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ESG Economist - NZBA loosens climate ambitions
The Net Zero Banking Alliance (NZBA) provides guidance to banks on setting climate goals. Initially, the NZBA had a key principle that banks should aim to limit global warming to 1.5°C above pre-industrial levels by 2100 and work towards transitioning to a net-zero economy by 2050. Banks committed to structure their portfolios according to these guidelines. On April 15, the NZBA released version 3 of its key principles[1]. These principles still align with the Paris Agreement, but the requirement to specifically target 1.5°C has been removed. This change gives banks more flexibility in choosing their paths to reducing emissions. In this note, we consider the potential impact of this change on emission reduction efforts.
ESG Economist – Is there a business case for sustainability?
Sustainability and climate change seem to have lost relevance in a world marked by tariffs, wars, and inflation. This note aims to establish a business case for sustainability, despite a loosening of regulatory standards and less participation of greens in the European Parliament.
ESG - Green bonds exhibit lower volatility and higher liquidity than non-green bonds
Following the first green bond issued in 2007 by the European Investment Bank, the green bond market has evolved to become what is now a USD 5 trillion issuance market. Green bonds offer several benefits for both issuers and investors, leading discussions amongst academics whether these advantages translate into green bonds trading at tighter spread levels (higher prices) compared to non-green bond. This spread difference is called the greenium and is positive if the green bonds trades at tighter spread levels. In this note, we aim to evaluate this topic and explore potential advantages of green bonds for market participants, such as volatility and liquidity. This note is the first of a series of notes about the greenium.
ESG Strategist - Investors pricing rating downgrades for TotalEnergies
Last week, the oil and gas company TotalEnergies issued a EUR 1.3bn 20-year unsecured bond, which attracted over EUR 3bn in orders. Considering the global energy transition, it is important to examine how oil and gas companies are positioning themselves and how investors anticipate their future trajectories. An analysis of the bond curves for oil and gas companies reveals that these bonds, particularly those with longer maturities, are trading at levels comparable to those of lower-rated companies. These results may suggest that investors expect these companies to be downgraded by two to three notches in the future.
ESG Strategist - Uptick of EU GBS will be limited and restricted to a few sectors
The EU Green Bond Standard (EU GBS) is a voluntary standard introduced by the European Commission to enhance the transparency and credibility of green bond markets within the EU. It was introduced as part of the broader EU Action Plan on Financing Sustainable Growth, with the regulation applying from 21 December 2024. The EU GBS promote the integrity and accessibility of green bonds, enhancing investor confidence, and facilitating the flow of capital toward environmentally sustainable projects, ultimately supporting the transition to a low-carbon economy. By providing a clear definition of what constitutes a green bond, the EU GBS seeks to mitigate the risks of greenwashing, improve the comparability of green financial products, and ultimately drive additional investment into initiatives that align with EU environmental objectives, such as climate change mitigation and biodiversity preservation. Since the application of the EU GBS in late 2024, only three issuers (being one corporate, one financial and one SSA) have used the EuGB label so far (EuGB is the name given to a green bond that complies with the EU GBS). In this piece, we explore the potential for an EuGB market and the additional incentive for both issuers and investors to use the label.
ESG Strategist - What does the NZBA exodus tell us about banks’ climate ambitions?
Several prominent US and Canadian banks have announced that they are leaving the Net Zero Banking Alliance (NZBA), which is a coalition aimed at aligning the banking sector with global climate goals, that has gained significant traction over the last few years. The departures in December 2024 and January 2025 represent a decline of 22% in the total assets of the banks participating in the alliance, while these banks also represent 12% of the assets of the entire global banking system. Given the size and systemic importance of these banks to the global economy, their departure was perceived as meaningful and triggered a lot of questions on the future of the banks’ climate ambitions. In this piece, we aim to explore these questions and what their departure might mean for the energy transition.
ESG Strategist - Why EU banks’ Green Asset Ratios may mislead on green alignment
Since January 2024, EU banks are required to disclose ESG-related information under their annual and Pillar 3 reports, the latter being part of the Capital Requirements Regulation (CRR). One of the most important ESG indicator that is disclosed is the Green Asset Ratio (GAR). The GAR indicates which share of a bank’s on-balance sheet total covered assets (exposures that do not include sovereign exposures and trading portfolios) can be considered as environmentally sustainable by aligning with the EU Taxonomy. The GAR is disclosed based on the stock of financial institutions (existing on-balance sheet covered assets) and on the flow (new loans and advances, debt securities and equity instruments). The former informs on the loan book’s current situation, while the latter provides a picture on the potential for future EU Taxonomy alignment. Starting this year, we will also be able analyze these ESG indicators from a historical perspective. While we wait for the 2024 data to become available, we conduct an analysis on the GAR based on most recent data available. We discuss how informative this ratio is for investors to evaluate a banks’ proportion of environmentally sustainable assets and how can it be used to gain better insights into banks’ sustainable activities.
ESG Strategist - Higher climate risks do not yet translate into steeper credit curves
In this piece, we look at all issuers included in the Bloomberg euro corporate bond index (excl. financials) and assess whether companies more vulnerable to climate-related risks – physical or transition - also experience steeper credit curves
ESG Strategist -Which gas network operators are better prepared for the hydrogen transition?
The build-up of an infrastructure for hydrogen seems to closely follow the dynamics around supply and demand for hydrogen. Given that everything points to Europe not being able to meet its 2030 targets for hydrogen supply, also creating a hydrogen-fit transportation network seems to be running behind schedule. This, however, reduces the risks that TSO/DSOs are prematurely repurposing or decommissioning their pipelines. Italian network operators are expected to incur lower costs for the build-up of a hydrogen infrastructure due to (i) the country’s high share of repurposed pipelines, (ii) its relatively low population density and (iii) lower share of mountainous geography.
ABN AMRO ESG Investor Survey – 2H 2024
ABN AMRO conducts an annual survey among investors to better understand their dynamics, investment behaviour, preferences and screening criteria for fixed income ESG investing. The survey had a total of 54 respondents, with the majority coming from Germany, France and The Netherlands.