countries have committed to start the TNFD nature-related corporate reporting. These organisations have committed to commence making disclosures aligned with the TNFD for FY24 or FY25. The TNFD’s recommendations are anticipated to be used to shape the development of future sustainability disclosure standards as the International Sustainability Standards Board (ISSB) has announced that the TNFD recommendations will inform its future standard setting.

Market update

All market data is sourced from Bloomberg BNEF as at 31 December 2023 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 market update for Q4 2023 prepared by ANZ Research.

Graph 1: Annual GSSSdisclaimer issuance fell 14.5% in 2023 and was down 26.8% on the 2021 peak.

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Graph 2: Australia’s inaugural sovereign green bond to be issued between April and June this year.

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Graph 3: Global annual sustainable debt issuance by region

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Global update

Beyond announcements at notable events, industry associations also announced key updates aligned to the sustainability themes identified by ANZ, such as transition and nature, including the following:

TNFD

  • The Taskforce on Nature-related Financial Disclosures (TNFD, or Taskforce) worked with the Integrated Biodiversity Assessment Tool (IBAT) to provide open access to its biodiversity map. The interactive map shows nature protected areas, areas with significant biodiversity and those that are home to threatened species.

    The TNFD recommends use of the map when assessing sensitive locations as part of its guidance on the Locate, Evaluate, Assess and Prepare (LEAP) approach. The TNFD provided draft guidance for companies on how to implement its ”LEAP” disclosure framework of nature-related issues in the following 8 sub-sectors:
    • oil and gas (extractives and minerals processing sector);
    • metals and mining (extractives and minerals processing sector);
    • forestry management and pulp and paper products (renewable resources and alternative energy sector);
    • food and beverage (food and beverage sector);
    • electric utilities (infrastructure sector);
    • chemicals (resource transformation sector);
    • pharmaceuticals (health care sector) and
    • aquaculture (food and beverage sector).
  • In addition, the Taskforce released its TNFD In A Box guidance, the first of three modules covering important aspects of nature-related issues.

  • In January 2024, a cohort of TNFD 320 early adopters were announced. These organisations have committed to start making disclosures aligned with the TNFD by FY24 or 25. TNFD’s recommendations are anticipated to be used to shape the development of future sustainability disclosure standards as the International Sustainability Standards Board (ISSB) has announced that the TNFD recommendations will inform its future standard setting.

COP 28

  • The United Nations Climate Change Conference (UNFCCC) or COP28 took place in Dubai from 30 November to 12 December. Key takeaways were:

    • UAE Consensus – An agreement was reached (dubbed the “UAE Consensus”) which included for the first-time reference to the need to “transition away from fossil fuels in energy systems, in a just, orderly and equitable manner, accelerating action in this critical decade, so as to achieve net zero by 2050 in keeping with science”.

    • NatureThe Joint Statement on Climate Nature and People The Joint Statement on Climate Nature and People was signed by 18 countries including the USA, China and the UK. The aim of the statement is to help protect and preserve biodiversity and ecosystems that are threatened by climate change and promote the use of private capital from multilateral development banks and bio-diversity funds. The statement also promotes uniformity on data sources, data collection ‘interoperability’ between metrics and methodologies and reporting frameworks.

    • Climate – Parties to COP pledged USD700m in funding to help lower-income countries address the damage from climate change. COP Presidency launched 10 principles aiming to make finance available, accessible, and affordable.

    • Renewable Energy – 118 countries (including Australia) agreed to targets to triple renewable energy capacity to at least 11,000 GW, and double energy efficiency this decade.

    • Food/Agriculture
      • 130+ countries (including Australia) signed a declaration to include emissions from agriculture and farming into national climate change plans.
      • More than 25 Food and agriculture organisations, joined forces with 3.6 million farmers to adapt to scale regenerative agriculture, accelerating transition of over 160 million hectares to protect soil and limit carbon emissions.
    • Methane – 50 oil and gas companies pledge to reach near zero-methane emissions by 2030 and to submit a plan to reach the 2030 targets by 2025. A fund was announced for methane abatement projects in emerging markets and developing economies. This group has also agreed to reach net zero operational greenhouse gas (GHG) emissions by 2050.

Carbon Markets

  • The International Organisation of Securities Commissions (IOSCO) outlined 21 ‘good practices’ that regulators could implement to promote efficiency and probity in the voluntary carbon market. The IOSCO is the organisation that connects the world's securities regulators and is recognised for setting standards for the securities sector globally. The IOSCO develops, implements and promotes adherence to internationally recognised standards for securities regulation. Further, the IOSCO works closely with the G20 and the Financial Stability Board (FSB) to set the global regulatory reform agenda.

Australia

Notable transactions

  • ANZ supported the Ground Lease Model 2 (GLM2) project, delivering affordable housing for Victorians. GLM2 is a Private Public Partnership (PPP) between the Victorian State Government and the Building Communities consortium. The Building Communities consortium, led by Tetris Capital as advisor and equity sponsor, successfully completed a Green and Social Loan with proceeds used for the Ground Lease Model 2 project. Under the Ground Lease Model 2 project, the consortium will finance, design and construct 1,370 new social, affordable, specialist disability and market rental residential dwellings across four project sites in Victoria. ANZ acted as Joint Sustainable Finance Coordinator.

  • Cbus Property conversion of AUD930m of debt facilities into Green Loans. ANZ supported Cbus Property convert AUD930m of debt facilities into green loans in line with its recently updated Sustainable Finance Framework. Cbus Property is a national award-winning integrated property investor and developer, and this transaction brings Cbus Property’s sustainable finance facilities to AUD1.585b, demonstrating the business’ ongoing commitment to embracing sustainable finance as a tool to support its sustainability objectives. ANZ acted as Joint Sustainability Coordinator.

  • QIC has successfully converted a USD300m subscription finance facility for one of its Infrastructure funds into a Sustainability-Linked Loan (SLL). This is understood to be one of the first for a subscription finance facility at a fund level for an Australian manager. The chosen targets encourage ambition for the fund through the validation of portfolio companies by the Science Based Targets initiative (SBTi), gender diversity and a GRESB (Global Real Estate Sustainability Benchmark) rating. The structure also rewards stretch ambition through the inclusion of a stretch target for demonstrating emissions reductions required to achieve the SBTi-validated target. ANZ acted as Joint Sustainability Coordinator and Joint Mandated Lead Arranger.

  • Scape successfully converted a AUD1.4b loan into a Sustainability-Linked Loan (SLL). Scape is Australia’s largest owner and operator of purpose-built student accommodation (PBSA). The PBSA provider’s 27 core fund assets across Sydney, Melbourne, Brisbane and Adelaide are bound by the SLL targets, which seek to incentivise roll-out of renewable electricity and achievement of ratings under Green Building Council of Australia’s (GBCA) “Green Star Performance” rating tool. ANZ acted as Joint Sustainability Coordinator.

Sustainability developments and updates from the regulatory and legal environment

  • The Australian Securities and Investment Commission (ASIC) announced during November 2023 enforcement priorities for 2024 to include “misleading conduct in relation to sustainable finance including greenwashing”, reflective of increasing attention around enforcement actions in response to growing concerns of greenwashing misconduct. The corporate regulator noted their intent to focus on relevant sustainable finance key areas of interest for enforcement which may include:

    • net zero statements and targets;
    • use of terms such as ‘carbon neutral’, ‘clean’ or ‘green’; and
    • the scope and application of investment exclusions and screens.
  • The Australian Competition and Consumer Commission (ACCC) released its eight principles to guide businesses that make claims about the environmental impact of their business, products or services, providing clarifying regulatory guidance to assist companies in complying with the Australian Consumer Law (ACL). It includes eight principles for trustworthy environmental claims that are consistent with the focus in the EU and UK. There is heightened awareness of ‘greenwashing’ risks arising from claims about products and services.

  • The Australian Federal Government announcements and updates:

    • Nature Repair Bill – The Australian Federal Parliament passed the Nature Repair Bill in December. The legislation creates a biodiversity credit market, to be known as a ‘nature repair market’ where landholders such as farmers, miners and indigenous peoples can create certificates as a result of protecting or restoring nature and biodiversity on their land. The Australian Sustainable Finance Initiative (ASFI) said that the nature repair market “provides a structure that will enable public private collaboration to enable increase flows of private capital to nature-positive outcomes.”

    • Nature Finance Council Launched by the Australian Government in late 2023, the Nature Finance Council (the Council) held its first meeting during December, bringing together experts in finance, business, environmental science and First Nations. A yearly work plan set by the Council’s chair and members will direct its discussions and the first work plan may be available in early 2024.

      The Council has been established with the aim to increase private sector financial flows to benefit nature, and will advise the Australian Government, through the Minister for the Environment and Water, on how to:

      • increase finance into transparent and real benefits for nature,
      • position Australia as a global leader in nature finance, and
      • commercialise credible emerging nature markets.
      The Council aims to help join policy, government programs and private capital, all of which are needed to achieve the 2030 Global Biodiversity Framework targets. ANZ’s Katharine Tapley, Global Head of Sustainable Finance of ANZ Institutional, has been appointed a serving member of the newly established Council.

    • Sustainable Finance Strategy consultation paper was released in November 2023. The release follows the commitment by Australian Treasurer Jim Chalmers in December 2022 to pursue an “ambitious and coordinated sustainable finance strategy” in 2023. ASFI stated that they “strongly support the ambition and focus” of the draft strategy:

      • Starting with climate but establishing a framework and signals that other sustainability issues will be incorporated, particularly nature and First Nations.
      • Positioning Australia to take a leadership role internationally in areas such as transition finance, nature and biodiversity and just transition.
      • Establishing Key Principles that reflect lessons learned from other jurisdictions, and industry support for an interoperable, useable, ambitious, and collaborative approach.
    • The Australian Government’s Australia's emissions projections 2023 paper on greenhouse gas emissions projections show that, compared with the legislated 2030 target of a 43% reduction on 2005 levels:

      • Under the baseline scenario, Australia’s emissions would fall 37% by 2030, being 1% above Australia’s 2021-2030 emissions budget.
      • Under the ‘with additional measures’ scenario, Australia’s emissions would fall 42% below 2005 levels by 2030, falling below the emissions budget by 1%. That is, the 2030 target is met when assessed on a budget basis.
      • GHG for nearly all sectors, including agriculture, electricity, industrial, land use, transport and waste, are projected to decline from 2023 to 2035.
      • Reductions are to come mostly from the electricity sector, this is cited as primarily due to the strong uptake of renewables facilitated by federal, state and territory policies. To meet the ‘with additional measures’ scenario, it is assumed that the share of renewable energy increases to 82% of electricity generated in Australia’s electricity grids by 2030.
  • Capacity Investment Scheme – in November, the Australian Government announced an expansion of the Capacity Investment Scheme (CIS) to target 9 GW of clean dispatchable capacity and 23 GW of variable capacity nationally, a total of 32 GW nationally. The CIS provides a national framework to encourage new investment that will support reliability in Australia’s rapidly changing energy market and support our energy system to reach 82% renewables by 2030. The CIS involves seeking competitive tender bids for renewable energy generation and clean dispatchable capacity projects that can fill expected reliability gaps.

  • The Australian Office of Financial Management (AOFM) published the Australian Government Green Bond Framework in December ahead of the expected debut issuance in mid-2024. The framework was developed in accordance with the ICMA Green Bond Principles and incorporating CBI Taxonomy and Climate Bond Standard and the UN SDG’s where applicable. The framework includes decarbonisation/ low carbon/ renewable technologies; nature protection, conservation and indigenous people’s cultural heritage preservation; climate change adaptation measures such as soil management and blue carbon initiatives (mangroves, tidal marshes and sea grasses) both in Australia and in developing nations.

  • The South Australian Government Financing Authority (SAFA) has released their Sustainability Bond Framework (November 2023). SAFA intends to have a 100% Sustainable bond structure over time, achieved by the issuing of any new bond or note under the Sustainable Bond Framework, and aiming to label existing bonds and notes first issued after 1 July 2018 (inclusive of any future taps of the existing bonds or notes) into a Sustainability bond under the Framework. The Framework applies government-wide and is aligned with South Australia’s ESG Commitments. A second party opinion (SPO) on the Framework confirmed its alignment with the International Capital Market Association’s (ICMA) Sustainability Bond Guidelines, Green Bond Principles and Social Bond Principles. 

  • Consultations on Australia’s Climate Related Financial Disclosures now open. The Australian Treasurer announced on 12 January 2024 that exposure draft legislation to give effect to climate-related financial disclosure requirements in Australia is open for consultation until 9 February 2024. This builds upon the Government’s final policy decisions related to Australia’s requirements for climate-related financial disclosures. Concurrently, the Australian Accounting Standards (AASB) is also consulting on draft Australian Sustainability Reporting Standards (AASB's exposure draft). AASB’s consultation concludes on 1 March 2024. The AASB will be conducting several outreach sessions to provide information on these draft standards in February 2024.
  • Blue Carbon – Australia signed up to a Blue Carbon joint action at COP28 along with Indonesia, Fiji, Japan and USA. Australian Environment Minister Tanya Plibersek said:

    “In Australia, we are determined to better protect, restore and expand blue carbon ecosystems, which are up to five times better at sequestering carbon than rainforests. We know our mangroves, saltmarsh and seagrass environments are incredibly important, for our fight against climate change, to help our ecosystems better adapt to climate pressures, and to support the livelihoods of coastal communities. That’s why we want to play our part in support these vital ecosystems at home and in the Pacific. These projects will take a community-led approach to blue carbon restoration and conservation, while increasing opportunities for private sector investment. We want to be a leader in protecting the world’s oceans for the future.”

New Zealand

Notable transactions

  • Wellington City Council secured a NZD400m Green Loan to fund the construction of the Sludge Minimisation Facility at Moa Point. ANZ acted as Mandated Lead Arranger and Joint Sustainability Coordinator.

  • NZD500m Sustainable Financing bond for LGFA – The New Zealand Local Government Funding Agency (LGFA) priced a NZD500m Sustainable Financing bond in September 2023. The proceeds intend to finance sustainable assets and activities, and incentivise Greenhouse Gas (GHG) emissions reductions as noted under LGFA’s Sustainable Financing Bond Framework (March 2023). ANZ acted as Joint Lead Manager for this transaction.

  • NZD300m Green Bond for Auckland Council – Auckland Council issued NZD300m, secured, unsubordinated fixed rate green bonds on 20 September. The use of proceeds of the offer are intended to be allocated in accordance with the Council’s Sustainable Debt Framework dated September 2023. ANZ acted as Joint Lead Manager for this transaction.

  • International Bank for Reconstruction and Development (IBRD) increased its 2 Feb 2028 sustainability bond by $500m NZD. ANZ acted as Joint Lead Manager

  • Social Impact Bond successfully completed. The Reducing Youth Reoffending in South Auckland Social Impact Bond (SIB) matured in September 2023. The SIB was issued in 2017 and funded a new set of services under a pay for outcomes mechanism with an intervention to reduce youth reoffending in South Auckland.

    An independent evaluation of the outcomes delivered to the 607 rangatahi (youth) and their whānau (families) who participated in the programme outperformed the benchmarks set for the programme delivering a lifetime social value of $9 for every $1 invested in the view of the reviewers. It achieved the goals for reduction in reoffending as well as delivering additional improved outcomes across several other areas of wellbeing. ANZ acted as Sole Arranger and Sole Lead Manager for this transaction.

Sustainability developments and updates from the regulatory and legal environment

  • Carbon credits – The New Zealand-based main carbon certification provider, Toitū Envirocare announced their exclusion of NZ carbon credits from its carbon verification programmes from early 2024. Toitū Envirocare states the NZ carbon credits are no longer aligned with global best practices in terms of integrity and transparency, and will not be assessed by the Integrity Council for the Voluntary Carbon Market in the future. This represents a major change to the voluntary carbon credit market. Within-boundary removals are still included. The NZ Carbon Units credit programme (NZUs), which are government-owned (businesses participating in the NZ ETS give the government one NZU for each tonne of emissions they produce), remain available for selling into the compliance-based local emissions trading scheme.

  • Ministry for the Environment – Our atmosphere and climate 2023” from the Ministry for the Environment and Stats NZ is published every 3 years: the latest report brings further evidence on the adverse impacts of climate change to the environment, communities, Māori interests, infrastructure and the economy, as well as biodiversity and ecosystems. Backed by an innovative digital storytelling platform, it includes four compelling stories of aforementioned adverse impacts.

  • New risk modelling released to help Aotearoa New Zealand’s pāua industry adapt to climate change. New research from the Sustainable Seas National Science Challenge supported the development of a new bioeconomic model to assess the impact of climate change of the Pau 2 fishery off the east coast of New Zealand. ANZ partnered with NIWA and the Pāua Industry Council and project lead, Terra Moana on the project.

    "To adequately understand the risks and ensure the sustainability and resilience of the pāua industry, it is vital that we collect and analyse data on these environmental changes" says Dean Spicer, ANZ New Zealand's Head of Sustainable Finance and part of the research team.

Asia

Notable transactions

  • USD940m Hyundai Mobis Green Term Loan facility – ANZ assisted Hyundai Mobis in securing sustainable funding to support an expansion of the group’s electric-vehicle (EV) manufacturing operations in the United States. The USD940m green-labelled, term-loan facility is backed by the Korea Trade Insurance Corporation, or K-Sure, the official export credit agency (ECA) of the Republic of Korea. The funding will support plans for four EV facilities in the US state of Georgia, to establish a stable EV production hub in the North American market. ANZ acted as Lead ECA Coordinator, Sole Green Loan Coordinator, Mandated Lead Arranger and Bookrunner on the deal for Hyundai Mobis Americas Inc., a fully owned subsidiary of Hyundai Mobis.

  • USD300m Bank of China Sydney Reg S Sustainability-Linked Loan Funding (“SLLF”) bond, under Bank of China Ltd.’s USD40bn MTN program. Net proceeds will be used to finance or refinance sustainability-linked loans (“Eligible SLLs”) that have been evaluated and selected by the issuer, to meet the criteria outlined in Bank of China’s sustainability-linked loan funding (“SLLF”) framework which is reviewed by ISS ESG. The Eligible SLLs are existing general corporate purposes loans that are intended to satisfy the characteristics of sustainability-linked loans and align with the Sustainability-Linked Loan Principles as published by the LMA, APLMA and LSTA. ANZ acted as a Joint Lead Manager and Joint Bookrunner.

  • ANZ acted as Placement Agent for the USD88m 4 Year Senior Orange Bond WLB Asset VI Pte. Ltd. Women's Livelihood Bond 6 for Impact Investment Exchange. Together with a USD12m first-loss tranche, the USD100m total transaction size marks the largest Orange bond issued to date. This was double in size and impact from its predecessor in the Women’s Livelihood Bond Series, a USD50m 4-year orange bond issued in 2022. ANZ has led all six issuances since the inception of the Women’s Livelihood Bond series, expected to empower >800,000 women and girls in the Global South. 

Sustainability developments and updates from the regulatory and legal environment

  • Singapore:

    • Singapore-Asia Taxonomy – The Monetary Authority of Singapore (MAS) launched the Singapore-Asia Taxonomy for Sustainable Finance (Singapore-Asia Taxonomy) – the Singapore-Asia Taxonomy sets out detailed thresholds and criteria for defining green and transition activities that are currently not green but are on a pathway to net-zero emissions and contribute to climate change mitigation across eight focus sectors: energy, industrials, carbon capture and sequestration, agriculture and forestry, construction and real estate, waste and circular economy, information and communications technology, and transportation. Providing clarity on what constitutes sustainable and transition financing will also help to reduce the risk of green or transition washing, as financial institutions will be able to identify and disclose how their financed activities and labelled products are aligned with the taxonomy. The Singapore-Asia Taxonomy is the first taxonomy globally to pioneer the concept of a “transition” category. This is in recognition of the need to properly contextualise “transition” for the Asian region.

    • Transition Credits Coalition – MAS announced the launch of the Transition Credits Coalition (TRACTION) and two pilot projects to test the use of high-integrity transition credits in transactions for the early retirement of coal-fired power plants. Supported by close to 30 members and knowledge partners across key stakeholder groups, TRACTION will study the challenges and propose solutions to scale the early retirement of The International Organisation of Securities Commissions (CFPPs) in Asia through high-integrity carbon credits. MAS announced two pilot projects to explore and test the practicality of different approaches in integrating high-integrity transition credits in the early retirement of CFPPs. The pilot projects are in collaboration with ACEN Corporation and Coal-to-Clean Credit Initiative, and the Asian Development Bank.

    • ESG in Fixed Income Asia 2023 – Held in Singapore, the ESG in Fixed Income Asia 2023 conference brought together a wide range of industry and ESG specialists and discussed current and upcoming ESG trends in fixed income, as well as the big issues and the strategies that can be deployed to further drive the growth and development of the green, social and sustainability bonds market in the region. Stella Saris Chow, Head of Sustainable Finance International, ANZ moderated a panel discussion on ESG-labelled loans.
  • China: Transition Finance

    • PBOC transition finance taxonomy- The PBOC announced in 2022 that it was developing a transition finance taxonomy that is expected to be in line with the G20 Transition Finance Framework.

    • Shanghai began trialling China’s first transition finance taxonomy on 1 January 2024. The taxonomy covers six sectors: shipping; ferrous metal smelting and rolling; petroleum processing; chemical raw materials and chemical products manufacturing; automobile production; and air transport. Shortly after the launch, Pudong Development Bank approved the first loan in line with the taxonomy – 310 million yuan (around USD43m) to Spring Airlines.

    • Hong Kong green taxonomy- the Hong Kong Monetary Authority (HKMA) launched a consultation on its own green taxonomy in May 2023. While the release of the first version is to be announced, the HKMA will expand the coverage of sectors and activities within the framework, such as including transition activities.
  • Southeast Asia: Transition Finance

    • The ASEAN Capital Markets Forum (ACMF) has recently published the ASEAN Transition Finance Guidance to address how entities may assess or demonstrate a credible transition in ASEAN to obtain financing from capital markets. It aims to accelerate the efforts of financial institutions to direct finance to transitioning companies, by standardising which companies should be the focus of such efforts; and to create incentives for real economy companies to create more ambitious and credible transition plans, through differentiating what commands a greater demand premium from investors.
  • Malaysia: ESG Reporting

    • Bursa Malaysia launches platform for mandatory ESG reporting. Malaysia’s stock exchange launched an ESG reporting platform in December 2023 for listed issuers to submit disclosures under the bourse’s enhanced sustainability reporting requirements.
  • Asia: Financing Asia’s Transition Partnership

    • FAST-P (Financing Asia’s Transition Partnership) blended finance initiative aims to catalyse up to USD5b from concessional and commercial capital providers globally. It will help finance and de-risk activities that are green or transitioning towards green and help scale-up blended finance capabilities and other similar financing schemes across Asia.

Europe/The UK

Sustainability developments and updates from the regulatory and legal environment

EU:

EU Green Bond regulation – In October 2023, the European Parliament formally adopted the regulation on European green bonds and optional disclosures for bonds marketed as environmentally sustainable and for sustainability-linked bonds (the EuGB Regulation). The aim of the EuGB Regulation is said to be to: facilitate the further development of the European market for green bonds; minimise the disruption to existing green bond markets and reduce the risk of greenwashing.

EU’s Critical Raw Materials Act – The EU announced provisional agreement of the Act in November 2023. The Commission’s proposed regulation establishes a list of 34 critical raw materials (including 16 strategic ones) and sets targets to increase the EU contribution of these substances (10% for extraction; 40% for processing and 15% for recycling). The draft agreement includes the objectives of the original proposal from earlier in 2023 and strengthens several elements. The Act reinforces the benchmark of recycling, clarifies the procedure for approving strategic projects and requires relevant companies to perform a supply-chain risk assessment on their sourcing of strategic raw materials.

CSRD delay – The European Commission proposed a two-year delay to the adoption of some features of the Corporate Sustainability Reporting Directive (CSRD) which came into force in January 2023. The CSRD requires certain companies disclose information on sustainability matters in accordance with European Sustainability Reporting Standards (ESRS). The CSRD requires the Commission to adopt, by 30 June 2024:

  1. Sector specific ESRS, which will set out the information specific to the sectors in which a company operates; and
  2. ESRS to be used by certain non-EU companies with business in the EU meeting certain thresholds.

The Commission argues the delay will allow the companies to focus on the implementation of the first set of ESRS, as well as allow more resources to be dedicated to the development of effective and proportionate sector specific ESRS and streamline the reporting requirements. Non-EU companies will need to report starting from financial year 2028 so the proposed delay gives them time to prepare for reporting under the CSRD.

  • You can read the announcement at the European Commission's website.

Environmental Crime Directive – The Council presidency and European Parliament negotiators reached a provisional agreement on a proposed EU law designed to improve the investigation and prosecution of environmental crime offences, rules which will leave companies operating in the bloc more likely to be prosecuted for environmental crimes. The directive defines environmental crime more precisely and adds new types of environmental criminal offences. It also harmonises the level of penalties for natural persons and, for the first time, for legal persons across all EU member states.

The EU Council and the European Parliament reach a provisional deal on the Corporate Sustainability Due Diligence Directive (CSDDD). The deal would require large companies operating in Europe to conduct human rights and environmental due diligence over harms in their value chains. The financial sector will initially be excluded from reporting on customer activity for the scope of the Directive, but will be required to report on their own supply chain activities.
 

Transition Financing – In November 2023, the European Bank for Reconstruction and Development (EBRD) and the Climate Bonds Initiative (CBI), (funded by the Green Climate Fund (GCF)), developed a guide for public and private sector issuers looking to finance their climate transition activities. The guide was drafted using CBI and ICMA frameworks.


The UK:

TPT Disclosure Framework: The UK’s Transition Plan Taskforce (TPT) was commissioned by the Government to” deliver the gold standard” for private sector climate transition plans. The final TPT Disclosure Framework was launched in October 2023. Following this, TPT also opened a consultation until 29/12/2023 on seven sector guidance documents. The UK Financial Conduct Authority (FCA) has signalled its intention to consult on strengthening requirements for transition plan disclosures in line with the TPT Disclosure Framework.

In January 2024, The TPT’s mandate has been extended by HM Treasury until at least 31 July 2024.

The UK announced a Transition Finance Market Review (TFMR), and this launched on 22 January 2024. You can read the Terms of Reference for the TFMR on their website
 

Scope 3 greenhouse gas reporting: In December the UK Department for Energy Security and Net Zero (DESNZ) issued a ‘Call for Evidence to gather feedback on the benefits, costs, and practicalities of Scope 3 GHG emissions reporting in the UK, including links to the government’s Streamlined Energy and Carbon Reporting (SECR) framework’.
 

Greenwashing: UK Regulator FCA Released Anti-Greenwashing and Sustainable Investment Product Rules in November 2024. The rules include criteria for use of each Sustainable Finance label, including requiring at least 70% of products assets to be invested in line with label’s objective. The anti-greenwashing rule came into effect at the end of May 2024. Borrowers will be allowed to commence using the new labels from July 2024. Ongoing product-level disclosures (including product sustainability objectives and metrics) will begin at the end of July 2025. The new labels are designed to help combat greenwashing and offer guidance for the rapidly expanding UK sustainable investment sector. Authorities hope that the measures will encourage more retail investment. The ‘anti-greenwashing rule’ applies to all FCA-authorised firms who make sustainability-related claims about products and services. The investment labels, disclosure and naming and marketing rules apply to UK asset managers.

USA

Notable transactions

  • USD1b Green Project Finance Loan for Longroad Energy - ANZ acted as the Sole Green Loan Coordinator, Joint Lead Arranger, Swap Provider and Letter of Credit Issuer for Longroad Energy's new project finance loan, which is supporting the development of a renewable energy project in Arizona (“Sun Streams 4”). Net proceeds of the green loan will be used to finance the construction and operations of a 300MW solar farm and 300MV battery storage facility in Maricopa County. 100% 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 120,000 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

  • The SEC missed the planned October 2023 deadline for release of its Climate Disclosure rule. In March 2022, the SEC announced a proposed rule that will require publicly traded companies to disclose GHG emissions, climate-related risks, effects and risk management processes within registration statements and annually (via 10-K filings). The rule has not yet been formally enacted, as debate continues over whether or not to include Scope 3 emissions. The SEC are looking to finalise the proposal around April 2024 and the new regulation will likely include Scope 3 for larger companies, following the reporting precedent set by the recently enacted legislation in California.

ANZ news and updates

As a global bank committed to supporting sustainable finance market growth, ANZ is actively 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 Sustainability news

Sustainability reading

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ANZ Sustainable Finance Insights, Q4 2023
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ANZ contacts

ANZ has a global sustainable finance team with presence in Sydney, Melbourne, Brisbane, Perth, Auckland, Wellington, Singapore, Hong Kong, London and New York.

Feedback and enquiries can be directed to ANZSustainableFinance@anz.com. See key contacts from each jurisdiction below.

 

Australia 

Katharine Tapley

Head of Sustainable Finance
T: +61 2 8937 6092
E: Katharine.Tapley@anz.com
Based in Sydney

International

Stella Saris Chow

Head of Sustainable Finance, International
T: +65 6708 2896
E: Stella.Saris@anz.com
Based in Singapore

UK and Europe

Emily Tonkin

Head of Sustainable Finance, UK and Europe
T: +44 77 7134 3112
E: Emily.Tonkin@anz.com
Based in London

New Zealand

Dean Spicer

Head of Sustainable Finance, New Zealand
T: +64 4 381 9884
E: Dean.Spicer@anz.com
Based in Wellington

United States

Sarah Ho

Director, Sustainable Finance
T: +1 646 209 8044
E: Sarah.Ho@anz.com
Based in New York

Portfolio and Analytics

Jo White

Head of Portfolio, Sustainable Finance Portfolio & Analytics
T: +61 2 8937 6062
E: Jo.White@anz.com
Based in Welliington

Glossary

ACCC
The Australian Competition and Consumer Commission

AOFM 
Australian Office of Financial Management

ASEAN
The Association of Southeast Asian Nations

ASFI
The Australian Sustainable Finance Institute

ASIC
Australian Securities and Investments Commission

Blue Carbon
Carbon captured by the world’s oceans and coastal ecosystems

CBI
Climate Bonds Initiative. A not-for-profit organisation that is developing the Climate Bonds Standard and Certification Scheme and is involved in Policy Engagement and Market Intelligence work

CBI Taxonomy
The Climate Bonds Taxonomy is a guide to climate aligned assets and projects. It is a tool for issuers, investors, governments and municipalities to help them understand what the key investments are that will deliver a low carbon economy

CEW
Chief Executive Women

CFPP
Coal fired power plant

CIS
The Australian Capacity Investment Scheme is a national framework designed to encourage new investment in renewable capacity, such as wind and solar, as well as clean dispatchable capacity, such as battery storage. It aims to help build a more reliable, affordable and low-emissions energy system in Australia

COP28
The United Nations Climate Change Conference or Conference of the Parties of the UNFCCC in Dubai in Nov/ Dec 2023

CSRD
Corporate Sustainability Reporting Directive

DESNZ
UK Department for Energy Security and Net Zero

EBRD
European Bank for Reconstruction and Development 

ESG
Environmental, Social, Governance

ESRS
European Sustainability Reporting Standards

EuGB
European Green Bond

IBAT
Integrated Biodiversity Assessment Tool

IBRD
International Bank for Reconstruction and Development

ICMA
International Capital Markets Association

IOSCO
The International Organisation of Securities Commissions

LGFA
The New Zealand Local Government Funding Agency

MAS
Monetary Authority of Singapore

SAFA
South Australian Government Financing Authority

SDG
Sustainable Development Goals

SEC
US Securities and Exchange Commission

SECR
Streamlined Energy and Carbon Reporting (UK)

SFF
The Aotearoa Circle’s Sustainable Finance Forum (New Zealand)

SLL
Sustainability-Linked Loan

TCFD
Taskforce for Climate-related Financial Disclosures

TNFD
Taskforce for Nature-related Financial Disclosures

Toitū Envirocare
New Zealand based carbon certification provider

TPT
The UK’s Transition Plan Taskforce

TRACTION
Transition Credits Coalition (Singapore)

UN
United Nations

Related articles

This publication is published by Australia and New Zealand Banking Group Limited ABN 11 005 357 522 (“ANZBGL”) in Australia. This publication is intended as thought-leadership material. It is not published with the intention of providing any direct or indirect recommendations relating to any financial product, asset class or trading strategy. The information in this publication is not intended to influence any person to make a decision in relation to a financial product or class of financial products. It is general in nature and does not take account of the circumstances of any individual or class of individuals. Nothing in this publication constitutes a recommendation, solicitation or offer by ANZBGL or its branches or subsidiaries (collectively “ANZ”) to you to acquire a product or service, or an offer by ANZ to provide you with other products or services. All information contained in this publication is based on information available at the time of publication. While this publication has been prepared in good faith, no representation, warranty, assurance or undertaking is or will be made, and no responsibility or liability is or will be accepted by ANZ in relation to the accuracy or completeness of this publication or the use of information contained in this publication. ANZ does not provide any financial, investment, legal or taxation advice in connection with this publication.

GSSS issuance data from BNEF include green bonds, social bonds, sustainability bonds, sustainability-linked bonds, green loans and sustainability-linked loans. The BNEF dataset does not include social or sustainability loans or transition labels.

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