Publication

Sustainaweekly - High carbon sectors to suffer margin squeeze

SustainabilityGlobalClimate economicsClimate policyEnergy transitionSocial impact
Macro economyGlobalClimate economicsClimate policyEnergy transitionSocial impact

Nick Kounis

Head Financial Markets and Sustainability Research

Larissa de Barros Fritz

Senior Fixed Income Strategist (Credit)

Casper Burgering

Senior Economist Sustainability

Shanawaz Bhimji

Head of Corporate Bond Research

Joost Beaumont

Head of Bank Research

In our latest edition of the SustainaWeekly, we cover a rich range of topics. We looked at the impact of the fossil fuel price shock on the margins of various sectors, using the carbon intensities reported by corporates. We then take a closer look at the Science Based Targets Initiative (SBTi), which will no longer validate the Paris-alignment of targets from companies in the oil and gas sector. We then go on to assess last week’s ESG bond issuance in the corporate space, an ECB report on inadequate bank ESG disclosures and the recent deterioration in emission trends in the Netherlands.

Sustainaweekly 21 Mar 2022 - ENGPDF(449KB)Download

Strategy Theme

Rising oil and gas prices will be more difficult for corporates to pass through, as consumers are feeling the pinch as well. We use the reported carbon intensities of corporates to calculate fossil fuel energy usage and the impact of higher energy prices on corporate profit margins and leverage.

Economics Theme

The Science Based Targets Initiative (SBTi) has decided to no longer validate the Paris-alignment of targets from companies in the oil and gas sector. This means that 5 companies who had their targets previously validated will be removed from SBTi.

ESG Bonds

Four new deals from 3 different companies came to the Corporates market this week, all with an ESG label. Despite strong orderbooks, companies were still required to pay double-digit new issuance premiums to get the deals done.

Policy and Regulation

An ECB report found that many banks still do not adequately disclose the impact of climate risks on their risk profile. Some improvement has been made with banks describing the incorporation of climate risk in governance, risk management and business model. However, the level of detail and disclosure of methods is still minimal.

Company and Sector news

Emissions in the Netherlands fell sharply in 2020 but due to the cold early months of 2021 and the partial return to normal in the second half of 2021, emissions increased again annually last year. The buildings and agricultural sectors led the move higher.

ESG in figures

In a regular section of our weekly, we present a chart book on some of the key indicators for ESG financing and the energy transition.