HSBC Issues World’s First SDG Bond, Shell Increases Clean Energy Spending
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Shell will increase its spending on clean energy to up to US$2 billion a year in order to help achieve the goals of the Paris Agreement.

HSBC launched a US$1 billion bond to directly supports the SDGs and the Paris Agreement, the first time that a private sector entity has issued a “benchmark-size bond” of this type.

Moody’s Investor Services has emphasized the importance of effective adaptation and mitigation strategies in order to avoid negative credit ratings.

1 December 2017: Recent SDG news about actions taken by the private sector includes a commitment by Royal Dutch Shell to halve its carbon footprint by 2050. HSBC has launched the world’s first corporate sustainable development bond, to directly support the SDGs and Paris Agreement on climate change. And Moody’s credit agency has warned US state and local governments to brace for climate shocks that may negatively affect their credit ratings, and to adopt mitigation and adaptation strategies in order to lessen those impacts.

Royal Dutch Shell will halve its carbon footprint by 2050 and increase its spending on clean energy to up to US$2 billion a year in order to help achieve the goals of the Paris Agreement, according to a letter to UNFCCC Executive Secretary Patricia Espinosa from Royal Dutch Shell’s CEO Ben van Beurden. As an interim goal, Shell will reduce its emissions by around 20% by 2035. To meet this goal, Van Beurden said the company will: provide lower-carbon fuels to customers; generate renewable power from solar and wind; expand the demand for battery electric vehicles by increasing the number of charging points; and develop gas markets for power and transport. He also noted plans to develop carbon capture and storage (CCS), and to help compensate for emissions from uses where alternatives do not yet exist by working with forests and wetlands. He called for well-targeted regulation, support for technological innovation and long-term policy frameworks that provide positive investment signals and motivate different choices and behaviors.

Shell said it will increase capital allocated to clean technologies to US$1-2 billion a year through 2020. It plans to measure progress on cutting its net carbon footprint by annually disclosing information from its energy use in its operations and in its energy products. [UNFCCC Press Release] [Letter from Shell CEO to UNFCCC Executive Secretary] [Shell Press Release and Announcement to Shareholders]

HSBC launched the world’s first bond that directly supports the SDGs and the Paris Agreement. The US$1 billion raised through the bond will finance projects that benefit communities and the environment, including hospitals, schools, small-scale renewable power plants and public rail systems. This is the first time that a private sector entity has issued a “benchmark-size bond” of this type. Stuart Gulliver, HSBC Group Chief Executive, noted the desire of investors for more socially and environmentally responsible investment opportunities, and said that 68% of global investors aim to increase their low carbon-related investments to accelerate the transition to a clean energy economy.

Proceeds from the HSBC bond will support projects aligned with seven SDG targets.

HSBC also published a framework for the SDG bond, which explains that the proceeds will be spent on projects that provide social, economic and environmental benefits and are aligned with seven SDG targets, related to: improving access to education (SDG 4), health care (SDG 3), freshwater and sanitation (SDG 6); increasing the share of renewables in the global energy mix (SDG 7); building sustainable cities and transport systems (SDG 11); and helping communities adapt to the impacts of climate change (SDG 13). HSBC will provide annual updates on how the proceeds are being used and will measure the impact of the projects and loans. The announcement follows HSBC’s pledge made during the UN Climate Change Conference in Bonn, Germany, in November 2017, to provide US$100 billion in sustainable financing and investment by 2025. [UNFCCC Press Release] [HSBC Press Release]

Global credit rating agency Moody’s Investor Services has emphasized the importance of effective adaptation and mitigation strategies to avoid negative credit ratings. In a report titled, ‘Environmental Risks – Evaluating the impact of climate change on US state and local issuers,’ the agency predicts that the accelerating impacts of climate change will affect the financial health of US states and municipalities. The report explains that climate shocks or extreme weather events have “sharp, immediate and observable” impacts on an issuer’s infrastructure, economy and revenue base, and environment, and are factored into the analysis of an issuer’s ability to deploy resources and implement recovery strategies.

The availability of state and federal resources is critical to improving the response capacity of local governments and their ability of lessen credit impacts. Moody’s analysis weighs the impact of climate risks with states and municipalities’ preparedness and planning while analyzing credit ratings. Analysts for municipal issuers with higher exposure to climate risks will focus on mitigation efforts and how such efforts will impact the issuer’s profile when assigning ratings. [UNFCCC Press Release] [Moody’s Press Release]


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