The Australian Securities Exchange (ASX) has opened its first environmental futures contracts, as it attempts to bring liquidity to the region’s carbon markets. The contracts cover three separate regulated markets: Large Generation Certificates (LGCs), which are generated when Australian utilities produce power from renewable sources; Australian Carbon Credit Units (ACCUs), which are carbon credits issued for activities like tree planting, savanna burning and soil carbon; and New Zealand Units (NZUs) –  carbon allowances provided under that country’s emissions trading scheme. Each unit or certificate represents one tonne of carbon dioxide. The new futures contracts have been standardised, with each equalling 1,000 underlying LGCs, ACCUs or NZUs. The ASX said it would temporarily waive transaction fees to encourage participation and help build liquidity. “As Australia moves from a voluntary to compliance-led carbon market in step with other global jurisdictions, derivatives markets can play an essential role,” said ASX Head of Commodities Daniel Sinclair. “The transition to clean energy, by definition, is uncertain, and ASX-hosted Environmental Futures will be a key instrument in managing risk and supporting the net zero targets of organisations and policymakers.” Greater liquidity and the ability to hedge risk will encourage more investment to flow into Australia and New Zealand’s renewable energy and climate change mitigation programmes, Sinclair added.

Following a strong start to the year, the ESG-labelled bonds market logged a noticeable deceleration in the second quarter of 2024, according to Sustainable Fitch. In a new report, the data provider noted issuance value fell by 31% year-on-year, bringing the tally for the first half of 2024 to 14% below H1 2023. Although it is likely too early to speculate on the reasons behind such a dip, Sustainable Fitch suggested they could include increased regulatory scrutiny and requirements, macroeconomic challenges – especially in China – perceived loss of pricing advantages from labelled debt (greenium), and reduced interest from “sustainably biased” institutions. In addition, while green bond issuance dropped by 29%, it continued to represent 63% of the total issuance value for the period. “This underscores their continued appeal to investors and issuers, largely due to familiarity with this type of bond and the widely shared and accepted science-based criteria on which they are based,” Sustainable Fitch said. In comparison, sustainability-linked bonds (SLBs) had a “minimal presence” in Q2, representing just 4% of total issuance value. “[This] is likely due to scrutiny regarding their credibility and impact, as investors remain cautious about the effectiveness and transparency around key performance indicators and targets,” Sustainable Fitch said. On the ESG regulation front, nature and supply chains have taken central stage this year – with the report pointing to the EU’s adoption of the Nature Restoration Llaw and the Corporate Sustainability Due Diligence Directive, as well as the US’ Federal Supplier Climate Risks and Resilience Rule and India’s BRSR Core-framework. 

Specialist asset management boutique KBI Global Investors (KBIGI) has confirmed its Revenue Alignment SDG Scores (RASS) for 2023, which it characterised as “overwhelmingly positive”. The scores represent the contribution companies held in KBI’s suite of natural resources equity strategies are making towards achieving the UN Sustainable Development Goals (SDGs). RASS was introduced in 2017 in the absence of an agreed common approach to impact reporting or measurement. The research method involves identifying the various business activities of an investee company, classifying all revenue streams, and determining whether the activity from which those revenues arise is contributing positively or negatively to one or more SDGs. KBIGI argues it is one of few asset managers equipped with this type of capability. “Many companies still do not even attempt to report on the impact of their own operation, and for the companies that do, it has been nigh impossible to compare the results with those reported by other firms,” it said in a statement. The firm ‘natural resources’ investment strategies target “high-impact” companies creating solutions to the global shortages of clean water, energy and food, developing sustainable infrastructure, and supporting the transition to a circular economy. “We started investing in water and … the energy transition in the year 2000, so have seen the inherent source of alpha to be derived from sustainable investing over more than two decades,” said KBIGI Deputy CEO Geoff Blake. “Instead of an informed hunch that investments in these strategies contribute to the achievement of the SDGs, we can now quantify this using a replicable and transparent methodology – and provide our investors with the reassurance that their investments are contributing in a positive manner.”

King’s Business School, part of King’s College London, has published an e-book outlining key climate finance policies the new UK Labour government can implement in its first 100 days to help accelerate the country’s energy transition. The book, entitled ‘Accelerating Transition: Climate Finance Policies to Prioritise in The First 100 Days’, was edited by David Carlin – a visiting Research Fellow at King’s College London and founder of Cambium Global Solutions – along with King’s Business School academics David Aikman and Marc Lepere, and Luca Taschini of the University of Edinburgh Business School. It contains more than 30 chapters written by leading academics on a range of topics under five headings: climate risk management; data and regulation; market incentives; international finance; and the built environment. The book comes just weeks after the Labour party under Prime Minister Keir Starmer ousted the Conservatives in a general election, on a platform of much greater climate ambition. It also follows warnings from the Climate Change Committee that Britain is not on track to meet its 2030 emissions goals. “Amid the challenges of climate change and the low-carbon transition, there is a historic opportunity for the UK – the home of the industrial revolution – to become a global leader in sustainable finance,” the four editors wrote in the introduction. “Effective policies can enable the UK to transform into a net-zero financial hub, spur innovation, and promote economic growth.” Recommendations include setting up the Office of Sustainability Planning; introducing double materiality into the Sustainable Disclosure Requirements (SDRs); requiring companies to disclose potential impairments as a result of global warming; bringing the UK’s climate finance regulation in line with EU’s; and issuing the UK’s first dedicated adaptation bond.

The Association for Financial Markets in Europe (AFME) has called on the UK government to focus on better financial regulation, bolster its relationship with the EU, and tackle issues in financial services collaboratively. In a paper outlining its vision for UK capital markets, AFME welcomed the new Labour government’s focus on green growth and intention to deliver many of the country’s goals with the help of private sector finance. “However, we would also encourage the government to recognise that the financial sector’s ability to support the transition will depend to a large extent on whether the conditions are in place to enable the real economy to transition, thereby creating opportunities for finance and investment to support such activities,” the association said. One of its suggestions was to more closely link the UK Emissions Trading System (ETS) to the EU’s, noting this would help to enhance confidence in both carbon markets, reduce compliance costs for covered entities, optimise price discovery, and enable participants to manage their carbon exposure more effectively. “Critically, such linkage would negate the need for carbon borders between the UK and EU, thereby preventing carbon leakage and alleviating the significant challenges that industry is likely to encounter with the implementation of carbon border taxation,” AFME said. In addition, should the UK government choose to proceed with its own green taxonomy, AFME argued it should be voluntary, decision-useful, usable in practice, and interoperable with other key taxonomies. 

Africa50, an infrastructure investment bank established by African governments, will host its annual General Shareholders Meeting 2024 (GSM) in Antananarivo on 19 September, in partnership with Madagascar. The large international gathering will bring together global leaders, investors, policymakers, and infrastructure experts to collaborate on the action required to finance a sustainable future for Africa. Key themes unpacked throughout the event will include catalytic capital, public-private partnerships, and strategies to stimulate the adoption of clean energy solutions. Policymakers and business leaders are due to discuss how to increase investment and development for renewable energy projects, providing a roadmap to harness the continent’s renewable energy potential. Emerging financial instruments such as carbon credits, green bonds and blended finance will also be assessed to accelerate green growth and scale up the delivery of game-changing  infrastructure. “Madagascar’s tremendous solar and hydropower potential positions the Southern African nation as a prime location for infrastructure investment in renewable energy, along with attractive opportunities in agricultural exports, special economic zones and critical minerals such as cobalt and nickel for electric vehicles,” Africa50 said in a statement. “Africa50’s GSM in Antananarivo will be a unique opportunity for Madagascar to leverage its abundant natural resources to global and local investors as the country’s strategic location and rapidly growing population underscore the need for bankable projects across strategic sectors including renewable energy, logistics, agriculture, and sustainable mining.” The event will feature a panel discussion calling for Africa’s shift to the widespread uptake of cleaner cooking solutions, reducing reliance on harmful energy sources such as charcoal, kerosene and wood – which are used by more than 900 million people in Africa. The programme will also make the case for gas being used as a transition fuel for the continent’s journey towards sustainable energy use that significantly reduces carbon emissions, improves public health and lowers the impact of deforestation.