French non-profit Reclaim Finance has identified the investors who participated in oil and gas major TotalEnergies’ latest US$4.25 billion bond issuance. By financing TotalEnergies this way, the investors – who included BlackRock, Vanguard and BNP Paribas – helped the company finance the development of new oil and gas projects on a very long-term basis (until 2064), which is incompatible with limiting global warming to 1.5°C, Reclaim Finance argued. The three-bond issuance was completed in April, and is the company’s largest since 2019, having been backed by at least 80 investors. TotalEnergies currently has plans to develop new oil and gas projects in 53 countries, including Mozambique, Papua New Guinea and South Africa. Bonds accounted for 70% of TotalEnergies’ financing sources between 2016-23. “While banks assist the company in issuing the bond, it is investors who purchase the bonds, providing TotalEnergies with fresh capital,” Reclaim Finance said. “Their new bond purchasers are turning a blind eye to the need to end support for fossil-fuel expansion and sanction companies that pursue activities incompatible with [the goals of the Paris Agreement].” TotalEnergies has also been issuing bonds with increasingly long maturities, with an average of 22 years between 2020-24, compared to six years between 2000-04. “Investors in TotalEnergies’ bonds are actively betting against the transition,” Reclaim Finance added.
Sustainable Investor
News in Brief
Octopus Energy’s generation arm has added 100 rooftop solar projects on French farms to its portfolio as part of a new investment to ramp up the firm’s green energy activity in the country. Through its acquisition of Sungen 10 from software company ELECO, Octopus will also work with the firm and local partners to build up to 100 megawatts of new rooftop solar projects at hundreds of French farms by 2030. Farmers involved in the project will have new large sheds built with solar panels on the rooftops for free – which can be used to store equipment, vehicles and hay, saving tens of thousands of euros they would have otherwise each spent building the structures themselves. The deal marks the next step in Octopus’ plans to channel €1 billion (US$1.1 billion) into France’s clean energy market by 2025 – its largest green generation market on continental Europe. Octopus now manages 13 onshore wind farms and 14 solar farms as well as rooftop solar projects across the country, with further deals in the pipeline. Octopus has also made other rooftop solar deals across Europe, including in Ireland, Portugal and the UK. “This is a win-win for farmers and Octopus Energy. Putting the roofs of farm buildings to work by installing solar panels means farmers get a free structure to store equipment and we can generate more clean power quickly,” said Alex Brierley, Co-head of Octopus Energy Generation. “Solar power is consistently one of the cheapest sources of energy we can build. These innovative small-scale projects distributed around the country shine a light on the future of renewable generation.”
Seven organisations have co-invested in a US$200 million sustainable aviation fuel (SAF) financing fund – one of two freshly launched vehicles focused on accelerating the production of the resource. Airbus, Air France-KLM, Associated Energy, BNP Paribas, Mitsubishi HC Capital, and Qantas collaborated with Burnham Sterling Asset Management to establish the Sustainable Aviation Fuel Financing Alliance (SAFFA) investment fund, in which Airbus is the anchor investor. Investments will be diversified across various SAF production pathways and regions, with the SAFFA having made its first investment in Crysalis Biosciences – a tech company dedicated to renewing US chemical manufacturing infrastructure with innovative fuel and chemical production technologies. In separate news, Spanish multinational tech firm Amadeus presented an investment proposal for Clear Sky’s debut sustainable aviation fund. Focused on SAF, carbon removal, alternative propulsion, ground operation innovation and materials recycling, the vehicle will look to catalyse the deployment of hundreds of millions of dollars across initiatives including tech companies in the venture space, project infrastructure and underlying innovations. “The journey toward sustainability in the travel industry is one we must undertake together,” said Decius Valmorbida, President of Travel at Amadeus. “We can only reach our goals collaboratively, and the potential investment outlined today is an excellent example of this approach in action … We believe solutions like alternative fuels and robust offset mechanisms will be central to the future of travel.”
Today, #AirFranceKLM, @Airbus and their partners co-invested in a Sustainable Aviation Fuel financing Fund aimed at accelerating the availability of SAF.
Find out more: https://t.co/M66yGzLheo pic.twitter.com/ErL0SLLcVP— Air France-KLM Group (@AirFranceKLM) July 23, 2024
Welsh local retirement scheme Clywd Pension Fund has reappointed private equity group Capital Dynamics to invest in clean energy projects in Wales. Through a separately managed account, Capital Dynamics will invest in low-carbon energy infrastructure under the Welsh government’s National Development Framework. The investments will contribute to the government’s target of drawing 100% of its electricity from renewable sources by 2035, Capital Dynamics said in a statement. “Re-engaging Capital Dynamics for our clean energy impact strategy in Wales reaffirms our trust in their expertise and underscores our commitment to delivering long-term, sustainable investment returns,” said Philip Latham, Head of Clwyd Pension Fund. Capital Dynamics first entered the UK clean energy market in 2010, and has since acquired 30 projects with a combined gross capacity of approximately 500 megawatts. “This clean energy investment mandate aligns closely with the newly elected UK government’s mission to reduce electricity bills, create local skilled jobs in industrial heartlands, and achieve British energy security once and for all,” said Barney Coles, Co-head of Capital Dynamics Clean Energy.
The Green Impact Exchange (GIX) has filed an application with the Securities and Exchange Commission, seeking approval as the first US stock market dedicated to the US$50 trillion-plus global green economy. GIX will list companies that make a binding commitment to set, implement, measure and achieve sustainability goals, and provide investors with transparency on their progress. Companies looking to be recognised for their sustainability pledges will be able to dual-list on GIX without giving up their primary listing, the exchange said. “Today’s filing is a major step forward for sustainable investors and capital markets,” said GIX CEO and Co-founder Dan Labovitz. “GIX will connect investors who care about sustainability with companies that are credibly committed to becoming and being sustainable.” The trading platform will be powered by ‘state-of-the-art’ technology, offering non-tiered, competitive liquidity and quoting programmes for members and market-makers. In line with the US National Market System regulation, GIX will ensure best execution for all trades directed or routed to its platform. “[Our] listing standards create accountability for companies by requiring them to have an internal governance infrastructure that supports their sustainable promises,” said GIX Co-founder Charles Dolan. “Investors can rely on GIX to distinguish between companies that are serious about sustainability and companies that are greenwashing.” In addition, the exchange will implement a ‘Return to Green’ programme, committing a portion of its gross revenue to support organisations “on the front lines” of sustainability efforts. “There’s a tremendous financial opportunity to bring together sustainable-minded investors with companies working hard to meet their environmental commitments,” commented Shiva Rajgopal, Columbia Business School Professor and GIX Advisor. “For that opportunity to be realised, there needs to be better transparency and accountability of sustainability initiatives and reporting. GIX will provide that.”
Transitioning from investing in conventional funds to sustainable ones has been found to have a minimal impact on institutional investors’ equity portfolio exposures, according to data provider Morningstar. In a new report, the group assessed the impact of switching from one type of investment to the other – using criteria such as sector, region, size and style – and found that both active and passive sustainable strategies tended to have a limited growth bias relative to their conventional peers. However, unlike passive strategies, active sustainable ones had a more varied bias across the four categories – for example, for the size factor, they showed a slight bias toward smaller market capitalisations when compared to conventional funds. Both active and passive sustainable strategies were significantly underweight in the energy sector, with bigger exposures to technology and healthcare. Investors in Europe and Asia were found to have more options for switching from conventional to sustainable funds without significantly changing their portfolio exposures, Morningstar observed. “Investors often express concerns about the implications of substituting conventional investments with sustainable options in their portfolios,” said Ronald van Genderen, Senior Manager Research Analyst at Morningstar. “Our study confirms that switching to a more sustainable investment profile can be achieved without significant alterations in risk exposures, [which] is because sustainable funds – whether active or passive – generally differ very little in size and style exposures to their conventional counterparts, thus providing a reassuring option for investors seeking to invest sustainably.”
Pension and insurance firms have supported a public-private blended finance model to mitigate investment risk and ramp up private finance into “green and good” infrastructure, part of a ten-point action plan from the Association of British Insurers’ Investment Delivery Forum. The new funding model aims to facilitate private investment in the UK’s critical infrastructure – specifically a national electric vehicle (EV) charging network – as well as support nuclear energy development and offshore wind investment. The model was developed in partnership with the Green Finance Institute (GFI) and benefitted from engagement by His Majesty’s Treasury’s blended-finance team, with public support – potentially from the government’s recently unveiled National Wealth Fund – to assuage concerns over initial risk in new infrastructure that private investors are unable to take on. Outlined as part of a new report, the plan also included a widening of the forum’s regional engagement plans, focusing on Manchester and the North West in 2023-24 and expanding to cover West Yorkshire, Liverpool, Wales and Scotland in 2024-25. “Members of the forum stand ready to act to accelerate the nation’s investment into green and good infrastructure,” said Rhian Mari-Thomas, CEO of the GFI. “This will deliver growth, jobs and help us meet our net-zero targets. The work done on new funding models, such as the EV chargepoint programme, are essential to facilitate the flow of private capital into the green infrastructure transition, and a number of members see nuclear as an attractive investment.”
It was a privilege to attend the Chancellor’s roundtable on Pension Investment this morning. The timing was perfect as today we've launched a 10-point action plan to support our sector channel more investment into large-scale infrastructure across the UK. https://t.co/He7CYm6UdA pic.twitter.com/RRyXn6dEQ6
— Hannah Gurga (@Hannah_Gurga) July 22, 2024
A group of investors, NGOs and religious groups have teamed up to call on companies in the agriculture and apparel sectors to tackle violence and harassment in their supply chains. Led by the World Benchmarking Alliance (WBA), the Collective Impact Coalition (CIC) aims to drive change in companies to accelerate the recognition, prevention and redress of violence and harassment in global apparel and agricultural sectors. The group has a strong focus on women and girls, who it says disproportionately experience workplace violence and harassment. According to the WBA, around 60% of garment workers and 43% of agricultural workers were female. The CIC calls on companies in both sectors to introduce a range of practices that implement and build on existing commitments. The call to action includes setting targets, assessing risks in supply chains, and integrating and acting on the findings of risk-assessment processes. While the majority of companies have policies on violence and harassment at work, the WBI found a number of gaps on enforcement. Only 5% of companies disclosed that they identified violence and harassment as a salient risk; 10% required suppliers to provide training to their managers and workers; and only 20% required suppliers to have a remediation process to address violence and harassment grievances. Signatories of the CIC include Boston Common Asset Management, Impax Asset management, Oxfam and the Interfaith Centre on Corporate Responsibility, and investor group representing asset owners and managers.
David Cox has been named as the new Head of Greenbank – Rathbones’ specialist ethical, sustainable and impact investment team – taking over from founding member John David, who will retire later this year. David has been leading Greenbank for 15 years and played a pivotal role in developing it since launch in 2004. Under his tenure, Greenbank grew significantly, with assets under management currently standing at £2.3 billion (US$2.97 billion). David also played a pivotal role in Rathbones’ Responsible Business, Responsible Investment and Stewardship committees, supporting the development of the group’s approach to sustainable business. Having joined Greenbank in 2023, Cox has over 20 years’ experience working in the financial services industry. He previously served as deputy chief investment officer at the Brunel Pension Partnership, spearheading the set-up and management of public-market investments and strategies. He has led award-winning initiatives in sustainable and environmental investments across asset classes, and holds the Chartered Alternative Investment Analyst (CAIA) designation, specialising in alternative asset classes and portfolio and index construction. “Looking forward, we will continue to work tirelessly with our clients on their financial and ethical/sustainable goals,” said Cox. “It is important for us and our clients that we understand the future world we are investing in. Investing sustainably is at the heart of how we think, and with our deep research capabilities, we are well-positioned to take advantage of the fantastic opportunities in the sustainable economy.”
Only 23% of the EU stock of green and sustainability bonds can claim alignment with the Green Bond Standard (GBS), which will become effective in December. New research published by sustainability and impact data provider MainStreet Partners noted that one of the key requirements to meet the GBS is for proceeds from fundraising to be allocated to projects aligned with the EU Taxonomy. Yet average alignment for assessed green bonds was 62%, while it was 21% for sustainability bonds. In total, assessed bonds represented approximately US$700 billion in assets. “Only 23% of the current stock of green and social bonds can claim accordance with the EU GBS,” said Pietro Sette, Research Director at MainStreet Partners. “This is expected to increase as both issuers and investors progressively realise the added benefits of the label, such as smoother compliance with regulation and lower reputational risk.” Eighty-three percent of GBS-eligible bonds were issued by European entities, such as Germany and France. Meanwhile, Asia-based issuers represented 9% of the eligible volume – which MainStreet Partners largely attributed to a partial overlap of local environmental taxonomies with EU requirements. From a sectoral perspective, the data provider expected manufacturing to play an “outsized positive role” in GBS-eligible bonds, representing around 5% of the total average alignment, compared to non-EU eligible bonds.
