Markets in Motion
Green Shoots
This September, we’re showcasing our most essential insights on ESG that point out certain positive developments in the space that may signify an improving landscape for environmental, social, and governance issues — from energy transition to the climate bond market.
Published: September 1, 2019
Richard Mattison
Dealing with the climate crisis is a global effort. At S&P Global, our conviction on environmental, social, and governance issues is clear: We believe in adopting a sustainable perspective, we practice ESG principles, and we are evolving all of our products to emphasize this frontier.
Refineries Review
Energy Transition Dampens Appetite for Asian Mega-Refinery Projects
Asia has been the last bastion of large oil refinery projects for years, but overcapacity in the near term and the decarbonization of transport fuels further out have raised questions over the need for more large-scale refining projects.
China and the Middle East are still adding new capacity that will come online in the next three to four years. But most of these projects were approved when the global economic outlook was still robust, and the roster of new project approvals looks bleak.
Sustainability Linked Loans provide a direct pricing incentive for borrowers to improve sustainability performance. In this CreditMatters TV, Corinne Bendersky explains this new financing structure and the importance of robust disclosure and external review of sustainability performance.
WATCH THE VIDEO
Diesel Demand
Alternative Tech Could Dent Diesel Demand in U.S. Road Freight Sector
Semi trucks are the workhorse of modern road freight. These large, two or three axel on-road trucks are used to haul freight trailers and, on average, each one travels over five times the distance of a typical US driver annually – at one-fifth the miles per gallon efficiency.
In 2018, US semi trucks demanded over 2 million b/d in petroleum products – primarily diesel. S&P Global Platts Analytics anticipates this energy need will grow through 2040 on the back of growing population and per capita GDP. Diesel semis have the potential for large efficiency improvements via integration of already mature technologies in aerodynamics, combustion control, and road load control.
Key Takeaways
- – An estimated 1.5 million semi trucks are likely to enter the US fleet across the next 20 years to fully meet domestic growth in road freight demand. A purchase decision will be made for these new vehicles that will ultimately reshape on-road semi demand and open the door for potential fuel switching.
- – We find a compelling economic case can be made for future fuel cell trucks in long haul applications, though economies of scale and cost declines in both hydrogen production and fuel cell manufacturing are necessary.
Innovation in Mining
Miners See Environmental Concerns as Key Innovation Driver, but Hurdles Remain
A new survey of the world's miners revealed that environmental concerns will drive innovation out to 2035 more than commodity prices, but some technologies that may improve the industry's image in that regard face negative perception.
Key Takeaways
- – A long-term energy shift is underway, which will transform the design and operation of industrial processes for industry.
- – Environmental concerns will be the top driver of innovation over the next 15 years, while operating costs were the main source of value from innovation followed by risk reduction.
Green Economy Framework
Amundi, AIIB Create Framework to Unlock Climate Bond Market
Green bond issues are not the complete answer to making companies greener, and firms need to look at adapting their overall businesses to potential climate risks, according to an executive from the Asian Infrastructure Investment Bank, which has developed a framework with asset manager Amundi SA to address the issue.
Key Takeaways
- – Green bond issues help companies be more transparent about climate-friendly projects, but do not address how an issuer will reduce carbon emissions, resilience to physical risks such as rising sea levels or the financial cost of the transition to a more green economy.
- – The framework's strategy is more to promote companies that are transitioning to a carbon-neutral economy rather than punishing those that are not taking action.
The Benchmark that Changed the World
Celebrating 20 Years of the Dow Jones Sustainability Indices
The year 1999 gave the world the euro, The Matrix, and the world’s first ever global sustainability benchmark—the Dow Jones Sustainability Index (DJSI). The product of a landmark collaboration between S&P Dow Jones Indices and SAM1 (now RobecoSAM), the DJSI pioneered sustainable indexing and has shaped corporate sustainability practices ever since. To commemorate the 20th anniversary of the DJSI in 2019, we reflect on its origins, its impact on the market, and the possible future of the sustainable investing landscape.
Key Takeaways
- – Inclusion in the DJSI is seen as a badge of honor by sustainability champions around the world.
- – Amid this proliferation of environmental, social, and governance (ESG) benchmarking tools, the DJSI continues to make waves as the evolving global standard for benchmarking corporate sustainability performance, even two decades later.