1 00:00:00,080 --> 00:00:02,320 Speaker 1: Hi, everyone. So by this point everyone has heard the 2 00:00:02,360 --> 00:00:04,600 Speaker 1: term sustainable finance, and most of us have heard of 3 00:00:04,640 --> 00:00:07,360 Speaker 1: green bonds. But these terms seem to be used quite often, 4 00:00:07,520 --> 00:00:10,159 Speaker 1: rightly or wrongly, as blanket turns for several types of 5 00:00:10,200 --> 00:00:13,720 Speaker 1: sustainable finance instruments. Have you heard of green loans? Wrote 6 00:00:13,720 --> 00:00:16,880 Speaker 1: about social bonds used to finance social projects, or even 7 00:00:16,880 --> 00:00:20,520 Speaker 1: sustainability linked bonds, bonds that are not tied to projects, 8 00:00:20,560 --> 00:00:23,720 Speaker 1: but to a company's sustainability goals, like a greenhouse gas 9 00:00:23,760 --> 00:00:27,200 Speaker 1: emissions reduction target. Long story short, there are all kinds 10 00:00:27,240 --> 00:00:30,080 Speaker 1: of types of sustainable debt instruments to choose from. This 11 00:00:30,120 --> 00:00:33,320 Speaker 1: week on the show, we've got Maya Godimer and Mallory Retiguliano, 12 00:00:33,400 --> 00:00:36,080 Speaker 1: sustainable finance analysts for BENF. They'll walk us through what's 13 00:00:36,080 --> 00:00:39,240 Speaker 1: available and who's using what, and they'll tell us about 14 00:00:39,240 --> 00:00:41,159 Speaker 1: how green bond issuance has seen a dip so far 15 00:00:41,240 --> 00:00:44,319 Speaker 1: this year, but social bonds are on a tear up 16 00:00:44,320 --> 00:00:47,680 Speaker 1: three in the first half of twenty up to forty 17 00:00:47,680 --> 00:00:50,320 Speaker 1: one point nine billion dollars. Our discussion is based on 18 00:00:50,360 --> 00:00:52,880 Speaker 1: report titled Sustainable Finance Outlook for the second half of 19 00:00:53,760 --> 00:00:55,760 Speaker 1: being If users can get this report on banf dot com, 20 00:00:55,840 --> 00:00:58,480 Speaker 1: the BENF mobile app, and the bloomber terminal. As a reminder, 21 00:00:58,520 --> 00:01:00,520 Speaker 1: benif does not provide investment or strat of you advice, 22 00:01:00,680 --> 00:01:02,120 Speaker 1: and you can hear the full disclaimer at the end 23 00:01:02,160 --> 00:01:04,040 Speaker 1: of the show. I'm Mark Taylor, and you're listening to 24 00:01:04,040 --> 00:01:14,080 Speaker 1: Switch on the BENF podcast. Glory Maya him Mark. Hi, Mark, 25 00:01:14,080 --> 00:01:16,200 Speaker 1: thanks so much for having us. Thanks for joining. This 26 00:01:16,280 --> 00:01:18,800 Speaker 1: is awesome. Really, we've been really trying to get this 27 00:01:18,840 --> 00:01:21,040 Speaker 1: podcast going for for quite a while and it's taken 28 00:01:21,040 --> 00:01:23,319 Speaker 1: a few times to get it started. So glad we 29 00:01:23,360 --> 00:01:26,319 Speaker 1: finally made it to chat. I think we've all heard 30 00:01:26,360 --> 00:01:29,520 Speaker 1: about green bonds, or at least in passing. I don't know, 31 00:01:29,760 --> 00:01:31,679 Speaker 1: but there seems to be a lot of flavors of those. 32 00:01:31,720 --> 00:01:34,600 Speaker 1: You know, sustainable debt takes many forms. Can you kind 33 00:01:34,640 --> 00:01:36,440 Speaker 1: of start us off just at the very basics and 34 00:01:36,480 --> 00:01:41,440 Speaker 1: explaining what types of green debt are out there? Absolutely, Mark, 35 00:01:41,480 --> 00:01:44,199 Speaker 1: and that's a great question to start off with. So 36 00:01:44,520 --> 00:01:47,360 Speaker 1: there are different types of sustainable debt. We call those 37 00:01:47,600 --> 00:01:51,360 Speaker 1: themes typically, and so the most well recognized is definitely 38 00:01:51,440 --> 00:01:53,960 Speaker 1: the green bond that you mentioned. It's been around for 39 00:01:54,000 --> 00:01:56,720 Speaker 1: the longest amount of time, and it still makes up 40 00:01:56,760 --> 00:02:00,680 Speaker 1: the majority of sustainable debt that is issue. But let 41 00:02:00,680 --> 00:02:03,560 Speaker 1: me just back up first, and what is sustainable debt? 42 00:02:03,640 --> 00:02:06,440 Speaker 1: To begin with green bonds or other varieties that will 43 00:02:06,440 --> 00:02:10,160 Speaker 1: will kind of talk about today. So sustainable debt describes 44 00:02:10,880 --> 00:02:14,600 Speaker 1: different kinds of borrowing activities. So these are loans or 45 00:02:14,680 --> 00:02:19,280 Speaker 1: bonds that are issued in order to promote environmental or 46 00:02:19,360 --> 00:02:23,840 Speaker 1: social benefits or improvements. So, for example, with a green bond, 47 00:02:24,240 --> 00:02:27,840 Speaker 1: you have money being raised in order to finance or 48 00:02:27,880 --> 00:02:32,519 Speaker 1: refinance environmentally friendly projects or activities. So a company will 49 00:02:32,560 --> 00:02:36,080 Speaker 1: issue these or a country. How how does that work? Yes, 50 00:02:36,120 --> 00:02:39,519 Speaker 1: a country, a company, you know, a country's government or 51 00:02:39,520 --> 00:02:42,679 Speaker 1: a municipal government, entities like those. And give me a 52 00:02:42,720 --> 00:02:45,679 Speaker 1: couple of examples maybe of just what kinds of activities 53 00:02:46,000 --> 00:02:49,440 Speaker 1: green activities they're used to fundraise for. So there's a 54 00:02:49,440 --> 00:02:52,800 Speaker 1: wide gamut of what what constitutes sort of an environmental 55 00:02:52,840 --> 00:02:56,800 Speaker 1: project or environmental activity. The most widely recognized as probably 56 00:02:57,080 --> 00:03:01,040 Speaker 1: renewable energy projects and renewable energy development, but it could 57 00:03:01,080 --> 00:03:07,400 Speaker 1: be anything from waste reduction programs, conservation projects, green buildings 58 00:03:07,440 --> 00:03:12,280 Speaker 1: and homes, last expolution reduction, a very wide variety of 59 00:03:12,360 --> 00:03:15,440 Speaker 1: activities and This is not setting stone. I think this 60 00:03:15,600 --> 00:03:18,200 Speaker 1: is something that we've seen this year. They are making 61 00:03:18,720 --> 00:03:21,120 Speaker 1: those kind of activities that you can find and things 62 00:03:21,160 --> 00:03:24,880 Speaker 1: to a green bone or social bone evolving over time. 63 00:03:25,280 --> 00:03:29,040 Speaker 1: It's also not setting stone. Inter Internationally, you have some 64 00:03:29,480 --> 00:03:34,160 Speaker 1: discrepancies between region, so that is something really interesting. It 65 00:03:34,240 --> 00:03:37,160 Speaker 1: shows the flexibility of those kind of instruments. I'm sure 66 00:03:37,200 --> 00:03:38,880 Speaker 1: we'll get into this, but is that a Is that 67 00:03:38,920 --> 00:03:42,960 Speaker 1: a problem that they're not standardized across market or or 68 00:03:43,000 --> 00:03:46,960 Speaker 1: the world. Yeah, we've seen it being a problem because 69 00:03:47,200 --> 00:03:51,800 Speaker 1: then it creates less transparency for investors. For a very 70 00:03:51,840 --> 00:03:55,560 Speaker 1: long time then investors were wondering what a green bone 71 00:03:55,840 --> 00:03:59,080 Speaker 1: or what a social bone could finance, and they were 72 00:03:59,400 --> 00:04:02,880 Speaker 1: fearing green washing as well. So the fact that there 73 00:04:03,000 --> 00:04:08,120 Speaker 1: is no so far robust legal binding framework of what 74 00:04:08,320 --> 00:04:13,240 Speaker 1: the green bond is or social bond is will really 75 00:04:13,760 --> 00:04:18,680 Speaker 1: make them make the market less robust than it should be. However, 76 00:04:19,160 --> 00:04:23,240 Speaker 1: we've seen we've seen lots of standardization and effort towards 77 00:04:23,279 --> 00:04:28,520 Speaker 1: defining those products and those instruments, and for instance, organization 78 00:04:28,640 --> 00:04:33,040 Speaker 1: like the International Capital Market Association or the Loan Market 79 00:04:33,080 --> 00:04:39,440 Speaker 1: Associations are really um They are really supporting UM those 80 00:04:39,520 --> 00:04:43,760 Speaker 1: kinds of instruments and and and bringing much more clarity 81 00:04:43,800 --> 00:04:46,520 Speaker 1: and transparency to this market. This is also why we've 82 00:04:46,520 --> 00:04:50,400 Speaker 1: seen it grown so much. I've been tangential to this, 83 00:04:50,600 --> 00:04:51,960 Speaker 1: you know, just part of being if you kind of 84 00:04:52,000 --> 00:04:54,960 Speaker 1: see this. You see these reports come out about sustainable financing, 85 00:04:54,960 --> 00:04:58,400 Speaker 1: green bonds, etcetera. For for years, and I've always kind 86 00:04:58,400 --> 00:05:01,799 Speaker 1: of had the sense that and there's a monumental task 87 00:05:01,920 --> 00:05:04,000 Speaker 1: to standardize all this stuff and get everybody on the 88 00:05:04,040 --> 00:05:07,280 Speaker 1: same page in your part of hearts. Do you think 89 00:05:07,320 --> 00:05:09,360 Speaker 1: they'll get it? Do you think they'll standardize all this 90 00:05:09,440 --> 00:05:11,920 Speaker 1: stuff and making sure they're all singing from the same 91 00:05:11,920 --> 00:05:17,280 Speaker 1: hand feet. Yeah, I hope so at least. I mean, 92 00:05:17,320 --> 00:05:18,960 Speaker 1: does it feel like progress is being made or do 93 00:05:18,960 --> 00:05:21,960 Speaker 1: you feel like it's just more acronyms in more organizations 94 00:05:22,000 --> 00:05:26,200 Speaker 1: and more you know, would be regulations thrown in. No. No, 95 00:05:26,440 --> 00:05:29,200 Speaker 1: I think that definitely there were some efforts made. I 96 00:05:29,240 --> 00:05:33,159 Speaker 1: think that we are seeing more and more standardization that 97 00:05:33,240 --> 00:05:38,560 Speaker 1: are international standardization. We are seeing also a request from investors. 98 00:05:38,600 --> 00:05:41,200 Speaker 1: And you know how it works, the by side rules 99 00:05:41,240 --> 00:05:45,479 Speaker 1: the world, So so basically, when the advice I decides 100 00:05:45,520 --> 00:05:49,040 Speaker 1: that they need transparency to invest in that market, then 101 00:05:49,160 --> 00:05:52,280 Speaker 1: then it does happen. So what we're seeing as well, 102 00:05:52,440 --> 00:05:55,320 Speaker 1: it was a great like analysis that Mattery made is 103 00:05:55,320 --> 00:05:58,800 Speaker 1: that right now more than eighty percent of all the 104 00:05:58,880 --> 00:06:02,159 Speaker 1: green bones that are issued in the world follow the 105 00:06:02,240 --> 00:06:07,320 Speaker 1: International Capital Market Association standards like Standards and Principle, despite 106 00:06:07,320 --> 00:06:11,440 Speaker 1: those principles being on a voluntary and now all the 107 00:06:11,520 --> 00:06:16,200 Speaker 1: strength that has been happening is now leading regulators to 108 00:06:16,279 --> 00:06:20,000 Speaker 1: question themselves about the need of standardization. So, for instance, 109 00:06:20,000 --> 00:06:22,360 Speaker 1: in Europe, and I'm sure we're going to talk about 110 00:06:22,400 --> 00:06:24,800 Speaker 1: that in the future as well of the of this podcast. 111 00:06:25,200 --> 00:06:28,599 Speaker 1: In Europe they are currently working on and they've already 112 00:06:28,640 --> 00:06:33,360 Speaker 1: published a first draft for European Green one standard, which 113 00:06:33,520 --> 00:06:38,599 Speaker 1: will help standardizing even more this market. So no, I 114 00:06:38,640 --> 00:06:41,280 Speaker 1: think there was a lot of effort being made as 115 00:06:41,320 --> 00:06:45,160 Speaker 1: long as as soon as more instruments are being created, 116 00:06:45,680 --> 00:06:49,760 Speaker 1: more standards are coming to the market. So for instance, 117 00:06:49,760 --> 00:06:54,160 Speaker 1: this year we've seen a few standards being either amended 118 00:06:54,360 --> 00:06:57,719 Speaker 1: or created to be able to regulate some part of 119 00:06:57,720 --> 00:06:59,920 Speaker 1: the market. And one thing to mention is also the 120 00:07:00,080 --> 00:07:03,560 Speaker 1: uh there aren't only green bonds, there's also different varieties 121 00:07:03,640 --> 00:07:06,080 Speaker 1: that have emerged over time. So while I mentioned that, 122 00:07:06,120 --> 00:07:08,560 Speaker 1: you know, green bonds are the longest standing variety of 123 00:07:08,960 --> 00:07:12,280 Speaker 1: sort of recognizable sustainable debt, at least in its current form. 124 00:07:12,680 --> 00:07:15,520 Speaker 1: There's also social bonds that maya mentioned, and those are 125 00:07:15,800 --> 00:07:18,360 Speaker 1: basically the same concept as as a green bond, but 126 00:07:18,400 --> 00:07:21,720 Speaker 1: they're just focusing on social projects or activities instead of 127 00:07:21,760 --> 00:07:25,480 Speaker 1: those that are environmental. You have sustainability bonds, which are 128 00:07:25,480 --> 00:07:29,200 Speaker 1: like a hybrid of the two it's for environmental and 129 00:07:29,360 --> 00:07:32,600 Speaker 1: social purposes, and green loans, which are sort of like 130 00:07:32,600 --> 00:07:34,600 Speaker 1: the counterpart to a green bond, but in the loan 131 00:07:34,640 --> 00:07:37,320 Speaker 1: market as opposed to the bond market. And we've seen 132 00:07:37,720 --> 00:07:41,480 Speaker 1: a different kind or a different variety of themes arising 133 00:07:41,720 --> 00:07:45,840 Speaker 1: recently that aren't project focused. You asked a really astute 134 00:07:45,920 --> 00:07:51,200 Speaker 1: question earlier like what projects mark constitute green or environmentally friendly? 135 00:07:51,720 --> 00:07:53,880 Speaker 1: But now we're seeing sort of a departure from the 136 00:07:54,000 --> 00:07:59,080 Speaker 1: solely project or activity based emphasis on the debt market. 137 00:07:59,600 --> 00:08:02,360 Speaker 1: And so what mean by that is um there's been 138 00:08:02,800 --> 00:08:07,560 Speaker 1: the arrival of two new varieties, sustainability linked bonds and 139 00:08:07,640 --> 00:08:13,440 Speaker 1: sustainability linked loans, which are not necessarily financing or raised 140 00:08:13,440 --> 00:08:16,160 Speaker 1: for a particular activity or project. They can be raised 141 00:08:16,160 --> 00:08:20,840 Speaker 1: for general corporate purposes. But the reason why we even 142 00:08:20,920 --> 00:08:24,800 Speaker 1: give them the theme or the flavor sustainable debt if 143 00:08:24,840 --> 00:08:27,160 Speaker 1: they're not, you know, financing any of that grain or 144 00:08:27,160 --> 00:08:31,560 Speaker 1: social activities in particular, necessarily is because they're being tied 145 00:08:31,720 --> 00:08:37,320 Speaker 1: to institutional targets for environmental, social or governance focuses. And 146 00:08:37,360 --> 00:08:39,560 Speaker 1: so we're seeing this this market brought in in its 147 00:08:39,640 --> 00:08:42,839 Speaker 1: breath and in its volumes too, but the varieties are 148 00:08:42,920 --> 00:08:46,360 Speaker 1: are getting much more inclusive and creative, which is cool 149 00:08:46,400 --> 00:08:48,000 Speaker 1: to see. Can you explain that though I don't I 150 00:08:48,000 --> 00:08:50,680 Speaker 1: don't think I quite understand what that means in practice. 151 00:08:50,840 --> 00:08:53,960 Speaker 1: If I gotta you know, sustainability linked bond or loan, 152 00:08:54,160 --> 00:08:56,040 Speaker 1: what would I do with that money? So the money 153 00:08:56,080 --> 00:08:59,480 Speaker 1: can be raised for whatever purposes the issuer, So like 154 00:08:59,520 --> 00:09:02,000 Speaker 1: the company or the government needs it for it, what 155 00:09:02,000 --> 00:09:04,520 Speaker 1: are the really deemed sustainability or what it doesn't need 156 00:09:04,559 --> 00:09:06,480 Speaker 1: to be? It can be, It absolutely can be for 157 00:09:06,640 --> 00:09:08,920 Speaker 1: you know, say, environmental purposes, but it doesn't have to be. 158 00:09:08,960 --> 00:09:11,720 Speaker 1: It can just be for the business functions. But what 159 00:09:11,840 --> 00:09:15,600 Speaker 1: makes it sustainable so to speak, is that what happens 160 00:09:15,640 --> 00:09:17,480 Speaker 1: is you say, Okay, I'm going to raise some some 161 00:09:17,559 --> 00:09:20,800 Speaker 1: debt and I'm going to raise it for whatever I 162 00:09:20,840 --> 00:09:22,360 Speaker 1: need it for. It doesn't have to be green. I 163 00:09:22,360 --> 00:09:25,800 Speaker 1: don't have to prove that. But I'm going to link 164 00:09:25,960 --> 00:09:30,240 Speaker 1: some aspect of this deal to a sustainability target. So 165 00:09:30,280 --> 00:09:34,000 Speaker 1: like maybe me company, Mallory Company says, Okay, I have 166 00:09:34,080 --> 00:09:37,520 Speaker 1: institutional targets to reduce my greenhouse gas emissions by x 167 00:09:37,559 --> 00:09:40,880 Speaker 1: per cent by this year, and if I don't meet 168 00:09:40,920 --> 00:09:44,160 Speaker 1: a certain goal like that, then I'm going to incur 169 00:09:44,360 --> 00:09:48,120 Speaker 1: maybe a penalty of some sort on that debt deal 170 00:09:48,200 --> 00:09:51,360 Speaker 1: that I took out. So maybe my interest rate will 171 00:09:51,400 --> 00:09:53,679 Speaker 1: go up for the remainder of the term of my 172 00:09:53,760 --> 00:09:55,600 Speaker 1: loan if I don't meet that goal, or maybe I'll 173 00:09:55,600 --> 00:09:57,400 Speaker 1: get a reward. Maybe I'll get, you know, sort of 174 00:09:57,400 --> 00:09:59,520 Speaker 1: a carrot instead of a stick. And if I do 175 00:09:59,640 --> 00:10:02,959 Speaker 1: meet my goal within the terms of that loaner bond, 176 00:10:03,160 --> 00:10:06,000 Speaker 1: I'll actually get a reduction and say my interest rate, 177 00:10:06,320 --> 00:10:08,720 Speaker 1: and I'll be able to have that for the remainder 178 00:10:08,720 --> 00:10:11,240 Speaker 1: of the term of the loan moving forward because I 179 00:10:11,280 --> 00:10:13,920 Speaker 1: met some sort of sustainability goal that I had set 180 00:10:13,960 --> 00:10:18,400 Speaker 1: for myself. So there's still sustainability baked into that debt type, 181 00:10:18,559 --> 00:10:21,080 Speaker 1: but it's not focused on whatever the project is that 182 00:10:21,120 --> 00:10:23,880 Speaker 1: it's being financed for. And this opens a lot of 183 00:10:23,960 --> 00:10:27,880 Speaker 1: doors for issuers, companies or governments or things like that 184 00:10:27,880 --> 00:10:31,160 Speaker 1: that don't necessarily have big projects that they want to 185 00:10:31,280 --> 00:10:35,720 Speaker 1: undertake with green financing, say, but still want to raise 186 00:10:35,800 --> 00:10:39,880 Speaker 1: some money and also further their sustainability goals. So it's 187 00:10:39,960 --> 00:10:42,880 Speaker 1: very inclusive variety. That's really cool. Okay, I think I 188 00:10:42,920 --> 00:10:45,160 Speaker 1: was pretty a bit slow on the uptake there of 189 00:10:45,240 --> 00:10:47,480 Speaker 1: understanding that. So it basically creates a carrot, you know, 190 00:10:47,520 --> 00:10:50,000 Speaker 1: for companies that want to get a loan but achieve 191 00:10:50,040 --> 00:10:52,280 Speaker 1: their sustainability goals as well. Yeah, it allows them to 192 00:10:52,280 --> 00:10:54,920 Speaker 1: be a little bit creative and add some you know, 193 00:10:55,000 --> 00:10:57,800 Speaker 1: even if they're very small teeth, adds some teeth to 194 00:10:57,880 --> 00:11:01,240 Speaker 1: the achievement or failing to achieve their sustainability goals. And 195 00:11:01,280 --> 00:11:04,240 Speaker 1: it's a carrot or a stake, so it means it's 196 00:11:04,280 --> 00:11:09,120 Speaker 1: either yes and it's really important actually, and in the 197 00:11:09,120 --> 00:11:11,360 Speaker 1: bond market we've been much more of a of a 198 00:11:11,400 --> 00:11:14,960 Speaker 1: stake than a carrotter. Just to be clear, the sustainability 199 00:11:15,080 --> 00:11:17,880 Speaker 1: goal is not set by the company. It's said by 200 00:11:18,000 --> 00:11:21,200 Speaker 1: the bank or the investors. Like everyone agrees on what 201 00:11:21,280 --> 00:11:23,640 Speaker 1: the company needs to achieve to get this carrot of 202 00:11:23,720 --> 00:11:25,640 Speaker 1: the stake. So, for instance, if you want to issue 203 00:11:25,640 --> 00:11:27,840 Speaker 1: a green bond, you're seeing a lot of like very 204 00:11:27,880 --> 00:11:30,320 Speaker 1: specific companies in a green one so far, because, as 205 00:11:30,360 --> 00:11:34,880 Speaker 1: Malorie explained, it's sometimes difficult to find an environmental purpose 206 00:11:35,000 --> 00:11:38,120 Speaker 1: for your bond. And let's say you're much more from 207 00:11:38,320 --> 00:11:42,319 Speaker 1: brown industry, or you're I don't know a food retailer, 208 00:11:42,480 --> 00:11:46,079 Speaker 1: or you're an industrial industry. It's much more complicated to 209 00:11:46,559 --> 00:11:50,640 Speaker 1: for instance, raise I don't know, two billion or even 210 00:11:50,760 --> 00:11:53,320 Speaker 1: like a benchmark bond, or to issue a large amount 211 00:11:53,320 --> 00:11:56,440 Speaker 1: of money that will go to a green purpose. However, 212 00:11:56,480 --> 00:11:59,000 Speaker 1: if you say I just need money, but I want 213 00:11:59,000 --> 00:12:02,160 Speaker 1: to show to my masters then that I am in 214 00:12:02,200 --> 00:12:07,280 Speaker 1: a transition path in my business, you can then say, okay, 215 00:12:07,360 --> 00:12:11,200 Speaker 1: we were agreeing that I would I was already planning 216 00:12:11,240 --> 00:12:15,920 Speaker 1: to reduce my greenhouse gas emission by let's issue a loan, 217 00:12:16,280 --> 00:12:19,320 Speaker 1: like a one billion loan for the purpose that I want. 218 00:12:19,880 --> 00:12:22,880 Speaker 1: And let's say that if in two years I reduced 219 00:12:22,920 --> 00:12:27,560 Speaker 1: my greenhouse guests emission not by but by six, then 220 00:12:27,720 --> 00:12:30,840 Speaker 1: I'm gonna like I'm going to reduce the margin I'm 221 00:12:30,880 --> 00:12:34,760 Speaker 1: going to pay on my loan by twenty five basis point. However, 222 00:12:35,320 --> 00:12:38,160 Speaker 1: if I don't hit the target or I increased the 223 00:12:38,240 --> 00:12:41,840 Speaker 1: number of greenhouse gas emission that I'm emitting, then I'm 224 00:12:41,880 --> 00:12:46,200 Speaker 1: gonna increase my margin I'm paying on my loan. The 225 00:12:46,280 --> 00:12:49,679 Speaker 1: only issue we've been seeing so far is that on 226 00:12:49,720 --> 00:12:52,679 Speaker 1: the loan side it works pretty well because it's a 227 00:12:52,720 --> 00:12:57,160 Speaker 1: private part of the market, so issuers are just discussing 228 00:12:57,200 --> 00:13:01,480 Speaker 1: with their banks to get this kind of security. However, 229 00:13:01,559 --> 00:13:04,120 Speaker 1: on the bone market, it might be a bit difficult 230 00:13:04,600 --> 00:13:08,160 Speaker 1: to sell it to wider investors because investors are happy 231 00:13:08,280 --> 00:13:11,600 Speaker 1: to get the coupon of the bone to increase if 232 00:13:11,760 --> 00:13:16,120 Speaker 1: issuers are not respecting their commitments. However, they're not really 233 00:13:16,160 --> 00:13:20,000 Speaker 1: happy to give less to get less coupon if they 234 00:13:20,040 --> 00:13:24,120 Speaker 1: are having the virtuous behaviors. So this is also why 235 00:13:24,160 --> 00:13:27,880 Speaker 1: we've seen much more sustainability link loan than sustainability Link bone. 236 00:13:27,920 --> 00:13:30,959 Speaker 1: The pricing as well, it almost becomes a structured product. 237 00:13:31,280 --> 00:13:34,800 Speaker 1: This is also what is super exciting with this market, 238 00:13:34,880 --> 00:13:37,080 Speaker 1: with the sustainable debt market, is that you can go 239 00:13:37,160 --> 00:13:42,800 Speaker 1: from very vanilla product too much more innovative product. That's fascinating. 240 00:13:42,800 --> 00:13:44,840 Speaker 1: Can you talk about the market for this so far, 241 00:13:44,960 --> 00:13:47,559 Speaker 1: like are these being used and if so, by whom, 242 00:13:47,679 --> 00:13:49,760 Speaker 1: How big is the market and how who's using it? Yeah, 243 00:13:49,800 --> 00:13:53,679 Speaker 1: so the market has grown for sustainability link loans at 244 00:13:53,760 --> 00:13:58,720 Speaker 1: least to be quite large. Now there are um, you know, 245 00:13:58,880 --> 00:14:01,920 Speaker 1: hundreds of sustained ability linked loans out there. There's still 246 00:14:01,960 --> 00:14:05,800 Speaker 1: only a very small handful handful of sustainability linked bonds. 247 00:14:05,840 --> 00:14:09,000 Speaker 1: They are newer, and like Maya was saying, there are 248 00:14:09,040 --> 00:14:11,280 Speaker 1: some caveats that make them a little more difficult. But 249 00:14:11,400 --> 00:14:16,000 Speaker 1: sustainability linked loans have caught on really quickly and we're 250 00:14:16,040 --> 00:14:20,640 Speaker 1: seeing them being issued. So the money being borrowed by 251 00:14:20,880 --> 00:14:25,360 Speaker 1: a very diverse group of issuers because they are able to, 252 00:14:25,640 --> 00:14:28,200 Speaker 1: like we've said, you know, be from any industry or 253 00:14:28,200 --> 00:14:30,560 Speaker 1: any sector and sort of set a target. I'm sure 254 00:14:30,600 --> 00:14:32,920 Speaker 1: in any sector or any company model there is a 255 00:14:32,960 --> 00:14:35,960 Speaker 1: sustainability target that you can set to improve yourself for 256 00:14:36,080 --> 00:14:39,120 Speaker 1: environmental or social or governance purposes. And so that really, 257 00:14:39,280 --> 00:14:41,880 Speaker 1: in my eyes, is unlimited, the ability to set those 258 00:14:41,880 --> 00:14:44,000 Speaker 1: targets and you know, do what you need to do. 259 00:14:44,320 --> 00:14:47,280 Speaker 1: Whereas you know, the projects are more difficult in the 260 00:14:47,320 --> 00:14:50,400 Speaker 1: more typical markets for you know, green bonds and social 261 00:14:50,400 --> 00:14:54,000 Speaker 1: bonds and sustainability bonds and green loans. We see that 262 00:14:54,200 --> 00:14:58,000 Speaker 1: governments and you know, sovereigns and supernationals are big issuers 263 00:14:58,040 --> 00:15:01,720 Speaker 1: along with entities like utilities, because it's more accessible to 264 00:15:01,760 --> 00:15:03,960 Speaker 1: undertake those big projects, especially in things like you know, 265 00:15:03,960 --> 00:15:08,080 Speaker 1: say renewable energy, whereas we're seeing companies in even things 266 00:15:08,120 --> 00:15:15,120 Speaker 1: like hospitality, technology, food and beverage communications getting involved I 267 00:15:15,160 --> 00:15:20,720 Speaker 1: think more quickly in the sustainability linked loan market, although 268 00:15:20,720 --> 00:15:23,240 Speaker 1: I will say that you know, green bonds still make 269 00:15:23,320 --> 00:15:27,080 Speaker 1: up the largest proportion of the sustainable debt market, so 270 00:15:27,120 --> 00:15:31,520 Speaker 1: it's not volume for volume, Sustainability linked loans are still smaller, 271 00:15:31,720 --> 00:15:35,040 Speaker 1: but they've caught on so quickly, and a wide variety 272 00:15:35,160 --> 00:15:38,240 Speaker 1: of borrowers are are starting to dip their toes in 273 00:15:38,320 --> 00:15:41,600 Speaker 1: and get involved because there are fewer barriers to entry 274 00:15:41,720 --> 00:15:44,240 Speaker 1: for a wide variety of company types. Yeah, it looks 275 00:15:44,240 --> 00:15:46,400 Speaker 1: like the first one was issued four years ago or so, 276 00:15:46,880 --> 00:15:50,480 Speaker 1: in the first sustainability linked loan was issued. Do you 277 00:15:50,520 --> 00:15:52,280 Speaker 1: think that that trend will reverse? Do you think at 278 00:15:52,280 --> 00:15:57,080 Speaker 1: some point sustainability link loans will outweigh green bonds, your 279 00:15:57,200 --> 00:16:00,960 Speaker 1: your heating A very like it's a bait in the team. 280 00:16:01,160 --> 00:16:05,440 Speaker 1: As we've seen the standardization around sustainability link bones, right, 281 00:16:05,560 --> 00:16:09,400 Speaker 1: we've seen the International Capital Market Association putting out their 282 00:16:09,560 --> 00:16:13,000 Speaker 1: framework of what we consider in the market to be 283 00:16:13,080 --> 00:16:15,680 Speaker 1: a sustainability link bone and which criteria you need to 284 00:16:15,720 --> 00:16:20,280 Speaker 1: fit to to be eligible to be an a sustainability 285 00:16:20,480 --> 00:16:22,720 Speaker 1: link bone. And I was saying to Malory when it 286 00:16:22,760 --> 00:16:25,120 Speaker 1: was issued, Oh, that's great, because it's also a great 287 00:16:25,160 --> 00:16:29,440 Speaker 1: transition to right mark. It's even if you're a heavy emits, sir, 288 00:16:29,640 --> 00:16:32,840 Speaker 1: even if you're from a brown industry, you can still 289 00:16:33,440 --> 00:16:38,360 Speaker 1: prove your commitments to sustainability via those instruments. And so 290 00:16:38,400 --> 00:16:41,160 Speaker 1: I was saying to Malory that I think that sustainability 291 00:16:41,520 --> 00:16:46,320 Speaker 1: link bond and sustainability link loan will outtake the market 292 00:16:46,520 --> 00:16:48,720 Speaker 1: and that we are going to see more and more 293 00:16:48,760 --> 00:16:54,800 Speaker 1: on those because investors in general around sustainability or requesting 294 00:16:55,160 --> 00:16:58,960 Speaker 1: much more transparency. So then you just don't have a 295 00:16:59,000 --> 00:17:01,200 Speaker 1: green bone that is root and then after you don't 296 00:17:01,200 --> 00:17:04,760 Speaker 1: necessarily know what it has been financing. You just have 297 00:17:04,880 --> 00:17:08,359 Speaker 1: the certification at the beginning. But I think that those 298 00:17:08,400 --> 00:17:13,000 Speaker 1: instruments will be uh will be the future of the market. However, 299 00:17:13,640 --> 00:17:19,000 Speaker 1: the disagreement is around the future of sustainability link bond 300 00:17:19,040 --> 00:17:22,880 Speaker 1: because right now, even if there is this whole excitement 301 00:17:23,040 --> 00:17:28,160 Speaker 1: from issuers and from investors for sustainability link bone, well 302 00:17:28,280 --> 00:17:32,119 Speaker 1: we haven't seen so many, and we know that the 303 00:17:32,160 --> 00:17:35,560 Speaker 1: market struggles to price them and that it's very difficult 304 00:17:35,560 --> 00:17:40,720 Speaker 1: to structure. There is the debate with Malory. Yeah, yeah, 305 00:17:40,720 --> 00:17:44,159 Speaker 1: And to be clear, sustainability linked loans. I think you 306 00:17:44,160 --> 00:17:45,879 Speaker 1: can feel free to disagree with me on this, but 307 00:17:45,960 --> 00:17:47,480 Speaker 1: I think we both think that those are going to 308 00:17:47,480 --> 00:17:51,119 Speaker 1: absolutely continue to grow. But the biggest question mark is 309 00:17:51,119 --> 00:17:55,000 Speaker 1: around those those newer sustainability linked bonds because yeah, like 310 00:17:55,040 --> 00:17:58,000 Speaker 1: Maya said, my skepticism is that they've been around now 311 00:17:58,280 --> 00:18:02,080 Speaker 1: since we haven't seen them up taken with the same 312 00:18:02,359 --> 00:18:06,520 Speaker 1: I guess zeal as sustainability lenk loans were in the beginning, 313 00:18:06,800 --> 00:18:09,000 Speaker 1: but that could also be because there's you know, a 314 00:18:09,080 --> 00:18:13,119 Speaker 1: larger training period or you know, a teething time that 315 00:18:13,200 --> 00:18:15,640 Speaker 1: needs to happen. I mean that is last year. That's 316 00:18:15,680 --> 00:18:18,680 Speaker 1: not that long ago, right, It's true, Yeah, that isn't 317 00:18:18,720 --> 00:18:20,679 Speaker 1: that long ago, But if you compare it to the 318 00:18:23,240 --> 00:18:27,000 Speaker 1: change in sustainability link loans, it's not keeping up with 319 00:18:27,200 --> 00:18:29,640 Speaker 1: what you would expect if you were just to take 320 00:18:29,680 --> 00:18:32,399 Speaker 1: a look at sustainability link loans and say they should 321 00:18:32,400 --> 00:18:35,000 Speaker 1: act identically, but they can't because it's a very different 322 00:18:35,040 --> 00:18:38,360 Speaker 1: market like Maya was detailing so well. So the only 323 00:18:38,400 --> 00:18:42,600 Speaker 1: question will be over time, as people figure out now 324 00:18:42,640 --> 00:18:46,320 Speaker 1: that there are principles and guidelines how to do this, 325 00:18:46,760 --> 00:18:50,160 Speaker 1: will they catch on because they're popular or will they 326 00:18:50,560 --> 00:18:52,520 Speaker 1: not be And that's sort of where we want to 327 00:18:52,520 --> 00:18:55,520 Speaker 1: find ourselves talking every day because it's not the same 328 00:18:55,600 --> 00:18:59,800 Speaker 1: lenders as well. For sustainability link loan. Usually what happened 329 00:19:00,119 --> 00:19:02,880 Speaker 1: for those of you who listen with a bit more 330 00:19:02,920 --> 00:19:06,640 Speaker 1: technicality is that usually there are revolver loans. So these 331 00:19:06,680 --> 00:19:10,600 Speaker 1: are loans where big corporations or corporations are going to 332 00:19:10,760 --> 00:19:14,600 Speaker 1: their bank and just discussing with the bank if they 333 00:19:14,640 --> 00:19:17,800 Speaker 1: can give lend them money through a loan. And then 334 00:19:17,840 --> 00:19:21,160 Speaker 1: the bank is like, there's a bit of loyalty relationship 335 00:19:21,240 --> 00:19:24,720 Speaker 1: between the bank and the issue. The bank is saying, Okay, 336 00:19:24,760 --> 00:19:28,879 Speaker 1: we really want to support you as a corporation towards 337 00:19:28,920 --> 00:19:31,679 Speaker 1: your transition, so we're gonna give you this carrot and 338 00:19:31,720 --> 00:19:34,000 Speaker 1: the stick, right, and you just have this bank to 339 00:19:34,080 --> 00:19:37,200 Speaker 1: agree if you start going in the bond market. It's 340 00:19:37,240 --> 00:19:40,200 Speaker 1: a public market. You need to do a road show 341 00:19:40,359 --> 00:19:45,600 Speaker 1: to explain to maybe hundreds of issuers, hundreds of investors, sorry, 342 00:19:45,920 --> 00:19:49,919 Speaker 1: why Initia might not pay the coupon it's said to 343 00:19:49,960 --> 00:19:54,760 Speaker 1: be paid in the bond agreement, and it starts becoming 344 00:19:54,920 --> 00:19:58,000 Speaker 1: a step down coupon, and that becomes a much more 345 00:19:58,000 --> 00:20:01,960 Speaker 1: complicated type of instrument that you need to push to 346 00:20:02,080 --> 00:20:06,040 Speaker 1: a wider number of investors. What we're thinking, however, what 347 00:20:06,160 --> 00:20:08,280 Speaker 1: we agree with Mannering, is that maybe in the bone 348 00:20:08,320 --> 00:20:11,520 Speaker 1: market we'll just have the stick and not the carrot. 349 00:20:12,119 --> 00:20:14,240 Speaker 1: And this is what ann L did in the past 350 00:20:14,600 --> 00:20:18,560 Speaker 1: to say, okay, we're issuing this bone in two years, 351 00:20:18,960 --> 00:20:21,680 Speaker 1: you'll assess us if we don't hit the target that 352 00:20:21,720 --> 00:20:24,840 Speaker 1: we're saying. At the issuance of the bone, it was 353 00:20:24,880 --> 00:20:27,360 Speaker 1: I think a greenhouse gas reduction target. If we don't 354 00:20:27,440 --> 00:20:30,159 Speaker 1: hit our greenhouse gas reduction target, then we're going to 355 00:20:30,240 --> 00:20:34,320 Speaker 1: pay more coupon. That's great for investors. It's I think 356 00:20:34,359 --> 00:20:36,840 Speaker 1: it could be the right structure. So it only goes 357 00:20:36,920 --> 00:20:39,600 Speaker 1: up one way, It only goes one way. Yeah, exactly, 358 00:20:40,119 --> 00:20:42,720 Speaker 1: how are these targets verified? Because each one of these 359 00:20:42,720 --> 00:20:46,280 Speaker 1: loans or bonds has a sustainability link target as well. 360 00:20:46,359 --> 00:20:49,600 Speaker 1: How are they verified like reduction in greenhouse gasses. Normally 361 00:20:49,640 --> 00:20:51,960 Speaker 1: they have certifiers the same way you will have credit 362 00:20:52,000 --> 00:20:55,880 Speaker 1: analyst or credit ratings. You have certifiers that will assess 363 00:20:56,040 --> 00:21:00,960 Speaker 1: that the company has verified the bone like that n 364 00:21:01,200 --> 00:21:04,560 Speaker 1: L or the issuer has made their target. It's really 365 00:21:04,640 --> 00:21:08,040 Speaker 1: a good question, however, Mark, because the question is asked 366 00:21:08,080 --> 00:21:11,520 Speaker 1: in the sustainability link bone market and in the sustainability 367 00:21:11,600 --> 00:21:14,240 Speaker 1: link loan market to make sure that because you could 368 00:21:14,240 --> 00:21:19,080 Speaker 1: even think about the wildest hypothesis about creating credit default swap, 369 00:21:19,240 --> 00:21:22,560 Speaker 1: but for a sustainability like getting I don't know a 370 00:21:22,640 --> 00:21:25,840 Speaker 1: stricture product that that covers you and that you can 371 00:21:25,920 --> 00:21:28,840 Speaker 1: hedge with if the company starts betting on the fact 372 00:21:28,840 --> 00:21:30,920 Speaker 1: that the company is not going to hit its target. 373 00:21:31,400 --> 00:21:36,320 Speaker 1: So we've never seen a situation where we don't know 374 00:21:36,359 --> 00:21:38,960 Speaker 1: if the company has hit their target or not. But 375 00:21:39,040 --> 00:21:41,040 Speaker 1: there is the same question on the green bond side. 376 00:21:41,160 --> 00:21:45,120 Speaker 1: I remember when I was still covering different banks, they 377 00:21:45,119 --> 00:21:49,840 Speaker 1: were asking me, okay, can you have a past issues. 378 00:21:50,320 --> 00:21:53,840 Speaker 1: There is reporting of the allocation of your fund making 379 00:21:53,880 --> 00:21:55,960 Speaker 1: sure that the company is issuing a green bond, But 380 00:21:56,040 --> 00:21:59,800 Speaker 1: after reporting on what the company has used the proceeds 381 00:21:59,840 --> 00:22:04,720 Speaker 1: for and clients. And this is again because we don't 382 00:22:04,720 --> 00:22:10,000 Speaker 1: have a legal framework, because it's not like compulsory to 383 00:22:10,080 --> 00:22:13,440 Speaker 1: be audited on your green bond. It's that the free 384 00:22:13,440 --> 00:22:18,399 Speaker 1: will of the issuer to then provide green bond reporting 385 00:22:18,800 --> 00:22:24,359 Speaker 1: like allocation reporting. So therefore people were asking us and 386 00:22:24,480 --> 00:22:28,160 Speaker 1: investors are still asking us, can we please check if 387 00:22:28,240 --> 00:22:32,000 Speaker 1: the bond were actually allocated for the right purposes. I mean, 388 00:22:32,000 --> 00:22:34,359 Speaker 1: it seems like only so long a market can survive 389 00:22:34,400 --> 00:22:37,440 Speaker 1: on good faith, right exactly. So you're seeing a lot 390 00:22:37,480 --> 00:22:41,800 Speaker 1: of third party certifire that are certifying the green bone frameworks, 391 00:22:41,960 --> 00:22:45,840 Speaker 1: so we're still pre issuance and that issuance certifying the 392 00:22:45,920 --> 00:22:51,600 Speaker 1: green bone and then you have the allocation report. This 393 00:22:51,680 --> 00:22:54,359 Speaker 1: can also be audited, so some firms are doing it, 394 00:22:54,400 --> 00:22:58,640 Speaker 1: for instance, for their social bond, done on or reporting 395 00:22:58,880 --> 00:23:02,760 Speaker 1: on what they've been using the money for. Sometimes it's 396 00:23:02,800 --> 00:23:06,000 Speaker 1: still quite vague and hazy. But in the case of 397 00:23:06,000 --> 00:23:08,199 Speaker 1: of then and you even have like the metrics of 398 00:23:08,600 --> 00:23:10,840 Speaker 1: I don't know how many jobs they've created, how many 399 00:23:10,880 --> 00:23:13,880 Speaker 1: people they've covered with the mitchell with the health insurance 400 00:23:13,880 --> 00:23:17,000 Speaker 1: and stuff like that, but it's still quite hazy. However, 401 00:23:17,400 --> 00:23:20,639 Speaker 1: good thing the European Union is starting to legislate on 402 00:23:20,760 --> 00:23:24,280 Speaker 1: this and with the European Green Bone Standard. We're still 403 00:23:24,320 --> 00:23:26,560 Speaker 1: waiting for the European Commission to come back on that 404 00:23:26,600 --> 00:23:29,400 Speaker 1: on need the draft has been issued so far, but 405 00:23:29,760 --> 00:23:32,400 Speaker 1: it seems in the draft that under the European Green 406 00:23:32,480 --> 00:23:37,399 Speaker 1: one Standard you will have a compulsory impact reporting and 407 00:23:37,480 --> 00:23:40,919 Speaker 1: you have compulsory auditing of your bone and certification of 408 00:23:40,960 --> 00:23:45,480 Speaker 1: your bone. So that's great news, excellent sege. It seems 409 00:23:45,640 --> 00:23:48,359 Speaker 1: maybe it's because I sit in London, I don't know, um, 410 00:23:48,400 --> 00:23:50,560 Speaker 1: but it seems like the EU is leading on all 411 00:23:50,600 --> 00:23:54,159 Speaker 1: of this. Is that true? For one? And and second, 412 00:23:54,160 --> 00:23:55,880 Speaker 1: you know, we we did an episode a few weeks 413 00:23:55,880 --> 00:24:00,560 Speaker 1: back about the EU Green stimulus coming out. Will this 414 00:24:00,600 --> 00:24:03,439 Speaker 1: be baked into that package, you know, getting this these 415 00:24:03,520 --> 00:24:06,600 Speaker 1: standards all all set or is that completely separate? So 416 00:24:06,800 --> 00:24:09,240 Speaker 1: that's a great that's a great question. I was about 417 00:24:09,280 --> 00:24:12,000 Speaker 1: to say that's a great question. Now that's a great question. 418 00:24:15,200 --> 00:24:18,440 Speaker 1: I'm quite well known in the team to love regulation, 419 00:24:19,800 --> 00:24:22,320 Speaker 1: and like I love regulation because I think that they 420 00:24:22,359 --> 00:24:26,240 Speaker 1: are the bedrock of a healthy growth in any market. 421 00:24:26,720 --> 00:24:30,120 Speaker 1: And and indeed the European Union in terms of volume. 422 00:24:30,440 --> 00:24:34,199 Speaker 1: In terms of sustainable that issue, the European Union is 423 00:24:34,320 --> 00:24:38,320 Speaker 1: leading in almost every subcategory of sustainable debt, has been 424 00:24:38,400 --> 00:24:41,400 Speaker 1: really the heaven of sustainable debt so far, and so 425 00:24:41,560 --> 00:24:45,200 Speaker 1: there was the need for legislature to come into place. 426 00:24:45,560 --> 00:24:49,040 Speaker 1: So in two thousand and eighteen, the European Commission set 427 00:24:49,119 --> 00:24:53,399 Speaker 1: up a European Action Plan for sustainable finance. Within this 428 00:24:53,520 --> 00:24:57,120 Speaker 1: action plan you had different pillars and the first one 429 00:24:57,720 --> 00:25:02,240 Speaker 1: was to create a green taxon me so European taxonomy 430 00:25:02,440 --> 00:25:06,600 Speaker 1: for sustainable activities, green activities in particular. They've just set 431 00:25:06,680 --> 00:25:09,600 Speaker 1: up what it means in Europe to be green. Basically, 432 00:25:10,359 --> 00:25:13,320 Speaker 1: that is the first part of the standardization, and Europe 433 00:25:13,400 --> 00:25:16,520 Speaker 1: is really leading the way because after that they were 434 00:25:16,560 --> 00:25:19,359 Speaker 1: able to create green bond standard, they are able to 435 00:25:19,760 --> 00:25:24,480 Speaker 1: they're already having the pipeline some compulsory disclosure for corporations, 436 00:25:24,720 --> 00:25:30,080 Speaker 1: for asset managers, insurers benchmark. It's massive what's happening, and 437 00:25:30,119 --> 00:25:34,080 Speaker 1: the more discussions we're having with Mallory around the globe, 438 00:25:34,200 --> 00:25:37,600 Speaker 1: so with our clients in Asia, our clients in the US, 439 00:25:37,640 --> 00:25:39,679 Speaker 1: and I think amer can talk about that as well. 440 00:25:40,119 --> 00:25:43,080 Speaker 1: I was on the call with the Canadian clients about 441 00:25:43,200 --> 00:25:46,320 Speaker 1: a week ago, and they were all saying, we're waiting 442 00:25:46,840 --> 00:25:50,600 Speaker 1: for the European Union to lead the way and so 443 00:25:50,640 --> 00:25:53,919 Speaker 1: that we can legislate in the future. I mean, the 444 00:25:54,080 --> 00:25:57,879 Speaker 1: US is still the Democrats are still preaching for an 445 00:25:57,920 --> 00:26:02,720 Speaker 1: American New Green Deal, and I think they will try 446 00:26:02,760 --> 00:26:06,280 Speaker 1: to use those legislations that are happening in Europe. So 447 00:26:06,480 --> 00:26:09,439 Speaker 1: I think it's quite We're quite positive and it's a 448 00:26:09,480 --> 00:26:12,640 Speaker 1: great advancement for the market. Yeah, once they're as Maya saying, 449 00:26:12,640 --> 00:26:14,679 Speaker 1: once there's the precedent for it, it will be so 450 00:26:14,800 --> 00:26:18,760 Speaker 1: much you know, maybe easier or palatable for for other 451 00:26:19,600 --> 00:26:22,359 Speaker 1: regions to get involved. And it's not only just that 452 00:26:22,480 --> 00:26:25,320 Speaker 1: another region it's doing it. It's that it's it's Europe, 453 00:26:25,520 --> 00:26:28,320 Speaker 1: which is really the leader in this space to begin with. 454 00:26:28,720 --> 00:26:31,760 Speaker 1: You know, they if we're talking about sustainable debt financing, 455 00:26:32,119 --> 00:26:34,560 Speaker 1: they make up the largest proportion in terms of regions 456 00:26:34,600 --> 00:26:38,000 Speaker 1: if you're looking at Asian Pacific or the America's by 457 00:26:38,040 --> 00:26:41,760 Speaker 1: how much. Roughly in this year, green one represents a 458 00:26:41,880 --> 00:26:46,760 Speaker 1: represents of all green bones issued in the region. It 459 00:26:46,880 --> 00:26:51,360 Speaker 1: was fort last year, and it's always been the I mean, 460 00:26:51,800 --> 00:26:54,439 Speaker 1: unless two thousand and sixteen where a back was leading 461 00:26:54,680 --> 00:26:57,160 Speaker 1: because China has been issuing a lot of green ones 462 00:26:57,200 --> 00:27:00,840 Speaker 1: as well, but for the past four years, Yemi has 463 00:27:00,880 --> 00:27:04,040 Speaker 1: been leading. They you know, are typically very focused on 464 00:27:04,119 --> 00:27:06,119 Speaker 1: this area. And so you know, not only having a 465 00:27:06,119 --> 00:27:09,719 Speaker 1: president but having a leader from the area that seems 466 00:27:09,760 --> 00:27:13,679 Speaker 1: to know a lot about this sphere is also you know, 467 00:27:13,720 --> 00:27:16,040 Speaker 1: a good sign and something people can look toward as 468 00:27:16,080 --> 00:27:19,520 Speaker 1: a as a beacon when they're trying to raise money 469 00:27:19,680 --> 00:27:22,080 Speaker 1: or finance for good. We need to say as well 470 00:27:22,119 --> 00:27:25,639 Speaker 1: that to be fair, the central Bank, the European Central Bank, 471 00:27:25,720 --> 00:27:29,800 Speaker 1: the regulators in general in Europe are really behind it. 472 00:27:30,200 --> 00:27:33,119 Speaker 1: I mean since Christine like that has been taking the 473 00:27:33,800 --> 00:27:37,840 Speaker 1: lead of the European Central Bank, she's been saying as 474 00:27:37,920 --> 00:27:41,520 Speaker 1: much as she can that she really wants to use 475 00:27:41,560 --> 00:27:45,239 Speaker 1: the European taxonomy and she really wants to promote the 476 00:27:45,240 --> 00:27:50,280 Speaker 1: European sustainable finance market. She's been like staying here and 477 00:27:50,320 --> 00:27:54,080 Speaker 1: there that she's thinking about doing the green quantitatives in 478 00:27:54,200 --> 00:27:58,840 Speaker 1: the green quantitative so green as it repurchase, meaning maybe 479 00:27:59,080 --> 00:28:03,000 Speaker 1: something to to promote and incentivize the asset repurchase of 480 00:28:03,240 --> 00:28:07,480 Speaker 1: green bond, which would potentially promote the issuance of green 481 00:28:07,560 --> 00:28:10,240 Speaker 1: bond in the region, and I mean even in in 482 00:28:10,359 --> 00:28:13,880 Speaker 1: the UK, we've seen the UK government also leading the way. 483 00:28:13,920 --> 00:28:17,040 Speaker 1: A Bank of England with Mark Karney, was one of 484 00:28:17,040 --> 00:28:21,240 Speaker 1: the first legislators that stated, for instance last year that 485 00:28:21,480 --> 00:28:26,399 Speaker 1: all bank and insurers that are regulated by the Prudential 486 00:28:26,440 --> 00:28:31,040 Speaker 1: Regulation Authority so under the UK Authority, will have to 487 00:28:31,119 --> 00:28:35,240 Speaker 1: disclose climate risk stress testing and their climate risk strategy 488 00:28:35,359 --> 00:28:37,920 Speaker 1: to the Bank of England. So we're seeing that in 489 00:28:38,440 --> 00:28:43,440 Speaker 1: Europe there there is a lot of happening for everybody listening. 490 00:28:43,720 --> 00:28:45,160 Speaker 1: I don't know about you, but I feel like I've 491 00:28:45,240 --> 00:28:47,840 Speaker 1: learned a ton during this time here with with Mallory 492 00:28:47,880 --> 00:28:49,520 Speaker 1: and Maya. But I think it would be good to 493 00:28:49,560 --> 00:28:53,040 Speaker 1: close with what's next. So Mallory, I mean, we didn't 494 00:28:53,080 --> 00:28:54,960 Speaker 1: talk about COVID, we didn't talk about the impact of 495 00:28:54,960 --> 00:28:56,720 Speaker 1: the overall size of the market this year, but what 496 00:28:56,760 --> 00:28:59,320 Speaker 1: do you see, you know, for the rest of and 497 00:28:59,360 --> 00:29:01,800 Speaker 1: beyond only we have to talk about the disruption that's 498 00:29:01,800 --> 00:29:04,600 Speaker 1: been going on and that has, you know, maybe touched 499 00:29:04,640 --> 00:29:08,320 Speaker 1: the sustainable debt market a bit, but nothing has been 500 00:29:08,360 --> 00:29:12,440 Speaker 1: decimated in any respect. We've seen steady issuance happening in 501 00:29:12,480 --> 00:29:15,680 Speaker 1: the first half and in some cases, you know, some 502 00:29:15,760 --> 00:29:20,560 Speaker 1: things have faltered, but nothing incredibly notable in context of 503 00:29:20,600 --> 00:29:23,200 Speaker 1: looking at the other side of the coin. The other 504 00:29:23,240 --> 00:29:26,240 Speaker 1: side is what has actually done well during this time, 505 00:29:26,480 --> 00:29:29,800 Speaker 1: and that has been outweighing those, you know, things that 506 00:29:29,840 --> 00:29:32,640 Speaker 1: have been performing average or a little under average when 507 00:29:32,640 --> 00:29:34,800 Speaker 1: we're talking about compared to this time, you know, say 508 00:29:34,880 --> 00:29:37,560 Speaker 1: last year. And the primary thing that you know, I 509 00:29:37,560 --> 00:29:40,600 Speaker 1: think is worth discussing is social bonds. So those are 510 00:29:40,600 --> 00:29:43,000 Speaker 1: those bonds that are raised in order to finance or 511 00:29:43,000 --> 00:29:47,920 Speaker 1: refinance social activities, usually toward a target population. So that 512 00:29:47,920 --> 00:29:52,160 Speaker 1: could be something like the unemployed, people of diverse backgrounds 513 00:29:52,160 --> 00:29:56,960 Speaker 1: who may have less opportunities in certain spaces, children, the elderly, 514 00:29:57,240 --> 00:30:00,960 Speaker 1: any number of target groups that need special consideration in 515 00:30:01,080 --> 00:30:04,840 Speaker 1: terms of social projects. And we've seen about a three 516 00:30:04,920 --> 00:30:09,400 Speaker 1: hundred and seventies six percent increase year on year in 517 00:30:09,560 --> 00:30:12,800 Speaker 1: social bond issue and since uh this time, basically the 518 00:30:12,840 --> 00:30:15,360 Speaker 1: first half of ten compared with the first half of 519 00:30:16,560 --> 00:30:18,360 Speaker 1: And you know, if we really think about that, it 520 00:30:18,440 --> 00:30:21,280 Speaker 1: makes a lot of sense because right now there's a 521 00:30:21,400 --> 00:30:27,840 Speaker 1: focus on overarching in many ways global social issues like healthcare, education, 522 00:30:28,240 --> 00:30:32,520 Speaker 1: people's rights, and different types of target groups that need 523 00:30:32,600 --> 00:30:35,400 Speaker 1: particular care, like the elderly, or children who need to 524 00:30:35,400 --> 00:30:38,680 Speaker 1: get schooling, you know, when there's less opportunities, or people 525 00:30:38,720 --> 00:30:42,280 Speaker 1: who are losing their jobs. The unemployed can also constitute 526 00:30:42,280 --> 00:30:45,880 Speaker 1: one of those social areas and target populations. So we've 527 00:30:45,920 --> 00:30:49,840 Speaker 1: seen this massive increase, and you know, we don't necessarily 528 00:30:49,880 --> 00:30:51,760 Speaker 1: think that that's going to stop. You know, maybe once 529 00:30:51,800 --> 00:30:53,760 Speaker 1: we move into recovery that all of a sudden, you know, 530 00:30:53,840 --> 00:30:57,120 Speaker 1: we'll see a stagnation, because in some ways these things 531 00:30:57,120 --> 00:31:00,080 Speaker 1: have lasting effects. I'm not necessarily saying it will grow, 532 00:31:00,280 --> 00:31:04,160 Speaker 1: you know, four each year from now on that you know, 533 00:31:04,200 --> 00:31:07,680 Speaker 1: it's probably untenable. But if you just think about the 534 00:31:07,720 --> 00:31:11,160 Speaker 1: focus and the shifts of people's mindsets, it's not necessarily 535 00:31:11,160 --> 00:31:13,920 Speaker 1: that people are thinking less about green, but they may 536 00:31:13,920 --> 00:31:17,480 Speaker 1: be thinking more about the intersection between green and social 537 00:31:17,840 --> 00:31:21,880 Speaker 1: and how overall sustainability in e s n G, which 538 00:31:21,920 --> 00:31:26,080 Speaker 1: means environmental, social and governance interplay with one another and 539 00:31:26,400 --> 00:31:29,040 Speaker 1: play a part in their decision making. And I think 540 00:31:29,120 --> 00:31:30,479 Speaker 1: that's a great thing. I think, you know, you need 541 00:31:30,520 --> 00:31:32,920 Speaker 1: to take into account the environmental and the social sides, 542 00:31:33,240 --> 00:31:36,600 Speaker 1: and so seeing that people are shifting focus or adding 543 00:31:36,720 --> 00:31:41,680 Speaker 1: focus rather to social financing is a boon. It's true. 544 00:31:41,680 --> 00:31:43,640 Speaker 1: For so long all we ever used to hear about 545 00:31:43,760 --> 00:31:46,400 Speaker 1: is the E right in Now hearing more about the 546 00:31:46,400 --> 00:31:49,480 Speaker 1: the S in E s G is fantastic, exactly. We 547 00:31:49,480 --> 00:31:51,920 Speaker 1: don't think that's going to just wipe away, as you know, 548 00:31:52,160 --> 00:31:55,520 Speaker 1: as recovery and healthcare sort of moved back to normal. Maya, 549 00:31:55,520 --> 00:31:58,200 Speaker 1: how about you, what's coming? I think the same. So, 550 00:31:58,360 --> 00:32:01,920 Speaker 1: I mean, I've been covering this so full bond surge 551 00:32:02,160 --> 00:32:04,720 Speaker 1: this year and I'm thinking the same. I think that 552 00:32:04,760 --> 00:32:08,320 Speaker 1: the E we had to prove to investors coming from 553 00:32:08,360 --> 00:32:11,280 Speaker 1: the sustainability angle of the market. We had to prove 554 00:32:11,320 --> 00:32:16,160 Speaker 1: to investor the E had financial materiality and they needed 555 00:32:16,240 --> 00:32:21,080 Speaker 1: to care about the environmental performance of companies and countries 556 00:32:21,160 --> 00:32:23,960 Speaker 1: as well. And I think part of the job is 557 00:32:24,000 --> 00:32:28,080 Speaker 1: done now because we're seeing regulators taking the lead in there, 558 00:32:28,360 --> 00:32:32,040 Speaker 1: because we're staying seeing compulsory comic risk stress sustaining, we're 559 00:32:32,040 --> 00:32:35,560 Speaker 1: seeing much more disclosure. So that is happening, that is 560 00:32:35,640 --> 00:32:38,840 Speaker 1: being part and the sustainable debt market is part of 561 00:32:38,920 --> 00:32:43,000 Speaker 1: a bigger trend, a trend that is promoting this right 562 00:32:43,560 --> 00:32:47,040 Speaker 1: of the market, promoting sustainability to be taken into account 563 00:32:47,040 --> 00:32:51,040 Speaker 1: in the investment process. The s is still it was 564 00:32:51,080 --> 00:32:54,920 Speaker 1: still quite difficult, you know, Like we moved in the 565 00:32:55,120 --> 00:32:59,840 Speaker 1: sustainable finance market from just you know, you need to 566 00:32:59,840 --> 00:33:02,560 Speaker 1: do it because it's better to be good, right, It's 567 00:33:02,760 --> 00:33:04,760 Speaker 1: it's better to be virtuous, and you need to be 568 00:33:04,800 --> 00:33:09,520 Speaker 1: appealing to the younger generations and you're bearing reputational risk. Two, 569 00:33:09,840 --> 00:33:14,800 Speaker 1: it's a financial like in your financial remit, you need 570 00:33:14,880 --> 00:33:18,280 Speaker 1: to take into account. And we're now facing this question 571 00:33:18,440 --> 00:33:22,800 Speaker 1: in the social part of sustainable finance. And I think 572 00:33:22,880 --> 00:33:26,200 Speaker 1: that COVID and the pandemic that we have seen, but 573 00:33:26,280 --> 00:33:28,880 Speaker 1: we're still seeing because a lot of people are still 574 00:33:28,920 --> 00:33:32,120 Speaker 1: working from home like we can we can like we 575 00:33:32,160 --> 00:33:34,280 Speaker 1: can at test because we're still working from home as 576 00:33:34,280 --> 00:33:38,640 Speaker 1: well doing this podcast. And we're saying that the company 577 00:33:38,840 --> 00:33:42,920 Speaker 1: that have been the most resilient during this crisis that 578 00:33:43,120 --> 00:33:46,600 Speaker 1: was a real life stress testing were the one that 579 00:33:46,800 --> 00:33:50,600 Speaker 1: invested in their social performance. And to invest in your 580 00:33:50,640 --> 00:33:55,000 Speaker 1: social performance, you need to issue debt to do so. 581 00:33:55,000 --> 00:33:57,719 Speaker 1: So what we're thinking is that the social debt market, 582 00:33:58,200 --> 00:34:02,680 Speaker 1: thanks to also more stundardization, will be able to grow 583 00:34:02,880 --> 00:34:06,040 Speaker 1: stronger in the future. And you remember Mark, when we 584 00:34:06,040 --> 00:34:08,920 Speaker 1: were talking about frameworks at the beginning of this podcast 585 00:34:09,000 --> 00:34:11,680 Speaker 1: and saying that it's not set in stone. Well, the 586 00:34:11,719 --> 00:34:15,520 Speaker 1: International Capital Market Association came up with a new framework 587 00:34:15,560 --> 00:34:20,040 Speaker 1: and new principle for the social bones as well during 588 00:34:20,120 --> 00:34:23,600 Speaker 1: the crisis to make sure that we don't have social 589 00:34:23,640 --> 00:34:27,880 Speaker 1: washing because there was such a surge, and also everyone 590 00:34:27,960 --> 00:34:30,919 Speaker 1: was trying to raise that that we needed to make 591 00:34:31,080 --> 00:34:33,520 Speaker 1: here about that. That's really good to hear. You really 592 00:34:33,520 --> 00:34:35,560 Speaker 1: don't want you really don't want things to start off 593 00:34:35,560 --> 00:34:39,440 Speaker 1: on kind of the wrong foot, especially in that domain. Yeah, yeah, no, definitely, 594 00:34:39,800 --> 00:34:43,840 Speaker 1: so I think that also, and also the as Mattery explained, 595 00:34:44,160 --> 00:34:48,400 Speaker 1: we have a more diversified pool of fissure for social bones, 596 00:34:48,480 --> 00:34:52,080 Speaker 1: so it's showing wider number of fissures that they can 597 00:34:52,160 --> 00:34:56,200 Speaker 1: actually use those tools to to to raise that. Thank 598 00:34:56,200 --> 00:34:57,799 Speaker 1: you so much for both of you for coming in 599 00:34:57,920 --> 00:34:59,959 Speaker 1: and joining on the pot today. I think we should 600 00:35:00,000 --> 00:35:01,799 Speaker 1: get back together towards end of the year and talk 601 00:35:01,840 --> 00:35:04,640 Speaker 1: about how it's gone with social bonds, UH and social 602 00:35:04,680 --> 00:35:06,640 Speaker 1: debt and see how it's picked up over the year. Yeah, 603 00:35:06,760 --> 00:35:08,880 Speaker 1: thank you so much for inviting us. We are really 604 00:35:08,920 --> 00:35:11,440 Speaker 1: looking for it. Absolutely, Thank you so much. Rocking, we'd 605 00:35:11,480 --> 00:35:13,359 Speaker 1: we'd love to come back on any time, though thanks 606 00:35:13,360 --> 00:35:23,320 Speaker 1: for having us. Today's episode of Switched On was edited 607 00:35:23,320 --> 00:35:26,200 Speaker 1: by Rex Warner of gray Stoke Media. Bloomberg an EAP 608 00:35:26,360 --> 00:35:29,120 Speaker 1: is a service provided by Bloomberg Finance LP and its affiliates. 609 00:35:29,239 --> 00:35:31,480 Speaker 1: This recording does not constitute, nor it should it be 610 00:35:31,520 --> 00:35:35,719 Speaker 1: construed as investment advice, investment recommendations, or recommendation as to 611 00:35:35,960 --> 00:35:38,439 Speaker 1: an investment or other strategy. Bloomberg an e F should 612 00:35:38,480 --> 00:35:41,120 Speaker 1: not be considered as information sufficient upon which to base 613 00:35:41,160 --> 00:35:44,680 Speaker 1: an investment decision. Neither Bloomberg Finance Lp Nor any of 614 00:35:44,680 --> 00:35:47,680 Speaker 1: its affiliates makes any representation or warranty as to the 615 00:35:47,719 --> 00:35:50,960 Speaker 1: accuracy or completeness of the information contained in this recording, 616 00:35:51,040 --> 00:35:53,359 Speaker 1: and any liability as a result of this recording. Did 617 00:35:53,360 --> 00:36:00,279 Speaker 1: expressly disc two