1 Avoided Emissions Use and Needs Stefan Henningsson, Climate Specialist, Sustainable Finance Group Level 2 Financing Sustainable financing 3 Green bonds Help companies transition Two ways: - Our own proceeds earmarked to finance loans
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1 • Avoided Emissions – Use and Needs
Stefan Henningsson, Climate Specialist, Sustainable Finance Group Level<br>
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2 Financing<br>
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Sustainable financing 3 Green bonds Help companies transition
Two ways:
- Our own proceeds earmarked to finance loans to customers that have environmental benefits and mitigate climate change
- Intermediary between our customers as issuers and investors by helping them issue, or invest in, green bonds via the capital markets
https://www.nordea.com/en/investor-relations/reports-and-presentations/bonds/green-bonds/ Green loans Finance specific investments with environmental benefits and give our customers the opportunity to address climate change in their financing
The customer commits to using the financing for a sustainable investment, which requires them to report the positive impact from the investment on, for example, energy or water consumption. Green mortgages Mortgage for customers who reside in climate-smart homes that fulfil criteria relating to either energy classification of buildings, the Nordic Swan eco-labelling or certification by the Sweden Green Building Council.<br>
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Nordea rationale for issuing Green Bonds 4 ...supports one of the most important aspects of sustainability at Nordea, namely conducting sustainable business:
Enables a connection between sustainable lending to customers and dedicated investor demand
Builds a more sustainable credit portfolio
…is a natural step in the process to reach Nordea’s long-term sustainability targets:
Manage Nordea’s indirect impact to fight climate change
Integrate sustainability in all policies, processes and products
…is well aligned with Nordea’s Key Principles to preserve market capacity:
Seeking diversification of investor base and product types
Maintaining a proactive behaviour Sustainability is not only the right thing to do; it also mitigates risk and is financially smart<br>
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Avoided Emissions – Financing example Sources: Nordea Gren Bond Report 2019, https://www.nordea.com/Images/33-345788/Green%20Bond%20Report%202019.pdf
Methodology: Nordic Public Sector Issuer’s Position Paper on Green Bonds Impact Reporting: https://www.icmagroup.org/assets/documents/Regulatory/Green-Bonds/NPSI_Position_paper_2017_Final-261017.pdf 1,3 Mt CO2eq
in annual emissions avoided 2019 through our 2,56 bn EUR green lending portfolio
Applying Nordic Public Sector Issuer’s Position Paper on Green Bonds Impact Reporting:
- eg 380 gCO2/kWh (European mainland mix) Avoiding through green bonds (Project Impact Reporting – Scope 3/Avoided Emissions) 2,56 bn EUR 2019 in:<br>
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6 Investing<br>
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Avoided Emissions – Investment example Global Climate & Environment Fund: Avoiding through climate solutions (Scope 3 “Avoided Emissions”) 7 Resource Efficiency Alternative Energy Fund Started 2008, Total Assets 18 Feb 2020: 3,0 bn EUR (Bloomberg)
Identifies and Invests in Climate & Environment Solution Providers. Proprietary global investment universe of ~1250 companies with market cap > €6.0 trillion
Attractive returns vs the general market Environment Protection Renewable Power
Solar
Wind
Energy Storage Energy Efficiency
Smart Grid
Eco-Mobility
Smart Farming
Intelligent Construction
Advanced Materials Clean Water & Air
Green Consumerism
Waste Management
Environmental Services
Sustainable Forestry Resource Efficiency Clusters Strategies Source: Nordea Investment Management AB *Note: Based on Market Cap<br>
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Impact Analysis of a portfolio company - Air Liquide 8 CO2 emissions avoided (2018) Source: UN Emissions Gap Report 2017 Global CO2 emissions (2016) Source: IEA Nordea Investment Management AB Oxy-combustion mechanism Emission reduction potential Source: Air Liquide Source: Air Liquide Global Climate & Environment Fund: Avoiding through climate solutions (Scope 3 “Avoided Emissions”)<br>
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Company example: Air Liquide 9 Source: Nordea Investment Management AB Absolute reported avoided emissions by companies in CDP 2016 (Kepler Cheuvreux Core Green Universe) Global Climate & Environment Fund: Avoiding through climate solutions (Scope 3 “Avoided Emissions”)<br>
Reduced Carbon Footprint – Investment example Source: Sustainability Exposure Report: Global Stars and Equity Fund:
https://www.nordea.lu/en/professional/documents/esg---sustainability-exposure-report-standard/ESG-SER-STD_GSTEF_eng_INT.pdf/ Note: Scope 1 & 2. Data as at 30.09.2019. The carbon footprint metric relies on carbon data gathered by Nordea Investment Funds S.A., MSCI Inc. and is based on the Swedish Fund Association’s recommendation. Further information on the calculation approach is available at:
https://www.nordea.lu/documents/responsible-investments---carbon-footprint-disclosure/RI-CFD_eng_INT.pdf/. Source: Nordea Investment Funds S.A., MSCI Inc. Global Stars and Equity Fund: Our customers Avoiding through lower carbon footprint than benchmark (Scope 1&2) Fund Started 2016, Total Assets 18 Feb 2020: 0,96 bn EUR (Bloomberg) Sustainability contribution orientation<br>
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Some reflections on Needs / Opportunities in Avoided Emissions 12 Timing
From Climate Disclosure to impact focused Portfolio Alignment data metrics decisions by many in financial sector now. Get solutions & avoidance into data metrics process flow of commited investors.
Framework avoided emissions
Need of Net Zero Compatible Innovation to equal Lower Risk / Better Rating / Higher Asset Value
Need of Increased ESG Service and Transition Risk Data Provider Awareness on Avoided Emissions as key pillar in their offerings
Emphasis on integrating area in other frameworks, guidelines and regulations (such as TCFD, EU Framework Sustainable Investments)
How will Net Zero Compatible Innovation be reflected in incoming EU regulation? Draft KPIs:
Turnover, Capital Expenditure (CapEx) or Operating Expenditure (OpEx) proportion associated with environmentally sustainable economic activities; and
Investor tailored information on companies whose products and services substantially contribute to environmental objectives
Use of updated, regionally relevant baselines to connect to real-world impact
How to get a good value chain balance: climate innovation intensity score, supply-chain, targets and engagement to complement “Weighted Average Carbon Intensity” ?
Potential avoided emissions and banks
Opportunity to integrate in growing Impact investing space. For ex Nordea / EQT ‘s Trill Impact.
Opportunity to integrate in guarantees schemes for bank lending to Startup & Growth, eg banks as intermediaries for EIBs InnovFin<br>
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Thank you! Stefan Henningsson, Group Sustainable Finance
Stefan.henningsson@nordea.com<br>