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Market Wrap

ESG Wrap — Emissions from Action speak louder than words, CLOsing-in on ESG standards

9fin team's avatar
  1. 9fin team
5 min read

This is the weekly ESG Wrap, which highlights Featured 9fin ESG content, such as TLDRs for all deals, news stories that have interested the ESG team this week, and 9fin ESG product updates.

9fin Featured Content

Action Retail — ESG QuickTake (9fin) (13/04/2023)

TLDR: Action Retail’s emissions reduction targets are not SBTi-verified, but the Dutch retailer is on track to meet its 2030 target. Action Retail states that 90% of its cotton and 92% of its timber are sustainably sourced, however, its definition of ‘sustainably sourced’ lacks specificity. The company shows good engagement with its suppliers, and conducts audits, spot checks, and mapping to ensure social and environmental compliance.

Envalior — ESG QuickTake (9fin) (12/04/2023)

TLDR: DSM Engineering Materials privately placed its TLB on 31 March 2023 to support its carve out from Royal DSM and merger with Lanxess to form Envalior. Our ESG QuickTake highlights ESG considerations for DSM Engineering Materials and Lanxess. Lanxess has an SBTi-verified 1.5ºC-aligned carbon reduction target, and is on track to meet its emissions reduction targets. Lanxess and DSM Engineering are exposed to litigation and reputation risks due to the presence of hazardous and forever chemicals in their product offerings. Royal DSM is exposed to biodiversity risks in its supply chain, with 34% of sites located in or adjacent to protected areas. Lanxess reports that it has no sites located in biodiversity sensitive areas.

ESG CLOs — New template and guidelines emerge (9fin) (06/04/2023)

Many US CLO managers have been incorporating ESG criteria in their investment decisions, without any standardised tools to do so or classifications to use when marketing their end product to investors. But a new model from Europe, as well as efforts to implement a standardised credit ESG framework, could be changing that.

HY Company News

High level load shedding to continue after Medupi unit breaks (14/04/2023)

Eskom will reduce electricity supply in South Africa by 6,000 megawatts until further notice after a generation unit at one of its newest coal-fired power stations broke down. This means blackout for as much as 12 hours a day. It is one of two giant coal-fired plants that have been under construction for more than a decade. 

News Stories

Climate Bonds Initiative launches certification scheme for corporate transitions, SLBs (14/04/2023)

The Climate Bonds Initiative (CBI) has extended its certification scheme to companies and sustainability-linked bonds, as part of its aim to increase trust in the market and address credibility issues. The scheme offers two levels of certification. One covers entities and bonds that are aligned with 1.5C pathways or already at or close to net zero. The second is for those that will be aligned by 2030. Certification will be provided to firms with transition plans that meet these pathways, or to SLBs with aligned climate targets. Sean Kidney, CEO of the CBI said that the standard was not intended to be in competition to SBTi-certification. He said “the direction of travel is collaboration between SBTi, ourselves, the Transition Pathway Initiative and others”.

EU regulators propose DNSH ‘safe harbour’ for ESG fund disclosures (13/04/2023)

European asset managers can choose to be exempted from reporting against some sections of the Do No Significant Harm (DNSH) framework when making fund-level ESG disclosures as required under the Sustainable Finance Disclosure Regulation (SFDR). The DNSH framework is used to ensure that sustainability-themed investments do not come at the expense of harms to other environmental or social objectives and is also a requirement of the EU taxonomy. But DNSH rules under the SFDR are notably different from those under the taxonomy. The proposed optional “safe harbour” for the SFDR is seen as a short-term workaround until the diverging concepts of DNSH within the taxonomy and SFDR can be aligned.

Cement SLBs set to rise, says Sustainable Fitch (12/04/2023)

As pressure mounts on the cement industry to decarbonise, Sustainable Fitch says that sustainability-linked bonds are set to become an important part of financing cement companies’ transitions. Cement producers rely on debt markets to fund operational and technological changes, it said, which means sustainability-linked bonds, or other labelled bond issuances, are likely to increase. While currently only a few producers, such as Holcim and HeidelbergCement have issued sustainability-linked bonds, this is likely to change, Sustainable Fitch said. High yield companies in the cement industry can found here.

Wall Street’s Biggest Banks Failing Key ESG Test in Fresh Study (12/04/2023)

An analysis by Ceres and the Transition Pathways Initiative has found that JPMorgan Chase & Co.Bank of America Corp.Citigroup Inc.Goldman Sachs Group Inc.Morgan Stanley and Wells Fargo & Co. have yet to align their oil and gas financing goals for 2030 with a scenario that keeps global warming within the critical threshold of 1.5C. “Our analysis highlights just how difficult it is for banks and their stakeholders to assess and compare how much progress they’re making on real oil and gas emissions reductions,” said Blair Bateson, director of the Ceres Company Network at Ceres. “And it goes beyond these six banks.”

Investors Seek to Tap Millions in Biodiversity Credits From New UK Project (03/04/2023)

A new financial experiment is currently underway in Puddington Moor: a project allowing investors to generate revenue in return for restoring the natural environment. The plot is one of the UK's first habitat banks, an area of land whose managers are committed to helping restore and protect nature. Ecologists assess and quantify that change, which is then packaged into tradeable units and sold as credits. A new law taking effect in November requires developers in England to show they can deliver a 10% net gain in biodiversity in order to get planning permission. The new market will help meet the government’s goal of growing annual private investment in nature to £1bn by 2030. 

Regulatory Round-up

ESAs propose amendments to extend and simplify sustainability disclosures (12/04/2023)

The three European Supervisory Authorities (ESAs) have published a Consultation Paper with amendments to the Delegated Regulation of the SFDR. The ESAs are proposing changes to the disclosure framework to address issues that have emerged since the introduction of SFDR. This proposals include extending the list of universal social indicators for the disclosure of principal adverse impacts (PAIs), refining the content of other indicators for adverse impacts and adding product disclosures regarding decarbonisation targets. Moreover, the ESAs propose further technical revisions to the SFDR, including improving the disclosures on how sustainable investments “do not significantly harm” the environment and society and simplifying pre-contractual and periodic disclosure templates.

Products Hints and Tips

Check out our brand new Sustainable Development Goal (SDG)-alignment frameworks that are now published alongside QuickTakes for every new deal in the market. Our framework assesses whether a company has identified priority SDGs and implemented a statement of support, targets, actions, progress, or engages with suppliers to achieve them. See Action Retail’s SDG Alignment Framework here (if you are not a client you can request Action Retail's SDG Alignment Framework).

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