Executive Summary 2Q17 (#2) - SEB Group€¦ · Important: Your attention is drawn to the statement on the back of this report which affects your rights 1 Executive Summary 2Q17 (#2)

The Green Bond 2Q 2017 (2)

1 Important: Your attention is drawn to the statement on the back of this report which affects your rights

Executive Summary 2Q17 (#2)

Since our last report six weeks ago, the green bond market continues to grow rapidly, with USD 56.2 billion of issuance YTD, standing at least 50% higher than 2016 volumes Year-over-Year (YoY).

Momentum from a record-breaking USD 27 billion issued in 1Q (which was 63% higher YoY) mostly carried through into 2Q17; with issuance breaking another quarterly record while growing to USD 28.9 billion, up 41% on 2Q16. Total cumulative green bond issuance stands at USD 284 billion by mid-June, with USD 258 billion outstanding.

The market is maturing and diversifying, with new regional hotspots (e.g. in Australia and Chinese Taipei) alongside new sectors that emerged over the year (e.g. sovereigns, insurers and medical/healthcare).

France features the most volume YTD with USD 13.2 billion, followed by the U.S. (USD 9.6 billion), China (USD 8.8 billion), Supranationals (USD 4.3 billion) and Germany (USD 3.5 billion). Previous editions flagged lagging Chinese issuance; however Chinese issuance has increased to the extent that it is actually up 9% YoY.

The green bond market responded to the U.S. decision to exit the Paris Agreement with at least USD 7.2 billion of issuance over the two weeks following the decision, including USD 2.1 billion out of the U.S. market; from municipal entities and a USD 1 billion green bond repeat issue from Apple.

As discussed in the SEB Market Comment, this resilience can be attributed to heightened green infrastructure investment demand (and green bond financing) that is underpinned by an increasingly broad complement of enablers and drivers including economic, technology, security, policy, social and green bond-specific forces, alongside increasing appetite from institutional investors.

SEB maintains its 2017 year-end green bond market potential issuance figures at USD 125 billion in a baseline scenario, with upside potential for issuance to rise to USD 150 billion. SEB’s scenario analysis for the green bond market is revised with new extrapolations that provide insights into the velocity of issuance and allow for consideration of different scenarios with forward projection ranges of USD 131-146 billion of issuance in 2017.

Securitizations slowed since 1Q but have still increased by 150% YoY, with over USD 3 billion of issuance. Issuance from government agencies is down slightly from 1Q but still up 83% YoY to USD 9.7 billion. Sub-sovereign issuance including from municipalities and regions rose since Q2, now up 55% YoY to USD 7.2 billion with very strong issuance out of the U.S. accounting for over half of all domestic green bond issuance. Activity in the corporate green bond sector was up 22% YoY, driven by a 66% rise in corporate non-financial issuance, standing at almost USD 11.5 billion compared with USD 6.9 billion YoY. The corporate financial sector, which had lagged 2016 issuance, almost completely caught up by mid-June, with USD 11.1 billion issued (down only -4% YoY).

New changes introduced in the 2017 update to the Green Bond Principles are discussed, released at the 3rd AGM on June 14. The changes are designed to clarify and strengthen the Principles while new Social Bond Principles and Sustainability Bond Guidelines were added.

Climate & Sustainable Finance Review

Guest contributors welcomed in this issue:

� KfW: On promoting the sound development of the green bond market;

� A new OECD report for the G20: Taking action on climate change will boost economic growth;

� A case study on the inaugural NWB Bank Affordable Housing Social Bond;

� Scientific literature update from CICERO: An ocean point of view.

Christopher R. Kaminker

Head of Research, Climate & Sustainable Financial Solutions; Senior Advisor, Large Corporates & Financial Institutions

+46 8 506 230 95 [email protected]

SEB Green Bonds Website

Letter to the Reader

For this publication, we have as usual invited a number of contributions. This time we have notes from KfW, OECD, NWB, all representing the public sector, and CICERO on science, providing readers with insights into their views and strategies.

When reading these insights, it seems logical to conclude that investing in a more efficient, less polluting and more resource-aware society, will not only minimize struggles with health, waste and resource challenges, but could also lead to employment, growth, broader wealth creation, and a more stable society.

So why doesn't all of this happen faster and why are these approaches not yet widely adopted, mainstreamed and broadly understood?

(Continues page 2) Christopher Flensborg Head of Climate & Sustainable Financial Solutions, SEB



Letter to the Reader (cont.)

It can all seem so simple - and yet --- In today’s report, we have (as usual) invited a number of contributions. This time we have notes from KfW, OECD, NWB, all representing the public sector, and CICERO on science, providing readers with insights into their views and strategies. When reading these insights, and for us while engaging with our partners, it seems logical to conclude that investing in a more efficient, less polluting and more resource-aware society, will not only minimize struggles with health, waste and resource challenges, but could also lead to employment, growth (measured in different ways), broader wealth creation (with more utilization of the limited resources available) and a more stable society. So why doesn't all of this happen faster and why are these approaches not yet widely adopted, mainstreamed and broadly understood? One reason, among others, could be leverage. Over the last three decades, increased focus on short term profit maximization has put strain on the balance between discounting long term value creation versus short term optimization. This has encouraged managers to demonstrate strength through heavy, short term cost controls – which provide solid short term results – but which leave long term strategic investments, and the required time investment, outside the mandated boxes. The good news is that we are currently experiencing a broad, powerful and very dedicated commitment from a large number of institutional investors - to address exactly this shortcoming – through ESG investment or sustainability integration approaches, not from a branding perspective, but rather rooted into mainstream investment approaches.

Affordable housing is a case in point: NWB just launched their first Social Bond - refinancing their lending to the Social Housing Associations in The Netherlands. For us, at SEB, working in close collaboration with NWB in creating the framework, this has been a tremendously insightful experience. As an investment bank, we normally don't get to talk to the engineers - however - to create a solid Green or Social framework - that is exactly what is required. Through our collaboration with NWB, we realized that we needed to learn more, from them, and from other experts including in academia. Issues like integration, health, inclusion, education and crime rates - can all be addressed through well governed, managed and inclusive social housing systems - it works in The Netherlands - and it is also a great example of a success approach that could be exported. Enjoy your reading! Christopher Flensborg Head of Climate & Sustainable Financial Solutions, SEB



1. Green Bond Market 2017 Market Development and Outlook

The green bond market continued to grow rapidly, with USD 56.2 billion of issuance YTD (broken down in Figure 4) with two weeks to go before the end of the second quarter. It seems summer came early to the green bond market, as it took until the beginning of September to reach this amount of cumulative issuance last year, with issuance standing at least 50% higher than 2016 Year-over-Year (YoY)1. A number of large announced deals are still in the pipeline for June, which suggests an even stronger 2Q lies ahead.

As shown in Figure 1, momentum from a record-breaking USD 27 billion issued in 1Q (which was 63% higher YoY) mostly carried through into 2Q17; with issuance breaking another quarterly record while growing to USD 28.9 billion, up 41% on 2Q16. Total cumulative green bond issuance stood at USD 284 billion by mid-June, with USD 258 billion outstanding (Figure 2).

As discussed last month, the market is maturing and diversifying, with new regional hotspots active (e.g. in Australia and Chinese Taipei, with Singapore and Japan readying pipelines) alongside new sectors that emerged over the year (e.g. sovereigns, insurers and medical/healthcare).

Figure 1. Periodic issuance and % change (USD billion) Figure 2. Total cumulative issuance (USD billion, as of 16/6/17 )

Source: SEB analysis based on Bloomberg/BNEF and SEB data Source: SEB analysis based on Bloomberg/BNEF and SEB data

Issuance was lifted again in June by a EUR 1.6 billion tap of the EUR 7 billion French sovereign green bond (Green OAT), which could be tapped again at least twice in 2017 in line with identified green funding needs, and Agence France Trésor’s ambition to provide comparable liquidity to other OATs. In terms of geographic issuance distribution, depicted in Figure 3, France has featured the most volume YTD with USD 13.2 billion, followed by the U.S. (USD 9.6 billion), China (USD 8.8 billion), Supranationals (USD 4.3 billion) and Germany (USD 3.5 billion) rounding out the top five.

Previous editions flagged lagging Chinese issuance, however by the time of this writing; Chinese issuance had increased to the extent that it was actually up 9% YoY (Figure 6). The pipeline of announced Chinese deals continued to appeared solid, complementing signaling from Chinese authorities that green bond issuance in 2017 potential is “strong” and efforts being developed to attract foreign investment into the domestic green bond market, while providing domestic policy incentives (as discussed in the regulatory update section of the previous edition).

1 Q2 YoY will refer to the period of 30 June 2016 to 16 June 2017, as there were still two weeks left at the time of this writing but since issuance was so strong in 2017 this slightly shorter period of time is still interesting to compare with a fuller period in the previous year.

Christopher R. Kaminker Head of Research, Climate & Sustainable Financial Solutions; Senior Advisor, Large Corporates & Financial Institutions [email protected]



Figure 3. Geographic distribution of green bond issuance in 2017 (USD Billion, as of June 16th)

Note: Country of Domicile classifications and terminology from Bloomberg used. SUPRANAT = Supranational; Tawian = Chinese Taipei. Top 10 issuers labelled in chart for illustration.

Source: SEB analysis based on Bloomberg/BNEF and SEB data

The green bond market responded to the U.S. decision to exit the Paris Agreement at the beginning of June with at least USD 7.2 billion of issuance (by date of announcement) over the two weeks following the decision. This includes USD 2.1 billion out of the U.S. market; from several municipal entities in California, Connecticut and Washington, to a USD 1 billion green bond repeat issue by Apple which explained alongside its return to the green bond market that “Leadership from the business community is essential to address the threat of climate change and protect our shared planet".2 Elsewhere in the days following the decision, the French Treasury tapped its Green OAT sovereign, and further issues were announced in China, Italy, the Netherlands and Sweden.

As discussed in the SEB Market Comment in this report, this resilience can be attributed to heightened green infrastructure investment demand (and green bond financing) that is underpinned by an increasingly broad complement of enablers and drivers including economic, technology, security, policy, social and green bond-specific forces, alongside increasing appetite from institutional investors.

SEB maintains its 2017 year-end green bond market potential3 issuance figures at USD 125 billion in a baseline scenario, with upside potential for issuance to rise to USD 150 billion. This range was constructed “bottom up” through a sector-by-sector analysis described in edition 1Q/1 that examines the potential for issuance across geographies and within the categories of Sovereign, Supranational, Agency, Municipal (and sub-sovereign), Corporate, Securitizations, and Project Bonds. Issuance in most of these sectors appears to be in line with SEB’s views on their potential for 2017, and activity is explored in this following section.

2 See: https://www.reuters.com/article/us-apple-climate-greenbond-idUSKBN1941ZE 3 SEB’s analysis estimates the “potential for issuance” using a variety of assumptions, as distinct from forecasting

SEB maintains its 2017 year-end green bond market potential issuance figures: USD 125 - 150 billion



Figure 4. Green Bond Issuance in 2017 (USD Billion, as of June 16th)

Notes: ABS/MBS = Asset Backed Securities/Mortgage Backed Securities; SSA = Sovereign, Supranational, Agency and Municipal, Regional and other sub-sovereign; Financials include Real Estate and Insurance; Corp. = non-Financial Corporates. SEB uses the BICS sector classification system with some adjustments using Bloomberg/MSCI green bond sector classifications. Bloomberg (see Guide to Green Bonds on the Bloomberg Terminal) methodologies used to qualify green bonds.

Source: SEB analysis based on Bloomberg/BNEF and SEB data

Securitizations (Asset Backed Securities and Mortgage Backed Securities) slowed since 1Q but have still increased by 150% YoY, with over USD 3 billion of issuance, including from US-based issuers Fannie Mae, MidAmerican Energy, Renew Financial, Mosaic and Hero, but also from Australia’s Flexigroup and the Beijing Enterprise Water Group in China.

Figure 5. Total cumulative issuance (USD billion, as of 15/6/17 ) Figure 6. China June 2016-17 (USD billion, cumulative)

Source: SEB analysis based on Bloomberg/BNEF and SEB data Source: SEB analysis based on Bloomberg/BNEF and SEB data

Issuance from government agencies is down slightly from 1Q but still up 83% YoY to USD 9.7 billion with new large transactions from KfW (see KfW section) adding to other national public financial institutions or development banks earlier in the year. With KommuneKredit Denmark issuing its first green bond in May (EUR 500 million, with books in excess of EUR 1.4 billion) all four Nordic Local Government Funding Agencies are now active issuers. SEB is honoured to have introduced all four of these institutions to the green bond market. Other repeat issuers in 2Q include Export Development Canada, which returned to the market with USD 500 million, its third green bond since 2014, and the Dutch national electricity system operator TenneT with a EUR 1 billion dual tranche green bond.

Issuance from government agenciesnearly doubles



Sub-sovereign issuance including from municipalities and regions rose since Q2, now up 55% YoY to USD 7.2 billion with very strong issuance out of the U.S. accounting for over half of all U.S. green bond issuance.

On the whole, activity in the corporate green bond sector was up 22% YoY, driven by a 66% rise in corporate non-financial issuance, standing at almost USD 11.5 billion compared with USD 6.9 billion YoY. This rise can largely be attributed to large-scale participation by the European electric/utility sector earlier in 1Q but also with diversifying participation from technology, engineering, water, medical/healthcare and forestry, pulp and paper sectors.

Figure 7. Currency split, cumulative issuance 2007-2017 Figure 8. Currency split of issuance in 2017 YTD

Source: SEB analysis based on Bloomberg/BNEF and SEB data Source: SEB analysis based on Bloomberg/BNEF and SEB data. BRL is 0.03%

In May, Repsol became the first major Western oil and gas company to issue a labelled green bond, with a EUR 500 million transaction that had EUR 2.8 billion of orders. According to BBVA4, the structuring bank, 45% of the bond was placed with “sustainable investors”, however the transaction attracted mixed market and media attention for a variety of reasons, including over the use of proceeds. It was not tagged as a green bond on the Bloomberg terminal, nor included in the Climate Bonds Initiative database, and was excluded from the Bloomberg MSCI, S&P DJI and Solactive green bond indices. In the month following the transaction when the Green Bond Principles 2017 Update was released (SEB is a member of the GBP Executive Committee), a new Q&A section was released that provides the market with more granular guidance on these types of issues.

Q: Can a green bond be issued by an issuer that has low ESG ratings, exposure to controversial issues or controversial sectors/technologies (such as fossil fuels or nuclear energy)?

A: The focus of green bonds is on the eligible projects rather than on the issuer itself. It should nonetheless be noted that the GBP recommend that issuers clearly communicate to investors their environmental sustainability objectives overall, and how they will identify and manage potential environmental and social risks associated with the selected projects. Many investors consider the issuer's profile and take into consideration the quality of the issuer’s overall profile and performance regarding environmental sustainability. In the presence of controversial issues, such as fossil fuel, extractive or nuclear based activities, or limited overall sustainability credentials, investors, stock exchanges, index providers and other market participants may also require additional transparency from the issuer, particularly around the strategic importance of sustainability for the business, demonstration of the issuer’s transition and/or sustainability benefits from the underlying projects that go beyond established sector norms and business as usual.5

The corporate financial sector, which had lagged 2016 issuance completely caught up by mid-June, with USD 11.1 billion issued (down only -4% YoY). China returned with at least 12 individual issuers, diversifying to real estate finance and bringing issuance to near 2016 levels. Sweden featured seven individual financial issuers across banks and real estate. IN Europe’s second green bond from the automotive finance sector, Volvofinans Bank issued a SEK 700 million green bond. The green bond framework was designed to fit Volvofinans Bank’s current portfolio of environmentally friendly cars, but also to be aligned with Volvo

4 BBVA was the structuring bank, Citigroup and HSBC joint global coordinators, and Banca IMI, BNP Paribas, CaixaBank, Goldman Sachs, Morgan Stanley, Santander and Societe Generale joint bookrunners.

5 See GBP Q&A: https://www.icmagroup.org/Regulatory-Policy-and-Market-Practice/green-social-and-sustainability-bonds/questions-and-answers/

Municipals and Regions growing

Non-financials drive a heightened and diversifying corporate bond market

Asia-Pacific and Europe drive financial sector issuance by banks and real estate financiers



Cars Corporation’s environment/business strategy going forward, and has a second opinion from Cicero. Following official sector encouragement, four banks out of Chinese Taipei added USD 1.7 billion to the green bond market (KGI, E.SUN, CTBC and Sinopac). Supranational institution (Multilateral and Regional Development Banks) issuances were down at several points in the first half of the year, but activity picked up to +6% YoY, with issuance reaching USD 4.3 billion. Their activities were covered in depth in the last edition, and with their heighted activity, the sector looks to be back on track in 2017 for a year. 2Q featured participation in a characteristically diverse range of currencies from ADB, EIB, IFC, NIB and the World Bank.

2. Green bonds: Market trajectory for 2017

From a “hawkish” perspective, if the market were to follow a trajectory based on month-to-month cumulative issuance market growth observed in 2016 for the rest of this year, this extrapolation would project forward to USD 146 billion. Using a different methodology of historical percentage change in issuance volume (as observed on a month-to-month basis) would result in a more conservative forward projection of USD 138 billion. Issuance continues to appear to be following a trajectory that is more statistically similar to the former methodology, and as such is referred to in Figure 9 Scenario A as “Hawkish Core”, while the latter is referred to as Scenario B “Hawkish Alternate”.

As the market has evolved over the course of the year extrapolations are continuing to provide insights into the velocity of issuance and allow for consideration of different scenarios. They have, and will continue to be updated throughout the year, in a quest to better understand the temporal characteristics of market. For instance, the Hawkish range of USD 131-146 billion is now somewhat higher than the modeling projected at the end of April (113-143 billion), in line with a market that is looking increasingly robust.

Figure 9. Green bond issuance 2014-17 and extrapolated “top-down” (left key) and “bottom-up” (right side) SEB scenarios (USD billion)

Note: Market figures for 2014-16 revised based on latest Bloomberg/BNEF data which is regularly updated

Source: SEB analysis based on Bloomberg/BNEF and SEB data and assumptions

An attempt is also made to model a more "dovish" scenario. The majority of Chinese issuance occurred in the second half of 2016 (see Figure 9, green dotted line), and although Chinese issuance is at the time of this writing up slightly (9% YoY), it was slow to return and there are high expectations for the rest of the year, so it can be useful to examine a scenario that attempts to control for Chinese issuance in 2017. The red scenario C in Figure 9 models a “Low China Scenario” with 70% of Chinese issuance that occurred last year (after June 2016). This level would be consistent with April activity that was characterized by smaller but more numerous and diverse issues. Under this scenario, the market would still grow through a traditionally busy autumn and project forward to USD 131

Velocity of issuance scenario modeling suggests hawkish forward projection range of USD 138-146 billion of issuance in 2017

Christopher R. Kaminker Head of Research, Climate & Sustainable Financial Solutions; Senior Advisor, Large Corporates & Financial Institutions [email protected]

A dovish scenario is revised upwards to USD 131 billion of issuance in 2017 based on stronger Chinese participation and overall market diversification



billion.6 This number has risen substantially from the USD 95 billion projected by the same scenario six weeks ago and could be taken as a sign of the geographic and sectoral diversification that the market has already achieved this year.

3. 2017 Update to the Green Bond Principles

The Green Bond Principles (GBP), updated as of June 2017, are voluntary process guidelines that recommend transparency and disclosure and promote integrity in the development of the Green Bond market by clarifying the approach for issuance of a Green Bond. The GBP are intended for broad use by the market: they provide issuers guidance on the key components involved in launching a credible Green Bond; they aid investors by ensuring availability of information necessary to evaluate the environmental impact of their Green Bond investments; and they assist underwriters by moving the market towards standard disclosures which will facilitate transactions.

Changes introduced in the 2017 update of the Green Bond Principles, announced at the 3rd GBP AGM, held in Paris on June 14 are designed to clarify and strengthen the Principles, they include:

• Detail on objectives of the GBP and its role in promoting the Green Bond market

• Project and traceability language updated to facilitate issuance growth especially from sovereigns and corporates

• Stronger guidance on issuer communication of environmental strategy and management of material environmental and social risk factors

• Expanded and additional definitions of green categories and new impact reporting metrics

Other developments:

• Release of new Social Bond Principles in support of bonds raising funds for projects with positive social outcomes, including affordable housing, employment generation, food security and socioeconomic advancement and empowerment;

• New Sustainability Bond Guidelines published to provide guidance for bonds combining green and social projects;

• Social and Sustainability bond market participants become eligible to become members of the GBP and fully integrated in its governance;

• An online Q&A has been made available to provide detailed guidance for participants in the Green, Social and Sustainability Bond markets.

6 As context, using average growth rates observed in the green bond market over the three last years of substantial issuance (2014-2016) would result in lower results for the Hawkish scenarios of USD 137 billion, USD 127 billion, using the respective methodologies. Note that averaging smoothens out the particular features of Chinese market participation which is useful to retain.



4. KfW: Promoting the sound development of the green bond market

The protection of the environment and the fight against climate change has a long tradition at KfW, the German promotional bank. Already in the early 1960’s, KfW launched a loan program on behalf of the government to finance air pollution prevention measures in Germany. What in these early days was a niche product, later on became a core focus of KfW’s activities. With financings provided of over EUR 260 billion for environmental and climate protection measures during the past ten years, KfW is one of the largest contributors to Green Finance worldwide. In Germany, KfW has been supporting the country’s energy transition (“Energiewende”) with EUR 100 billion since 2012 mainly financing renewable energy and energy efficiency projects in the form of loans to households or small and medium sized companies. Given the enormous amounts needed globally for environmental and climate protection measures in the future, global capital markets will have to play a crucial role in order to raise these funds. Linking its experience in environmental and climate protection finance and its standing in international capital markets, KfW decided to comprehensively support the development of the green bond market. In 2014, KfW entered the market as an issuer. Since setting up its green bond programme, KfW has issued 11 green bonds amounting to EUR 11.5 billion making KfW one of the major and most active issuers in the space. Most recently, KfW has issued its largest green bond so far in a EUR 2 billion transaction. Large and liquid green bonds in EUR and USD have been complemented by issuance in AUD, GBP and SEK. ‘Green Bonds – Made by KfW’ are linked to a loan programme financing renewable energy projects. KfW has been widely acknowledged for its comprehensive while user-friendly impact reporting that provides investors with GHG reductions per EUR 1 million among other indicators based on an external evaluation.

Figure 10. Allocation of Green Bond Investments by categories Figure 11. KfW Green Bond Issuance as of June 2017

Source: KfW Source: KfW

In April 2015, KfW announced the setting-up of a dedicated green bond portfolio, backed by a specific mandate from Germany’s Ministry for the Environment, and started investing in green bonds on a global scale. In line with the strong growth of the green bond market, the target volume of the portfolio was doubled from EUR 1 to EUR 2 billion in May 2017. This clearly demonstrates KfW’s continued commitment to the green bond market. So far, KfW has invested a total of nearly EUR 800 million in green bonds mainly financing energy efficiency, renewable energy, clean transportation, and water and waste water projects. Eligible asset classes comprise SSAs, Financials, Corporates, Covered bonds as well as Asset Backed Securities. Based on the Ministry’s mandate, KfW has defined minimum criteria that are aligned with the Green Bond Principles and encompass a clear description of the projects to be financed, a competent project selection, a transparent process for the management of proceeds as well as a regular public reporting including environmental impacts. KfW also requires an external review. Prior to investing, KfW thoroughly analyses green bonds taking into account a green bond’s framework and documentation, marketing materials, third party verifications and the issuer’s ESG strategy. After issuance, KfW conducts a detailed analysis of the reporting to make sure the minimum criteria are met until the bond matures. On specific issues, KfW enters into a dialogue with green bond issuers pre- and post-issuance to provide feedback and exchange views.

Doris Kramer Vice President Head of Investment Strategies, Sustainability KfW Bankengruppe www.kfw.de Green Bonds Impact Report



In addition, KfW actively supports the qualitative development of the green bond market by engaging in market-led initiatives like the Green Bond Principles and by initiating and keeping up a dialogue with market participants on environmental and climate protection. KfW regularly reports on the bank’s green bond portfolio, KfW’s engagement in the green bond market and the overall development of the segment to the Ministry for the Environment. Going forward, KfW will keep promoting the sound development of the green bond market in order to provide financing for the safeguarding of our environment and the transition into a low carbon society - and encourages all market participants to engage in this goal.

5. OECD: Taking action on climate change will boost economic growth

Integrating measures to tackle climate change into regular economic policy will have a positive impact on economic growth over the medium and long term, according to a new OECD report prepared in the context of the German Presidency of the G20. Investing in Climate, Investing in Growth shows that bringing together the growth and climate agendas, rather than treating climate as a separate issue, could add 1% to average economic output in G20 countries by 2021 and lift 2050 output by up to 2.8%. If the economic benefits of avoiding climate change impacts such as coastal flooding or storm damage are factored in, the net increase to 2050 GDP would be nearly 5%. The report says G20 countries – which account for 85% of global GDP and 80% of CO2 emissions – should adopt a combination of pro-growth and pro-environment policies in developing their overall growth and development strategies. This means combining climate policies such as carbon pricing with supportive economic policies to drive growth centred on investment in low-emission, climate-resilient infrastructure. “Far from being a dampener on growth, integrating climate action into growth policies can have a positive economic impact,” said OECD Secretary-General Angel Gurría, presenting the report at the Petersberg Climate Dialogue in Berlin. “There is no economic excuse for not acting on climate change, and the urgency to act is high.”

Figure 12. Combining climate action with economic reforms Figure 13. More ambitious climate policies will not harm growth

Source: OECD Source: OECD

Infrastructure investments made over the next 10-15 years will determine whether the 2015 Paris Agreement’s objective to stabilise the global climate can be achieved, and delaying action will end up being more costly. The report shows that taking action only after 2025 would lead to an average output loss for G20 economies of 2% after ten years relative to taking action now. The delay would mean that, eventually, even more stringent climate policies would have to be introduced more urgently, risking greater environmental and economic disruption and leaving more fossil fuel assets as economically unviable. Infrastructure is at the heart of economic growth and yet there has been chronic underinvestment in most G20 countries. Limiting the global temperature rise to below 2 degrees, in line with the Paris Agreement, will require USD 6.9 trillion per year in infrastructure investment between now and 2030, only 10% more than the carbon-intensive alternative. In addition, climate-friendly infrastructure is more energy-efficient and would

Anthony Cox Deputy Director Environment Directorate OECD http://oe.cd/g20climate



lead to fossil fuel savings totalling USD 1.7 trillion annually, more than offsetting the incremental cost. Even in countries where the transition to a low-carbon economy will be economically challenging, such as in net fossil-fuel exporters, the right combination of policies can mean that low-carbon growth offsets the cost in terms of the economy and jobs of putting in place mitigation policies. The report recommends that G20 countries:

• Ensure the integration of climate objectives in pro-growth reforms, in particular to deliver better resource allocation, stronger investment and structural reforms in line with the low-emission transition.

• Strengthen climate mitigation policies, including carbon pricing, fossil fuel subsidy

reform, smart regulations and the use of public procurement to help drive low-

carbon innovation

• Scale up efforts to mobilise private investment in low-emission and climate

resilient infrastructure through further efforts to green the finance system.

• Engage local governments, employers and workforce in the transition of exposed

activities and communities, to deliver a just transition for workers.

6. NWB Affordable Housing Social Bond Case Study

On 31 May 2017, the NWB Bank (Nederlandse Waterschapsbank N.V.) launched a 7-year EUR 1.5 billion and a 15-year EUR 500 million inaugural Affordable Housing Bond, for lending to Social Housing Organizations in the Netherlands.

“We are very happy with the result of our first Housing Bond. This turns out to be an excellent way of bringing the social impact of the social housing sector in the Netherlands under the attention, and it gives the investors the chance to invest in bonds with a social impact. After our successful Green Bonds this introduction of the Social Bond again shows that there is added value in bringing bonds to the market with Environmental, Social and Governance (ESG) value. The result of this dual tranche issue would not have been the same without that.” Tom Meuwissen, General Manager Treasury, NWB Bank

NWB serves local authorities, such as water authorities and municipal and provincial authorities, as well as government-backed institutions. Most of our clients are societal organizations, such as institutions engaged in social housing, healthcare, education and activities related to water and the environment. Like our clients, the shareholders of NWB Bank are Dutch public-sector parties.

In the Netherlands there has been successful implementation of social integration through a well-established infrastructure of large stocks of affordable housing for different income groups, providing affordable high quality living for lower income groups of the society. NWB Bank is a large lender to the Dutch social housing associations. With an ambition to raise further awareness around the Dutch social housing system and initiate further investor interest for social housing in general, NWB Bank issued these Housing Bonds to finance the lending to social housing. The Dutch system, apart from securing housing for those in need, also targets a larger group of tenants, like youth and older people, who are facing challenges to find affordable living.

Tom Meuwissen General Manager Treasury NWB Bank

Website



A slightly tailored refinancing of NWB’s lending to this sector

NWB commissioned SEB to assist in the creation of the framework and worked together with recognized social housing experts from academia to provide a reflection on the pillars of the Dutch affordable housing system seen from an international angle. These reflections were used to tailor the framework in a way so as to mitigate any uncertainty when going to market. As an example, one key ambition of the Dutch system is smoothing societal integration, which requires that the Dutch Social Housing Associations need to walk on the border of different income levels, which means that 20% (max) of the dwellings can be populated with income levels above the prime target area. To avoid forcing investors to have in-depth understanding of the complexity of these issues, NWB decided to make a haircut of the eligible loans of 20%. The framework, supported by an academic review, was used to obtain a second party opinion review by Sustainalytics.

"Those most affected by the housing shortage are the most economically vulnerable parts of the population. NWB’s social housing bond could thus play a key role in incentivizing the sufficient supply of long-term affordable social housing, particularly for those populations at the lower end of the income.

Given this context, Sustainalytics is of the opinion that NWB’s social bond addresses a growing need for affordable housing for vulnerable populations nation-wide. The NWB Social Bond can help alleviate a backlog of social housing applications and excessive waiting times, further worsened by an increase in refugee arrivals and a large income distribution gap in the Netherlands.” Sustainalytics Review

Key takeaways

From a financial perspective, we find that the clarification of the pillars of social housing simplify the way we value our engagement. If a property area lacks management, governance and an overall commitment, there is a significant financial risk associated to the outlook for this area. Issues like unemployment and lack of integration often lead to increases in health issues, crime rates and eventually the feeling of safety - which all lead to deteriorating property values. Vice versa - a well-defined, governed and managed system, even in less popular areas, does - over time - provide comfort and trust, which is a base requirement for deploying capital. It feels natural for us to activate our stakeholder network, and use their intelligence to bring more awareness into the financial society.

“Where we normally see most larger accounts having an interest in Green Bonds (with different motivations), we experienced a slightly different regional distribution picture on the NWB affordable housing bond. We saw strong demand from France, Netherlands and Germany - but lower participation from UK, Scandinavia and Switzerland. We think there are a number of reasons for this, one being the French legislation on transparency and the related strong commitment by the French investment society, another being a proximity bias to social investments. One can almost say "social is a more local challenge whereas climate is a global challenge ". But most importantly, it seems like the Green Bond strategies are now broadly accepted and about to be implemented. Social bonds - for some investors - are still at a rather early stage. We had a number of investors stating - "we want to invest but we are not ready yet". It will be interesting to see how this investor perception continues to develop.” - Erik Bauer, Head of Market Sales, SEB

7. Science update from CICERO: An ocean point of view

1.5-degree Celsius warming – when? The Oceans decide

In many ways, the oceans are the memory of the Earth’s climate system. A warm year at a particular location will for instance set its imprint on part of the ocean. Via the ocean currents, this signal will be transported to other places, where it will be relieved back to the atmosphere up to decades later. Changes in these ocean processes could mean that we reach the 1.5°C global warming level several years sooner than anticipated. Recent climate model predictions suggest a turnaround in this slow-moving natural oscillation in the climate system, called the Interdecadal Pacific Oscillation (IPO), meaning, a sustained period of rapid temperature rise might be underway. If the Pacific Ocean moves to a positive IPO phase, this could mean global warming exceeds 1.5°C already around 2026, i.e. around 5 years earlier than with the negative IPO, which predicts reaching 1.5°C in 2031.

Knut H. Alfsen Senior Researcher CICERO (Center for International Climate and Environmental Research – Oslo) Norway’s foremost institute for interdisciplinary climate research



Figure 14. Observed global annual mean surface temperature anomaly (NOAA, 2000–2016, 1850–1900 baseline), modelled plume of future temperature anomalies accounting for a temporary 0.1°C influence of the 2015–16 El Niño, and 1.5°C Paris target and timing of the ensemble mean breaching this level shown in dotted blue and red lines.

Source: Henley and King (2017)

“Policymakers should be aware of just how quickly we are approaching 1.5°C. The task of reducing emissions is very urgent indeed” says the lead author of the recent study: Henley, B. J., and A. D. King (2017).7 Given the short time span till 2026, the probability of stabilising the temperature increase at 1.5-degrees Celsius or even 2-degrees Celsius, seems more remote than ever.

Ocean, ocean everywhere

You may have noticed a flood of news and commentaries on the state of the oceans the last month. This was linked to World Oceans Day on June 8th and the UN conference on the ocean in New York from June 5th to 9thhttps://oceanconference.un.org)/. Earth’s oceans play crucial roles in the world. They cover more than 70% of the planet’s surface and are vital to survival of life. However, the UN and science community say that life-sustaining capacities of the seas are at risk. We have for a long time heard about the dangers of sea level rise and ocean acidification with associated coral bleaching. More recently another threat also associated with climate change has been noticed: The Ocean is losing its oxygen at a faster rate than predicted. A new study8, based on data analysis of the last 50 years, concludes that the decline is about two to three times faster than what is expected from decreased solubility associated with ocean warming.

7 Henley, B. J., and A. D. King (2017): Trajectories toward the 1.5°C Paris target: Modulation by the Interdecadal Pacific Oscillation (Geophys. Res. Lett., 44, 4256–4262, doi:10.1002/2017GL073480). 8 Ito, T., S. Minobe, M. C. Long, and C. Deutsch (2017), Upper ocean O2 trends: 1958–2015, Geophys. Res. Lett., 44, 4214–4223, doi:10.1002/2017GL073613.



Figure 15. Geographical extent of more than 405 coastal dead zones worldwide.

Source: https://nofishleft.wordpress.com/tag/marine-dead-zones/

“This is most likely due to the changes in ocean circulation and mixing associated with the heating of the near-surface waters and the melting of polar ice”, the researchers write. They continue: “If it is a warming signal, we should expect to see continued widespread declines in oceanic O2. The impact of ocean deoxygenation may be profound.” Aquaculture, open sea fisheries and tourism are some of the hardest hit economic sectors.9 Extended dead zones in the oceans and ”respiratory stress” of their ecosystems are not what the oceans or we need right now.

Atlantic hurricane season outlook: Above normal

Forecasters at NOAA’s Climate Prediction Center say the Atlantic could see another above-normal hurricane season this year, which means bad news for owners of coastal businesses and properties (https://pubs.usgs.gov/fs/hurricane-impacts/). For the upcoming Atlantic hurricane season, which runs from June 1 through November 30, forecasters predict a 45 percent chance of an above-normal season, a 35 percent chance of a near-normal season, and only a 20 percent chance of a below-normal season. These numbers include Tropical Storm Arlene, a rare pre-season storm that formed over the eastern Atlantic in April.

“The outlook reflects our expectation of a weak or non-existent El Niño, near- or above-average sea-surface temperatures across the tropical Atlantic Ocean and Caribbean Sea, and average or weaker-than-average vertical wind shear in that same region,” said Gerry

9 http://www.oceanscientists.org/index.php/topics/ocean-deoxygenation



Bell, lead seasonal hurricane forecaster with NOAA’s Climate Prediction Center (http://www.cpc.ncep.noaa.gov/products/outlooks/hurricane.shtml).

Warmth will worsen precipitation extremes

It is a well-known prediction from climate models that wet regions will become wetter and dry regions dryer under global warming scenarios. Last month, two scientists, Aaron E. Putnam and Wallace S. Broecker from University of Maine and Columbia University, respectively, confirmed this prediction in new research10 based on independent historical evidence. For the Northern hemisphere, the study shows a strengthening of extreme precipitation during summer, while during winter the rainbelts and drylands will expand northwards.

Figure 16. Map illustrates global seasonal precipitation anomaly [June-July-August (JJA) precipitation minus December-January-February (DJF) precipitation]. Red shades depict position of rain belts in the boreal summer, blue shades indicate the position in the austral summer.

Source: Putnam and Broecker (2017)

New record – again The CO2 measurements at the Mauna Loa Observatory in Hawaii registered a new monthly record for May this year.11 No further comment necessary!

Figure 17. Monthly Carbon Dioxide sets a new high

Source: Scripps Institute of Oceanography, Mauna Loa Observatory; Climate Central

10 (http://climatenewsnetwork.net/22358-2/, Putnam, A. E. and W. S. Broecker, Human-induced changes in the distribution of rainfall, Science Advances, 31 May 2017: e1600871, http://advances.sciencemag.org/content/3/5/e1600871) 11 (https://www.esrl.noaa.gov/gmd/ccgg/trends/

Cloudburst, North Vancouver: Wet or dry, extremes will become more intense. Image:

Terence Thomas via Wikimedia Commons



8. Market Comment: U.S. Withdrawal from the Paris Agreement

Originally published June 2nd, 2017, revised on June 16th 2017

Event:

At 3pm ET on the 1st of June, U.S. President Donald Trump announced at a press conference that the U.S. would begin the process of withdrawing from the Paris Agreement.

“In order to fulfil my solemn duty to the United States and its citizens, the U.S. will withdraw from the Paris climate accord, but begin negotiations to re-enter either the Paris accords or a really entirely new transaction, on terms that are fair to the United States… We will start to negotiate, and we will see if we can make a deal that’s fair…If we can, that’s great. If we can’t, that’s fine.” Mr. Trump told press at the White House.

Following the announcement, France, Germany and Italy issued a joint statement saying they believed that the Paris Agreement cannot be renegotiated, which was then followed by a statement from Jean-Claude Juncker confirming that the EU would not renegotiate the Agreement.

There will be many questions as to what will come next but insights can already be drawn from what has happened so far. Initial SEB comments were issued immediately following the decision. This note updates our views (which remain the same) with new numbers and facts.

Implications:

The Paris Agreement set out a global action plan to put the world on track to avoid dangerous climate change by limiting global warming to well below 2°C. The U.S. is the world’s second largest emitter of Greenhouse Gases (GHGs).

Under the terms of the agreement, the U.S. must wait until November 2019 to formally submit a bid to exit under the accord’s withdrawal mechanism. It would take another year before the U.S. fully exits. A future U.S. Administration could re-join, if it chose to, thus placing the issue at the forefront of the 2020 U.S. Presidential election. As such, the decision itself was largely symbolic, and the Paris Agreement remains in force regardless of the decision. A recent article in the academic journal Nature can be consulted for an in-depth discussion of the implications for the Paris Agreement itself, international relations in the wake of the decision, and the prospects for financial aid to developing nations, which will be affected by the decision and may have knock-on effects.

An analysis using the C-ROADS simulation model built by Climate Interactive and the M.I.T. Sloan School of Management suggests that the world would warm by 3.6 degrees Celsius (6.4 degrees Fahrenheit) by 2100 when compared with pre-industrial levels with the U.S. outside the Paris Agreement, more than the 3.3 C - degree baseline scenario.

The short term implications are mixed and will have more to do with the domestic energy and environmental policy landscape than U.S. participation in the Paris Agreement. Overall the decision itself appears to have had negligible impact on global or domestic energy markets, which were more responsive to US crude oil inventory, and in the following weeks from EIA, IEA and OPEC reports. Prima facie, carbon-intensive industries domestically would stand to gain from this decision and the associated domestic policy actions. However, in the medium to long term, the fossil fuel sector continues to face powerful market, technological, economic, competitive and demand-side challenges.

The center piece of the U.S. Nationally Determined Contribution to cut domestic GHG emissions 26-28% below 2005 levels by 2025, the Clean Power Plan, was already in the process of being dismantled, and rules for vehicle fuel-economy standards and methane leaks were under review. However, the U.S. economy was already in the process of de-carbonization while becoming more efficient in its energy consumption at the same time. American energy consumption had started becoming decoupled from economic growth already a decade ago, with the two no longer carrying a correlation. By the end of last year, GHG emissions economy-wide were already an estimated 12% below 2005 levels; which is nearly halfway to the U.S. Paris pledge, with power sector emissions already within 2% of the Paris pledge due to fuel switching in the power sector (from coal to gas and renewables).

Christopher Kaminker, Head of Research, Climate & Sustainable Financial Solutions, SEB

Arvid Böhm, Chief Strategist Nordic Equites, SEB

Klas Eklund, Senior Economist, Sustainability, SEB



As the U.S. moves away from the Paris Agreement and its domestic climate goals, natural gas which had an important role to play as a bridge fuel under the Paris Agreement, may lose some favor, although the economics of natural gas extraction will be the overriding drivers. The fate of coal companies is intertwined with competition from cheap natural gas and renewables, domestically.

According to the U.S. Department of Energy, domestically, fuel-shifting within the electric power sector away from coal has created hundreds of thousands of jobs in the renewable energy industry, with the solar now employing twice as many workers as the coal sector. A major driver of the energy transition has been cheap natural gas prices as a benefit of the unconventional oil and gas revolution. An outstanding question will centre on how will the relative price of coal vs. natural gas change? Energy market economics and fundamentals will be the decisive factors in answering this question.

Few implications for low-carbon energy in the U.S. can be drawn from this decision alone. U.S. domestic support for wind and solar (through the Production Tax Credit and Investment Tax Credit) were recently renewed with bi-partisan congressional support, and 29 U.S. States (+ Washington DC) and 3 U.S. territories have a Renewable Portfolio Standard. Corporate procurement of renewable energy has become a new source of investment demand over the years as a diverse range of U.S. companies under the RE100 initiative seek to voluntarily become 100% powered by renewables. This type of action has resulted in a cumulative 11 GW of renewable energy power purchase agreements signed by corporates to date.

Actions and reactions

Over the last weeks as rumors of the decision circulated, leaders from G7 and G20 countries, 1,100 US businesses from Apple (AAPL) to Exxon Mobil (XOM), over 280 global investors managing USD 17 trillion, among many others, petitioned the U.S. President to remain part of the Paris Agreement.

In the wake of the decision, 13 U.S. States, 1 territory and 246 cities with 138 million people pledged to meet the Paris commitments in the absence of federal action under the U.S. Climate Action Alliance. Separately, a spontaneous movement in the U.S. arose among 1,227 American businesses and investors, 125 cities, 9 states and 183 universities (with a combined GDP of 6.2 trillion), joining together to sign up for a “We Are Still In”12 declaration (a pledge to support climate action to meet the Paris Agreement).

Michael Bloomberg, the UN Secretary-General’s Special Envoy for Cities and Climate Change, submitted a statement of unity (“America’s Pledge”) to the UN on behalf of all the actors in this initiative. The goal of the initiative is to submit a “Societal Nationally Determined Contribution” to the UN in due course. Among the numerous international responses included affirmations of support for the Paris Agreement from China, India, the EU, the “G6”; along with bilateral climate action agreements between the EU and China, and the State of California and Germany. Green bond issuance continued full speed ahead with Apple issuing its second green bond while citing its support for Paris.

Box 2. Selected quotes from investors, corporates and government leaders in the U.S.

“Climate change does not need a passport. This is a global issue that needs a global solution. Investors support the Paris Agreement because it makes financial sense. Because we’re a global investor, we’re looking at this not just in the United States but in a whole wide range of markets internationally.” – Anne Simpson, Investment Director, Sustainability, CalPERS

“Man-made climate change is real, the science is incontrovertible, and the threat to our planet is undeniable. We cannot walk away from our obligations and pretend that reality doesn’t exist. We’re going to fight back, lead by example, and work towards a sustainable future in every capacity we can. If the White House works to turn back the clock on the environment, cities like New York will continue to stand up and protect it. That’s why I’m proud to join with hundreds of elected officials, educators, and business leaders in declaring that we’ll uphold the Paris Agreement.” – Scott Stringer, NYC Comptroller

“We are deeply disappointed by the recent shift in climate policy. NIKE believes that climate change is a serious global threat and that the world will need to radically redesign industrial systems and economies in order to enable a low-carbon growth economy. We will continue to honor our commitments on climate, including reaching 100% renewable energy in all NIKE

12 The We are Still In declaration and a complete list of signatories is available at www.wearestillin.com



owned or operated facilities around the world by 2025, participating in the U.S. Department of Energy’s Better Buildings Challenge and advancing materials innovation globally.” – Hannah Jones, VP, Innovation Accelerator and Chief Sustainability Officer, NIKE, Inc.

“Climate change is a fact of life that people in Los Angeles and cities around the world live with every day. It is a grave threat to our health, our environment, and our economy — an urgent challenge that requires unprecedented collaboration. The President may be pulling out of the Paris Climate Agreement, but L.A. will lead by committing to the goals of the accord — and working closely with over 200 other Climate Mayors as well as governors and CEOs across the U.S. to do the same.” – Eric Garcetti, Mayor of Los Angeles, Los Angeles, California “As the first state in the Trump era to take executive action to limit carbon emissions and create clean energy jobs, Virginia is proud to join this alliance of states, cities and businesses. President Trump's announcement to withdraw the United States from the Paris Climate Agreement does not speak for the states and cities that are committed to fighting climate change and paving the way for a new energy economy. If the federal government insists on abdicating leadership on this issue, it will be up to the American people to step forward — and in Virginia we are doing just that.” – Terry McAuliffe, Governor, Commonwealth of Virginia

“The President’s decision to withdraw from the Paris agreement does nothing but motivate us even more to make responsible decisions on behalf of our planet. Columbia is still committed to finding innovative solutions for renewable energy and protecting the natural resources that we already have. As one of dozens of Mayors for 100% Clean Energy, I know we have the leadership and innovation to ensure our country does not lag behind in the midst of an incredibly important issue.” – Steve Benjamin, Mayor of Columbia, Columbia, South Carolina

Source: http://wearestillin.com/

As such, it can be expected that all of these actors will continue to work to drive forward a low-carbon and climate-resilient transition. Internationally, this decision will have minimal effect on the business case for and trajectory of low-carbon and climate-resilient investments. The center of gravity of low-carbon investment had already been shifting towards China and India. Increasing appetite for sustainable investments from institutional investors and corporates underpin a robust complement of drivers of low-carbon investment.

These include economic factors (labor and export market benefits), health costs (from local air and water pollution), technological forces (“cost-down” curves in renewable energy equipment and lithium-ion batteries), social movements, energy security concerns linked to fossil fuel imports and supply chain risks. Domestic policy action in support of low-carbon investment is widespread: 114 countries have renewable energy policies and almost 40 countries and more than 20 cities, states and provinces already use carbon pricing mechanisms or are planning to implement them. Alongside them, close to 500 global companies operate with carbon pricing systems.

Solar power is projected to be the least-expensive electricity technology in most of the world before 2030, surging electric vehicle deployment will help push lithium-ion battery costs down by 73% by 2030 and onshore wind costs will fall an additional 47%by 2040, according to Bloomberg New Energy Finance, which also forecasts USD 7.4 trillion of investment in renewables over this period.13 Regulators in China canceled more than 100 planned coal-fired power plants in 2017 and India canceled 14 GW of planned coal facilities in the same period, as the costs of new build solar were reported to fall below coal, and as it progresses towards a 175 GW target of renewables deployment by 2022. The EU is targeting at least 27% of the region’s energy to be generated from renewable energy sources by 2030, which will require some EUR 1 trillion of investment in renewables.

In sign of increased focus from institutional investors on climate change, Assets Under Management of signatories to the UN-supported Principles for Responsible Investment jumped to USD 73.5 trillion while a majority of Exxon Mobil’s shareholders, in a reversal, voted at the AGM in favor of more open and detailed analyses of the risks posed to its business by policies aimed at stemming climate change.

Market reactions were quite mixed as headlines of the U.S. decision circulated over the last days and through to the time of the decision. Some renewable energy manufacturing stocks were down (most have since recovered), others were flat or up,

13 Bloomberg New Energy Outlook, 2017



but many oil, gas and coal stocks were falling too before and some continued to fall after the decision, with others rebounding somewhat. Tesla and SpaceX CEO Elon Musk, and Bob Iger, CEO of Disney both announced they would resign from White House advisory councils.

As the announcement was made by President Trump the VIX moved from 10.20 to 9.70, suggest that knowing is better than not knowing. The EUR/USD cross was more or less unchanged; from 1.1214 down to 12.09 and then up to 1.1214 again which suggested the decision was not expected to change the world balance in any dramatic way. WTI traded down from USD 49 to USD 47, indicating that the U.S. decision will increase fossil fuel investments and add supply. However there was also simultaneous news that OPEC crude output was boosted in May by Libya. Asian and European stock markets traded higher on the same morning.

When compared to the MSCI World Index, clean energy stocks (as measured by the NEX Index) had generally been up YTD while oil, gas and coal indices had been down. In the days following the decision, clean energy stocks responded very favourably, outperforming the market as well as other types of fossil fuel stocks. Indeed, a low-carbon version of the MSCI World Index which was designed to match the overall market with very little tracking error closely followed its reference index. An index tracking U.S. and global YieldCos (listed vehicles which bundle clean power projects) was up YTD and was also up somewhat as the US decision was announced, and then continued to rise, matching the market.

A global coal index fell in the days after the decision, but then recovered and outperformed, whereas an index measuring oil and gas exploration and production stocks performed the worst from among these initially, and recovering later, although its performance is more correlated to the prices of oil and gas which had fallen.

Figure 18. Short term performance of equity indices after the decision

Source: Bloomberg Terminal



SEB Climate & Sustainable Financial Solutions

Christopher Flensborg Head of Climate & Sustainable Financial Solutions Phone: +46850623138 [email protected] Assistant: [email protected] Christopher Kaminker Head of Research, Climate & Sustainable Financial Solutions; Senior Advisor, Large Corporates & Financial Institutions Phone: +46850623095 [email protected] Samantha Sutcliffe Senior Advisor, Climate & Sustainable Financial Solutions, Large Corporates & Financial Institutions [email protected] Mats Olausson Senior Advisor, Climate & Sustainable Financial Solutions, Large Corporates & Financial Institutions [email protected] Gabriella Eriksson Advisor and Specialist Green Library, Climate & Sustainable Financial Solutions, Large Corporates & Financial Institutions [email protected] Urban Josefsson Head, Rates Distribution, SEB Markets [email protected] Anna Svensson Stockholm, Credit Sales, Large Corporates & Financial Institutions [email protected] Anders Wickman London UK Sales, Fixed Income - CaM Bond Sales [email protected] Peter Thiberg London UK Sales, Fixed Income - CaM [email protected] Jonas Englund Cross Asset New York [email protected] Paul Bergel Macro & Credit Sales New York [email protected] Lauri Hälikkä Macro & Credit Sales New York [email protected] Marcus Jansson Sales Germany [email protected] Bo Madsen Denmark [email protected] Jukka Honkaniemi Finland [email protected]

This report was published on 19 June 2017. Cut-off date for calculations was 15 June 2017, unless otherwise stated.

Subscribe / unsubscribe to The Green Bond by sending an e-mail to: [email protected]

Lars Dybwad Head, Macro Sales, Norway [email protected] Miikka Riihimäki Head, Macro Sales, Singapore [email protected] Martin Bergqvist Head, Markets, Hong Kong [email protected] Sir Roger Gifford Senior Banker, Large Corporates & Financial Institutions, London [email protected]


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Opinions, projections and estimates contained in this report represent the author’s present opinion and are subject to change without notice. Although information contained in this report has been compiled in good faith from sources believed to be reliable, no representation or warranty, expressed or implied, is made with respect to its correctness, completeness or accuracy of the contents, and the information is not to be relied upon as authoritative. To the extent permitted by law, SEB accepts no liability whatsoever for any direct or consequential loss arising from use of this document or its contents.

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