International Capital Market Association’s (ICMA) 54th Annual General Meeting and Conference was held in Vienna last week with 900 delegates from 40 countries. Capital market experts from around the globe gathered to connect and share insights with colleagues from across the industry. The meeting culminated in a gala reception at Hofburg Palace.
The conference took place over three days, June 8 to 10, allowing ample time for learning and networking. There was a preconference dinner to open the festivities, with the conference and gala the following day, and additional sessions to round out the week. Ten of the 15 sessions touched upon sustainable finance and ESG, indicating the strategic importance of sustainability in the industry. While there were countless ideas and thoughts exchanged, a few key takeaways stood out.
Greenwashing and Regulatory Efforts
There are three main pillars of the European Securities and Markets Authority's (ESMA) sustainability roadmap, according to Verena Ross, EMSA Chair. They are promoting transparency and tackling greenwashing, building regulation at the EU and national level, and monitoring, assessing, and analyzing the markets and risks. Ross touched upon ESMA’s goal of further investigating and avoiding greenwashing while making it clear that strengthening corporate sustainability reporting and disclosure is one of its key priorities. Additionally, EU Commission’s Corporate Sustainability Reporting Directive (CSRD) is expected to be a primary tool for improving transparency and standardization for corporate level ESG reporting.
Different objectives and methodologies behind ESG risk ratings were also acknowledged and considered to be understandable, noting that more transparency and disclosure is needed to avoid concern from market participants.
While green, social and sustainability bond issuances have been affected by market volatility and the current geopolitical crisis, the labeled debt market has demonstrated resilience, hitting US$200 billion in the first quarter of 2022. The sustainability-linked bond segment has experienced significant growth, doubling in Q1 2022 vs Q1 2021.1 It was noted at the conference that sustainability-linked bonds are expected to maintain their momentum as the greenium becomes more apparent and more corporates intend to align their financing strategies with transition pathways, especially in hard-to-abate industries.
With the bond market slowing down compared to last year, there is an expectation of increasing interest in different product segments such as securitization, repo, commercial papers and ESG funds. It is apparent that other instruments, especially securitization, are gaining momentum across different regions. ICMA works closely with market players to explore the application of different instruments and intends to provide more guidance.
EU Taxonomy and Transition to Net Zero
In an inspiring speech, Julia Hoggett from London Stock Exchange explained why firms should integrate diversity and inclusion strategies into their operations. Hoggett touched on the importance of senior management involvement and data challenges around capturing diversity and inclusion issues on an entity level. Hoggett also reminded the audience on the limitations of setting high-level objectives, and the importance of developing more tangible and measurable targets. Hoggett explained, “It’s not for the diverse to have to ‘fit in.’ It’s up to all of us to be inclusive of everyone and create an equal opportunity to thrive.”
1 Climate Bonds Initiative, "Sustainable Debt Market, Summary Q1 2022," https://www.climatebonds.net/files/reports/cbi_susdebtsum_q12022_01e.pdf.
Financing a Sustainable Future: The Evolution of Sustainability-Linked Finance Instruments
The sustainable finance market has seen rapid growth in the last two years, with sustainable debt issuance surpassing US$1.6 trillion in 2021. This blog explores the market trends and future of sustainability-linked loans and sustainability-linked bonds.
Does ESG Impact Valuation? Answering the Most Common Questions About IPO ESG Assessments
Companies working toward an IPO increasingly understand that having an effective ESG strategy is an important strategic consideration for investors and regulators alike. This FAQ answers the most common questions about what an ESG assessment involves.
Preparing for an IPO: How an ESG Assessment Can Make a Difference
For pre-IPO companies, having a plan to manage ESG issues and disclosures can make a difference in pre-IPO fundraising, valuation, building credibility in the market, and contributing to the overall success of an IPO. This blog post explains why.