BayernLB one of world’s most sustainable banks
Munich – BayernLB has again reached the top-10 list released by independent rating agency ISS ESG (formerly oekom research) as part of an international sustainability ranking of public and regional banks. Among the 252 scrutinised institutions, BayernLB came out in 8th place, thereby defending its top-10 positioning (as at 30 January 2020) attained repeatedly over the past years. The sustainability analysts at ISS ESG gave the Bank especially good marks for its performance in corporate governance and environmental management. Another regular on the top-10 list is BayernLB’s most important subsidiary, Deutsche Kreditbank AG, or DKB.
BayernLB has been consistently meeting the rating agencies’ tough ESG standards for many years and is one of the most sustainable banks in the world. Back in 2001 ISS ESG began awarding BayernLB its “Prime” status on a regular basis for the Bank’s above-average commitment to sustainability. This rating signals to investors that BayernLB tackles the challenges associated with ESG systematically and taps into new business potential in the process. ISS ESG is one of the most renowned rating agencies around the globe when it comes to sustainable investing. A partner to institutional investors and financial service providers, ISS ESG spots those issuers of stocks and bonds that are exceptional for the responsibility they demonstrate towards the environment and society at large.
FebrClimate Bond Initiative: Investors prefer green bonds from the real economy
Investors who buy green bonds pay particular attention to so-called green integrity, pricing and post-issuance standards when making investment decisions. This is the result of a survey conducted by the Climate Bond Initiative among the largest European fixed income managers. According to the survey, just under four out of five respondents (79%) would not buy a green bond if the proceeds from the issue of the bond were not clearly and comprehensibly used to finance green projects. If there is insufficient reporting after a bond is issued, 55% would sell the bond. The study also shows a positive correlation between the amount of greenhouse gas emitted by certain economic sectors and the interest in bonds from these sectors. Preference is given to Issuers from the real economy (93%), followed by development banks (76%) and states or quasi-governmental organisations (57%). The most popular investment sectors are energy, transport and buildings.
World Economic Forum: Climate Change Largest Global Risk
For the first time in the history of the World Economic Forum (WEF) Global Risk Report, the dangers of climate change and related environmental risks occupy the top five places among the most likely threats over the next ten years. The ranking is led by the risks of extreme weather events such as floods and extreme droughts, which are currently causing the devastating bush fires in Australia. Second most likely to occur are the failure to combat climate change, followed by natural disasters and loss of biodiversity and man-made environmental disasters.
BayernLB arranges first blue social bond for DKB
ABN Amro, BayernLB, DZ Bank, Natixis and UniCredit joined forces to place a blue social bond for BayernLB subsidiary DKB. The Pfandbrief is part of DKB’s social bond programme and fulfils both the Social Bond Principles (SBP) and the UN’s Social Development Goals (SDGs). The EUR 500 million in funds raised will be used to finance water supply and the disposal of effluents. The order book stood at over EUR 2 billion.
The social Pfandbrief is underpinned by a “blue” lending pool of EUR 1.3 billion from DKB’s social bond programme. Around 90 investors contributed to an order book that was four times oversubscribed. The blue social bond has a maturity of 10 years and a coupon of 0.01 percent. 62 percent of the bond’s subscription came from Germany, with 38 stemming from foreign investors. The share of ESG investors was 30 percent.
Institutional investors want to invest climate-neutrally
The combined pension funds and insurers within the Net-Zero Asset Owner Alliance have agreed at the climate summit in New York to make their investment portfolios, totalling USD 2.4 trillion, climate-friendly. By 2050, these portfolios are to be completely climate-neutral; the Net-Zero Asset Owner Alliance has set milestones for 2025, 2030 and 2040. In order to achieve their goal, investors are looking to persuade emitters of harmful greenhouse gases, such as coal-fired power plant operators, to switch to a more environmentally friendly production, but also to dispose of their shares if necessary.
The Net-Zero Asset Owner Alliance was initiated at the beginning of 2019 by Allianz, Caisse des Dépôts, Caisse de dépôt et placement du Québec (CDPQ), Folksam Group, PensionDanmark and Swiss Re. Since then, Alecta, AMF, CalPERS, Nordea Life and Pension, Storebrand and Zurich have come aboard as founding members. The Alliance, convened by the UNEP Financial Initiative and the Principles for Responsible Investment (PRI), is also supported by WWF. It is part of the Mission 2020 Campaign, an initiative led by Christiana Figueres, former Executive Secretary of the United Framework Convention on Climate Change (UNFCCC).
BayernInvest, a wholly-owned subsidiary of BayernLB, already announced last week at its first-ever Economics Investor Summit 2019 that it will conform all its own-managed portfolios to the 1.5-degree target set by the Paris Climate Agreement by no later than 2025 – in line with the individual customers’ investment strategies. Moreover, BayernInvest as a company itself is setting the course for climate neutrality by 2022.
Climate protection pays off
Investing in climate protection is not only necessary in view of the consequences for people and the environment, but is also economically attractive. This was the finding of a recent study by the Global Commission on Adaptation. The Commission estimates that investments of USD 1.9 trillion by 2030 in measures to adapt to climate change can generate a net profit of USD 7 trillion. The study focuses on how the economy can be protected against loss caused by climate change and, at the same time, realise opportunities. According to the Commission, this entails such measures as improving the early warning systems for natural disasters, which are becoming increasingly frequent, cultivating useful plants that are more drought-resistant, and improving flood protection.
BayernLB assists with dual tranche green hybrid bond for EnBW AG
BayernLB has acted as joint lead manager in arranging a green hybrid bond for EnBW, the proceeds of which will be used solely to fund climate-friendly projects. The rating agency ISS-oekom, which specialises in sustainability matters, has confirmed that the EnBW bond complies with the Green Bond Principles. In addition, the green hybrid bond has been certified in accordance with the high standards of the Climate Bonds Initiative (CBI). The tranches have a volume of EUR 500 million each and maturities of around 60 years.
BayernLB, ING and LBBW place record-breaking green Schuldschein for Porsche AG
BayernLB, ING and LBBW have joined forces and arranged a green Schuldschein for Porsche AG. ING furthermore served as “green advisor” in the transaction. This is not only the first green Schuldschein to be issued for an automobile manufacturer but also the biggest green Schuldschein ever. It was placed in tranches of five, seven and ten-year terms, with both fixed and variable interest rates. The investor base ended up being highly diversified, as was desired, and, thanks to the strong interest of the 100 or so investors in Germany and around the world, the originally planned amount of EUR 300 million was raised to EUR 1 billion.
Porsche AG will be using the capital towards its green finance framework project for researching, developing and producing electric cars (Porsche Taycan) and to invest in efficient factories that manufacture battery-run vehicles only. That the plans are aligned with the Green Bond Principles was confirmed by independent agency ISS-oekom.
IPCC calls for overhaul of land use
In its latest special report on the interplay between agriculture and climate change, the IPCC (Intergovernmental Panel on Climate Change) is calling for a radical reform of global land management. According to the scientists’ analyses, the land surface air temperature has already risen by around 1.5 degrees Celsius since the end of the 19th century. Just under a quarter of the greenhouse gas emissions responsible for the temperature increase comes from land use, especially forest-clearing and farming. If the planet continues to heat up, the scientists fear, food production could be so negatively impacted that supply bottlenecks ensue. The IPCC recommends drastically reducing deforestation, protecting wetlands better and moving away from meat.
Earth Overshoot Day was 29 July
Our reserves of wood, agricultural land, fish and other natural resources needed to last a whole year if the Earth is to be kept in a state of natural equilibrium, were already used up by 29 July. The date was arrived at by some number crunching by think tank Global Footprint Network.
In 2017, humanity needed another three days to consume its natural resources for the year, while the year before it was seven.
Earth Overshoot Day has been calculated since 1970. That year it fell on 29 December.
CEOs see climate change as biggest threat
Climate change and other environmental risks pose the greatest threat to company growth, according to CEOs around the world. Of the roughly 1,300 executives surveyed by KPMG in its 2019 Global CEO Outlook, 22% deemed these risks to be the most troubling. Ranking second were the resurgence of protectionism and the uncertainties associated with disruptive technologies, each considered by 18% as the biggest cause for concern.
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Global reforestation can stop climate change
Planting around 900 million hectares of forest could be an effective way of combating climate change and staying under the 1.5°C cap set by the Intergovernmental Panel on Climate Change (IPCC). This was found in a new study carried out by researchers at the science and technical university ETH Zurich. Some 2.8 billion hectares of land worldwide is currently covered by forest, and the proposed reforestation would be possible without negatively affecting cities or agricultural areas. The new forests, cumulatively around the size of the USA, could store 205 billion tonnes of CO2. That’s about two thirds of the roughly 300 billion tonnes of CO2 that humans have been releasing into the atmosphere since the beginning of the Industrial Revolution.
Finland to be carbon neutral as early as 2035
Finland is aiming to be carbon neutral by 2035 – sooner than any other industrial nation. The government is namely looking to offset CO2 and other greenhouse gas emissions mostly through absorption by its forests. Following the year 2035, Finland’s target balance will even be negative: more CO2 is to be captured and sequestered from the atmosphere than emitted by Finnish companies and private households. The 2035 target makes Finland an EU pioneer, leading Iceland, which plans to become carbon neutral by 2040, and Sweden, which wants to do the same by 2045. Germany’s target year still stands at 2050.
World Water Development Report: UNESCO criticises inadequate access to clean drinking water
According to UNESCO’s recent World Water Development Report, more than 2 million people worldwide lack safe access to clean drinking water. Half of these people live in Africa, the report states. It asserts that drinking water that meets hygiene standards is only available to a mere 24 percent of the sub-Saharan population. Moreover, only just under half of the world population has access to clean and functioning sanitary facilities. The UN’s intention, as stated in No. 6 of the UN Sustainable Development Goals (SDGs), is to have clean water and appropriate sanitary facilities available to everyone by 2030.
Netherlands issues green bond of just under EUR 6 billion
The Netherlands is the first triple A-rated nation to issue a green bond. The proceeds are intended to finance green and climate-related expenditure and capex, including projects in the fields of renewable energy, energy efficiency, clean traffic and adapting to climate change. The green bond with a volume of EUR 5.98 billion has a coupon of 0.5 percent and maturity of 15 January 2040. The order book was closed with a total volume of EUR 21.2 billion. The issue price was set at EUR 98.89, which equates to a yield at issue of 0.557 percent.
Implementing the UN sustainable development goals
Climate Action, goal no. 13 of the UN Sustainable Development Goals (SDGs), is by far the most urgent of the 17 goals the United Nations has set for itself. This is the result of a survey conducted by the SustainAbility Institute in which 454 experts were interviewed worldwide. According to these experts, the most progress in the past few years has been made in achieving goal no. 17, forming strong partnerships for sustainable development. The reason for this is the increase in cooperation between sectors and companies for the implementation of the SDGs. Non-government organisations, social entrepreneurs and the UN are deemed the most important drivers in this development, while national governments are being criticised for their inadequate engagement.
187 countries agree to new global regulation on plastic waste
Soon only sorted, cleaned and recyclable plastic waste will be eligible for global trading, as the export of lower-quality plastic scraps will require the permission of the importing countries. No fewer than 187 nations agreed to this new regulation at a UN conference in Geneva. The framework agreement is legally binding and constitutes an amendment to the 1989 international Basel Convention on controlling transboundary movements of hazardous wastes and their disposal.
World conference on biodiversity
In Paris yesterday the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (IPBES) kicked off its conference on the first assessment on global diversity to be carried out since 2005. The aim of the IPBES plenary session is to reach a global consensus by 4 May on the state of the planet’s ecosystems and the challenges and potential solutions regarding their preservation. IPBES is a multinational organisation that advises governments on scientific policy affecting biological diversity and ecosystem preservation. It works along the lines of the Intergovernmental Panel on Climate Change (IPCC).
The draft report concludes that animals and plants are becoming extinct today at a pace that is up to one hundred times higher than the average rate taken over the past ten million years. The scientists at IPBES believe that anywhere from 500,000 to one million of the estimated ten million plant and animal species are critically threatened. A major cause is the loss of wildlife habitat.
A new study backed by the EU Commission shows that protecting natural habitats is good for the economy. While protected areas, which make up around 18 percent of the EU’s land mass, incur some EUR 6 billion in costs each year, they create about EUR 300 billion in savings, according to the researchers, for example through flood protection and bee pollination.
Largest offshore wind farm in the Baltic Sea opened
The Arkona offshore wind farm, which is considered the largest wind farm in the Baltic Sea, officially went into operation on 16 April 2019. It is a joint venture between the energy supplier E.ON and the Norwegian energy company Equinor, who shared the costs of around EUR 1.2 billion. The wind farm, consisting of 60 turbines, has a capacity of 385 megawatts and can supply approximately 400,000 households with electricity.
22 countries form a climate coalition
In the fight against climate change, the finance ministers from 22 countries – among them Germany, France and the United Kingdom - have signed an agreement to promote better cooperation on climate protection and noticeably increase the cost of CO2. In the joint paper, the ministers propose various measures to reduce CO2 and other greenhouse gas emissions. These include effective emissions trading and environmental taxes proportionate to CO2 emissions. The ministers are also considering cutting subsidies for fossil fuels. According to IMF Managing Director Christine Lagarde, around USD 5.2 billion was paid worldwide in subsidies for coal, oil and gas in 2015.
EU Parliament calls for climate-neutral economy
Amid the fight to stop climate change the EU Parliament has adopted a resolution requiring a greenhouse-gas-free economy by 2050. The EU Members of Parliament deem such a transformation necessary for achieving the goals under the Paris Climate Agreement. The MEPs are also looking to cushion the social impact of this industrial transition by setting up a special fund for regions that will be especially affected by the decarbonisation. According to the resolution, the transition to climate neutrality can potentially translate into 2.1 million new jobs by 2050.
BayernLB successfully places first social covered bond from France
In its role as joint lead manager, BayernLB has successfully placed the first-ever social covered bond from France. The issuer of the 8-year, billion-euro note is Caisse Française de Financement Local (CAFFIL), a subsidiary of the French development bank SFIL.
This social covered bond is the first of its kind in Europe to be issued from the public healthcare sector. The public debt instrument will be used to refinance loans granted to French public hospitals. These loans, in turn, help provide all citizens throughout the country – regardless of their social or financial background – access to healthcare. When presented at roadshows in Germany, France, the UK, the Netherlands, Denmark and Finland, this product was met with great enthusiasm especially, but not exclusively, by investors focussed specifically on sustainable alternatives.
More than 110 investors placed over EUR 2.6 billion worth of orders. This enabled the new issue premium to be priced at zero – an outstanding success both for the issuer and while also demonstrating BayernLB’s placement power. Another aspect worth noting is that over a third of the issue was placed with investors who highly value sustainable investments.
This issue is yet another milestone in the Bank’s green finance activities, with BayernLB having assumed for the first time the role of joint lead manager of an ESG bond from France.
UN warns of underestimated dangers to the environment
UNEP, the United Nations Environment Programme, has warned in its new report “Frontiers 2018/2019” that there are currently five global environment risks that have so far been underestimated. These are: advances in synthetic biology, the fragmentation of ecosystems as a result of expanding infrastructure, permafrost thaw, excess nitrogen worldwide and a maladaptation to climate change.
With permafrost degrading at an alarming rate, the report points out that around half of the world’s soil organic carbon is stored in permanently frozen peat. As peatland sites thaw they release greenhouse gases like CO2 and methane, which in turn only further exacerbate climate change. The authors therefore believe permafrost to be a potential “tipping element” for the greenhouse effect.
The danger of a maladaptation lies wherever local adaptive measures bring short-term improvements but worsen the situation long term, according to the report. As an example the authors cite the Coastal Climate-Resilient Infrastructure Project in Bangladesh aimed at protecting portions of the country from the rising sea level. Although there are already clear signs that these areas will be under water in the year 2050, such measures encourage people to migrate to these regions.
Australia to reach Paris Agreement climate goals earlier than expected
Australia is set to reach the goals for 2030 set under the Paris Climate Agreement as early as in 2025. This was the finding of a recent study published by the Australian National University in Canberra. The conclusion was drawn from the country’s proliferation of renewable energy. According to the study, Australia will be in a position in 2024 to cover around 50 percent of its electricity demand through renewable energy sources. In 2019 roughly 250 watts per capita in additional, renewable energy is to be installed. The most recent upgrade in Germany amounted to 100 watts, whereby the EU average lies at not even half of this figure.
A recent study by the Organisation for Economic Co-operation and Development, or OECD, purports that Australia is still relying heavily on coal. At present, approximately 63 percent of its electricity demand is covered through coal.
2015 to 2018 hottest years on record
The past four years were the hottest since global weather data began to be recorded, according to the UN. In a new analysis the World Meteorological Organization, or WMO, refers to a “clear sign of continuing long-term climate change”. It cites 2018 as the fourth-warmest year on record, with a global mean temperature of one degree Celsius above the pre-industrial average (from 1850 to 1900). The 20 hottest years on record all took place within the last 22 years, the WMO has furthermore stated. Europe especially was affected by the higher-than-average temperatures. “The long-term temperature trend is far more important than the ranking of individual years, and that trend is an upward one”, said WMO Secretary-General Petteri Taalas. And if this trend continues, he added, the global average temperature could rise three to five degrees by the end of the century. Taalas warned that “we are the first generation to fully understand climate change and the last generation to be able to do something about it”.
Energy consumption in the EU up again
Energy consumption in the EU went up for the third year in a row in 2017. At 1,561 Mtoe (tonne of oil equivalent, in millions), primary energy consumption stood at 1 percent above that of the previous year. This means that the distance to the EU’s energy-efficiency finish line for 2020 has grown longer again. The EU is namely looking to cut primary energy consumption down to 1,483 Mtoe by 2020. In 2014 the EU member states managed to get tantalisingly close to this goal. Since then, however, consumption has been on the rise again.
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Green bonds: next boost ahead
BayernLB expects somewhere between EUR 175bn and 185bn in new green bond issues for 2019 – 5 to 10 percent more than in 2018. Given the still-low amount of maturities in this relatively young market, the net issuance volume should be very high. The rather subdued activity among traditionally active issuers, particularly development banks, supranationals and other sovereign-like institutions, is now being taken up by new issuers, especially in the corporate and banking sectors.
Green bonds might get a boost from the EU’s Action Plan “Financing Sustainable Growth”. Talks are underway on introducing both a Europe-wide standard definition of green bonds – the EU Green Bond Standard – and a “green supporting factor”, i.e. lower risk weightings for green bonds. Such preferred regulatory treatment of green bonds, combined with an established classification system in the form of a green bond label, would amount to an enormous gain in popularity for this asset class, as investors would see a higher, risk-adjusted yield, and issuers lower funding costs.
Germany far behind 2020 climate protection goals
Germany will by far fail to meet its climate goals for the year 2020, according to the government’s most recent Climate Action report for 2018. Rather than reducing greenhouse gas emissions by the targeted 40 percent compared to 1990, the base year, the country is on track to see a mere 32 percent decrease. In 2017 it achieved a reduction of 27.5 percent. Progress is expected for the energy sector by 2020, due in part to the EU emissions trading reform. Some of these advances, however, will be offset by higher emissions in transport and buildings, according to the report. The reduction target for 2030 is 55 percent.
Antarctic ice melt is gaining pace
Ice in the Antarctic is currently melting six times as fast as in the 1980s. Since 2009, the Antarctic has lost almost 252 billion tonnes of ice a year; between 1979 and 1900 it was only 40 tonnes a year. These are the key results of a new study by the University of California. Since this process is furthered by global warming, the study’s author Eric Rignot, chair of Earth System Science at the University of California, Irvine, commented “we expect multi-meter sea level rise from Antarctica in the coming centuries”. Even from 1979 to 2017, melting ice at the South Pole caused the sea level to rise by around 1.5 centimetres, states the analysis. The study's authors are particularly concerned that a large amount of ice also disappeared in East Antarctica, which was previously considered immune to the effects of global warming. "This region is probably more sensitive to climate change than has traditionally been assumed, and that's important to know, because it holds even more ice than West Antarctica and the Antarctic Peninsula together," the study’s researchers warn. The scientists used the most long-term analyses of Antarctic ice so far for the study. They are based on high-resolution aerial photographs from Nasa and satellite data from several aerospace authorities.
Carmakers plan to invest 300 billion US dollars in e-mobility
In the next five to ten years, car manufacturers intend to invest around USD 300 billion in developing electric cars and battery technology. This emerged from a recent analysis by Reuters news agency. German carmakers have particularly ambitious plans. The Volkswagen Group has announced that it will invest USD 57 billion by 2025 just in developing electric car batteries and another USD 34 billion is earmarked for product development. According to Reuters, Daimler is planning investment of around USD 42 billion and BMW intends to spend USD 6.5 billion. In total, German car manufacturers’ investments add up to almost USD 140 billion. Chinese carmakers want to devote around USD 57 billion to electromobility, while US auto firms will commit around USD 39 billion.
Reuters evaluated statements by a total of 29 carmakers from China, France, Germany, India, Japan. South Korea and the US in producing its market analysis. It did not take account of plans by suppliers or tech companies.
Munich Re publishes natural disasters overview for 2018
According to calculations by the reinsurance company Munich Re, natural disasters led to losses of around USD 160 billion worldwide in 2018. Of this total, the devastating wildfires in California alone accounted for USD 24 billion, with Hurricane Michael causing USD 16 billion worth of damages and the drought in Europe USD 3.9 billion. Around 50 percent of the overall financial losses worldwide were insured. This makes 2018 one of the ten most expensive years in terms of total losses caused by natural disasters; for the insurance sectors, it was in fact the fourth most expensive year since 1980.
Munich Re points to the impacts of climate change in connection with the California wildfires and reckons that there are clear indications that climate change is increasing their frequency and extent. According to climate experts, the same applies to other disasters like hurricanes and droughts.