Category: Uncategorized

Sustainability-Linked Debt Finds New Ground

Key Points: Sustainability linked debt’s recent “expansion” into the option to include ESG KPIs isn’t in itself a problem, but products must be labeled appropriately to maintain credibility for this quickly-growing category. Meanwhile, the first sovereign issuance earns a 10 basis point “greenium,” pointing to the benefits of clear (and maybe few) targets.

An option to add ESG KPIs later. Oceaneering International entered into a new $215 Million revolving credit facility last month. The company has the option to implement environmental, social and governance (ESG) key performance indicators (KPIs) at a later date. The potential adjustment to the cost of borrowing following implementation of these ESG KPIs, and verification through established measurement and reporting procedures, is modest: one basis point on the commitment fee and five basis points on the borrowing rate. Analysts have taken issue with Oceaneering’s labeling of its facility as a Sustainability-Linked revolver given the uncertainty as to whether the company will make ESG commitments at all, let alone how ambitious the commitments will be.

Chile issues the first sovereign SLB. In March 2022, Chile issued a US$2 Billion (US$ denominated) sustainability-linked bond, the first from a sovereign issuer. Strong demand led to an estimated “greenium” of ten basis points. At least in part, the demand was credited to the fact that the issuance carried a potential penalty of as much as 200 basis points if the targets, which include only two items and relate to the country’s greenhouse gas reductions, are not met. Further, it was thought that this level of potential penalties might set a benchmark, as well as the fact that the KPIs are simple, for other sovereigns considering similar financing. Chile is an experienced issuer of sustainability bonds — news and analysis service provider Environmental Finance cites US$33 Billion in cumulative issuance — which likely helped smooth the sale process.

Sustainability-Linked was fastest growing green lending sector in 2021. As we discussed in more detail in a recent Payne Financial Post, sustainability-linked bonds and loans grew 245% year-over-year in 2021 to $482 Billion, per Bloomberg estimates, (for comparison, green bonds + loans totaled $642 Billion). Sustainability-linked bonds appear to have maintained its 2021 pace in 1Q22, with US$24 Billion of issuance vs. $103 Billion in all of 2021, per Environmental Finance; in contrast, total ESG issuance (i.e. green, social and sustainable) slowed from last year’s pace by as much as 20%, according to some estimates.

 

 

Payne Institute Welcomes New Research Associate 1/11/2022

Payne Institute Welcomes New Research Associate

The Payne Institute welcomes our new Research Associate, Baba Freeman. Baba will initially be embedded within the COMET (the Coalition on Materials Emissions Transparency) partnership to help improve the transparency and quality of environmental, social, and governance disclosures along the mineral and metals value chain. Baba comes to the Payne Institute with years of experience in management consulting and finance in the oil and gas and electric power industries, in which he worked on a diverse range of projects and gained expertise in strategic analysis and business performance improvement. His academic background is in petroleum geoscience, mineral and energy economics, and policy.   January 11, 2022.  

Historical Fire Broke Out in Boulder

By Feng Chi (David), Hsu and Elijah Mt. Castle

The Marshall Fire in Boulder County burned more than 6,000 acres and leveled multiple subdivisions. The fire has been reported as the most destructive fire in Colorado history. One armed person has been arrested after threatening firefighters in the area, but as of now no cause has been determined by officials. According to a press conference Monday Jan 3rd, Boulder County law enforcement is working closely with the FBI and the ATF to determine the cause of the fire. The Marshall fire is one of two that started early in the morning on December 30th, 2021. The other fire was quickly put out, but strong winds over 100 mph and dry land caused the Marshall fire to spread rapidly. The National Weather service has reported that the Denver area has experienced the least amount of precipitation on record by over an inch. Fortunately, 8 inches of snow doused the affected area and helped prevent further damage to communities. Around 1000 homes have been destroyed in Boulder County. The Federal Emergency Management Agency (FEMA) has begun dispersing aid to the communities affected, including food and lodging. According to the President of Xcel Energy-Colorado there are approximately 400 homes still without power and 8000 without gas. 2 people are still reported missing, and at the time or writing no loss of life has been reported.

Source: https://www.cnn.com/2022/01/02/us/colorado-wildfires-sunday/index.html

Live Stream of Press Conference: https://www.youtube.com/watch?v=3v7WYEpAjVA

Large Wildfires in California

By Elijah Mt. Castle

California has experienced several large wildfires over the month of August. The Dixie fire has been burning since July 13th and has grown over 910,000 acres. The Caldor fire started August 14th and has grown to over 216,000 acres. The River Complex and Monument Fire  both started on July 30th and are relatively smaller fires, 121,000 and 183,000 acres respectively. Numerous structures have been destroyed and thousands of residents have been displaced by the various fires. The Dixie Fire alone has destroyed 692 homes. The Monument Fire and River Complex were started by lightning. The other major fires are still under investigation. Dry conditions and wind have severely impacted fire suppression tactics over the month and all fires specifically listed are continuing to burn into September with some having predicted containment in October. Pictured are the VIIRS Night Fire detections for August with an associated temperature range. The darker the color in a location the longer a detection has been present. Also pictured is the VIIRS day/night band radiance for August 17th.

Space exploration and development is essential to fighting climate change 8/16/2021

Space exploration and development is essential to fighting climate change

Payne Institute Fellow Alex Gilbert writes about how the recently released Sixth Assessment Report of the Intergovernmental Panel on Climate Change presents a worrying scientific consensus: climate change is happening, humans are causing it, even our best efforts cannot prevent negative effects, and reducing emissions now is essential to preventing catastrophic consequences. The Biden Administration recognizes the urgency of addressing this challenge. This prioritization rightly reflects the growing capabilities of the public and private space sectors to help our society understand, adapt, and mitigate climate change.  Perhaps most importantly, growing space activities can accelerate the clean energy transition to reduce emissions by catalyzing technological development of existing and new energy technologies.  With foresight and targeted intervention, emerging space capabilities and industry can improve our climate outcomes.  August 16, 2021.

Earth Day 2021

By Elijah Mt. Castle

Earth Day is an international day of environmental protection. Started on April 22, 1970 Earth Day is now observed in over 193 countries. Earth Day was first proposed at the 1969 United Nations Educational, Scientific and Cultural Organization (UNESCO) by activist John McConnell. The event originally took place on March 21, but it was moved to April 22nd when United States Senator Gaylord Nelson suggested hosting nationwide sessions to raise environmental awareness. Earth Day is a day to celebrate conservation and peace between the nations of the world. The Paris Climate Agreement was signed on Earth Day in 2016 by over 120 countries around the world. This agreement has helped strengthen both diplomatic ties and global climate change mitigation. We here at the Earth Observation Group would like to wish you a happy Earth Day.

Multiple Wildfires in Nuevo León

By Elijah Mt. Castle

Mexico is currently facing one of its worst forest fire seasons in decades. Over 1,000 people have been evacuated in Nuevo León, Mexico alone. Drought conditions and high winds have severely hindered firefighting efforts. The La Niña weather system has caused high winds with gusts up to 90kph. These high winds have grounded helicopter fire fighting units. This year alone, fire has destroyed over 29,000 hectares(~72,000 acre) of forest nationwide, the third largest loss of forest land in a decade. There are currently 75 active wildfires across Mexico. Pictured are the VNF detections in Nuevo León for March 17th -28th 2021. Also pictured is the EOG Nighttime Lights mosaic for March 27th 2021. The more pronounced the color is on the map, the longer fire has been burning there.

Weeks Long Fire Contained in Similipal National Park

By Elijah Mt. Castle

Similipal National Park has been aflame since February 24th 2021, and is now contained according to government officials. The associated tiger sanctuary also caught fire. The park, located in Odisha India, is an important biosphere for the country. Roughly one third of the forest has been destroyed or gutted for fire breaks. Fires have also been raging in surrounding areas for weeks. There have not been any reports of loss of life because of the fire, and most of the larger animals have moved to the inner-part of the preserve to escape the fire. Smaller animals and flora were not so lucky. Many reptiles and medicinal plants were killed in the fire. The exact cause of the fire is not known, but it is speculated to be man made. Many locals will burn away dead leaves to collect seeds and flowers used in alcohol and other products. The Odisha government is currently taking volunteers and paying locals to help keep the blaze contained. Pictured are the VNF detections for February 24th – March 12th 2021 in and around Similipal. The more pronounced the color is the longer the fire has been burning at that location. Also pictured are the EOG Nighttime Lights for March 6th.

Gravity Wave over United States

By Elijah Mt. Castle

The propagation of a gravity wave has been detected in cloud cover over the Eastern United States. A gravity wave is a wave generated in a fluid by the force of gravity or buoyancy attempting to restore equilibrium in the medium, i.e. the waves are caused by the fluid attempting to return to its resting place. When fluid is displaced from its equilibrium the fluid will move back and forth producing a wave. Gravity waves are responsible for many natural phenomena: ocean waves generated by wind; tsunamis; cloud patterns; and ocean tides. Pictured is an effect of a gravity wave on cloud cover over the United States. The rippled effect in the clouds could have been caused by a variety of interactions. This is a rare event to be captured so clearly by satellites.

Hawaiian Volcano Becomes Active Once More

By Elijah Mt. Castle

The Hawaiian volcano Kīlauea has become active. Kīlauea has been erupting since December 30th 2020. All lava flows are currently in the uninhabited lava lake and pose no threat. Kīlauea last erupted in 2018, when it erupted for 3 months straight. It was believed that a volcano the size of Kīlauea would only stop erupting when it was out of magma. However, the 2018 eruption only used a third of the available magma in the chamber. It was believed the volcano would remain dormant for much longer than it has. Chemical analysis of the lava shows it is not a new production of lava, but rather the remnants of the 2018 eruption. The Hawaiian Volcano Observatory is monitoring the eruption for new information and any risk it may pose. Pictured are the VNF detections for January 29th-31st 2021 for the volcano. Also pictured is the EOG Nighttime Lights for January 31st 2021, where the volcano can clearly be seen.