Entries for 'Sustainable Finance'

Voluntary carbon credit issuance and retirement have cooled significantly amidst integrity concerns, highlighting the need for private sector-led initiatives like the ICVCM Core Carbon Principles to be operationalized as soon as possible.

The ESG debt universe has expanded by $1.1 trillion over the past four quarters, surpassing $5.6 trillion in Q3 2023.

Rising global tensions and political divides could hinder multilateral efforts to achieve sustainable development goals. Global economic performance remains subdued, with significant regional disparities; a contributing factor has been the prolonged stagnation in global capital flows over the past 15 years amid post-financial crisis regulatory initiatives.

Our New York Climate Week events last week—which included an IIF Transition Finance Workshop, an IIF/TCW Blended Finance Roundtable, and the launch of the IIF Global Debt Monitor—focused on the changing landscape for net-zero transition planning and addressing the challenges of mobilizing capital for climate action.

Voluntary carbon credit issuance picked up significantly in Q2 2023, as the ICVCM Core Carbon Principles and Assessment Framework were launched. Greater collaboration between the supply-side ICVCM and demand-side Voluntary Carbon Markets Integrity Initiative (VCMI) will support market development and rapidly growth in demand as companies ramp up climate commitments.

Global climate flows surpassed $1.1 trillion in 2022 - up over 25% from $870 billion in 2021. However, this is still well short of what will be needed to achieve net-zero emissions. ESG stock and bond market performance improved in Q2 2023. Despite rapid growth, ESG integration in global debt markets is still at an early stage: just 6.1% of total debt issuance in Q2 2023 was ESG-linked.

The ESG debt universe (bonds and loans) hit a fresh record high of $5.4 trillion in H1 2023, up 30% from H1 2022. However new ESG debt issuance slowed to some $630 billion in H1 2023—over 15% lower than in H1 2022.

With global policymakers focused on mobilizing private capital for climate finance—particularly in emerging markets—multilateral development banks (MDBs) and development finance institutions (DFIs) are devoting more resources and capacity to catalytic capital and blended finance. Greater private sector participation could be incentivized through improved capital treatment of blended finance instruments and policy measures to help to enhance market liquidity.

Global clean energy investment continues to outpace spending on fossil fuels, largely driven by China and mature markets. While the subdued global economic outlook is weighing on commodity prices—including energy transition metals and minerals the growing push to shift to solar and wind energy should boost demand for aluminum, copper, and rare-earth minerals on the path to net-zero economy.

While worldwide efforts are being made to shift to renewables and alternative fuels, fossil fuels are still projected to be a major source of energy by the end of the century, accounting for nearly 25% of global supply; Given this continued reliance on fossil fuels, carbon capture and storage (CCS) technologies have a vital role to play in addressing climate change—but are currently projected to fall short of their potential on the path to net-zero.

The strong momentum in climate pledges and climate investment flows in recent years is encouraging… but many publicly listed firms still have business practices that are not aligned with keeping global warming < 2°C.

High and rising global debt levels have created a slow-burning crisis, with countries increasingly vulnerable to future shocks after the unprecedented surge in government debt resulting from the Covid-19 pandemic.

Early and up-front capital spending is crucial for managing the long-term costs of the energy transition; Achieving net zero emissions will require extensive investments in new and innovative technologies, with nearly half of emission reductions expected to come from technologies currently under development.

Amid tighter monetary and financial market conditions, ESG fund flows remain subdued and volatile. After large outflows in March, April saw a slight recovery in investor appetite for ESG funds. However, outflows from emerging market ESG funds accelerated in April.

The ESG debt universe hit $5.1 trillion in Q1 2023, up from $3.8 trillion a year ago and $2.3 trillion in Q1 2021. Amid the recent banking sector turmoil, ESG loan issuance fell sharply in Q1 2023, coming in at $40 billion—over 65% lower than in Q4 2022. In contrast, ESG bond issuance reached its highest level in five quarters.

The voluntary carbon markets continue to gain momentum despite financial market volatility in recent months. The proliferation of net zero targets by large corporates remains the major driver of market expansion.

At our IIF Sustainable Finance and Global Debt & Financial Stability Roundtables last week, key themes included net zero transition finance as well as the impact of higher funding costs for vulnerable sovereign and corporate borrowers.