Daily ESG Briefing: Aussie firm has credit outlook slashed over ESG and stranded asset risk

The latest developments in sustainable finance

Moody's has downgraded North Queensland Export Terminal’s credit outlook to negative from stable, citing decline for coal demand and broader ESG risks. The firm, formerly known as Adani Abbot Point Terminal, faces “rising refinancing risk” in the run up to the maturity of a $500m bond in December, said Moody’s. “Refinance risk is being heightened by reduced appetite from creditors for coal investments due to ESG considerations,” it added. “Increasingly onerous environmental restrictions in Australia are likely to affect the operating regime of coal mines or terminals and hinder mine expansions. The latter could also be restricted by judicial challenges.” The issuer’s credit rating could be downgraded if Moody’s continues to see problems for December’s bond refinancing, it said, or if it faces weakened financial leverage. Earlier this week, Moody’s was described as “shameful” for its decision to cut the credit rating of Mexico’s state-owned oil producer Pemex. CEO Octavio Romero, described the move as one that “lacks professionalism [and] ethics”.

US financial sector trade bodies the Securities Industry and Financial Markets Association (SIFMA) and the Investment Company Institute (ICI) have opposed the creation of ESG disclosure standards by the CFA Institute, over concerns that it would further confuse and burden investors. According to submissions to the CFA Institute, SIFMA said that the standards would “introduce unnecessary regulatory complexity to the already crowded ESG reporting landscape”, while ICI described the project as “merely offer[ing] different, but not materially improved, standards”. 

The Central Bank of Egypt (CBE) has issued a framework to help regulated banks incorporate sustainable finance principles into their  lending and investment decisions. The framework is based on three objectives: safeguarding the environment, improving social impact and increasing foreign investment. The CBE also mooted the creation of specialised banks which will focus on providing low-cost financing for green projects.

Chartered Professional Accountants of Canada is the latest body to come out in support of a bid for Canada to host the new International Sustainability Standards Board. An initiative called Canadian Champions for Global Sustainability Standards has been launched, backed by the federal government, to accompany a proposal to set up the Board’s headquarters in the country. Bids from other countries will also be accepted, with a decision due at COP26 in November. 

ESG issues in the seafood industry present significant financial and reputational concerns and threaten the achievement of UN Sustainable Development Goals (SDGs), according to a report by Changing Markets Foundation, Feedback, Coalition for Fair Fisheries Arrangements and Western Sahara Resource Watch. High fish mortality rates and wild-caught fish in feed were both identified as major issues that were being overlooked by investors. The report found that a €200m green bond issued by Mowi, the world’s largest seafood producer, last year did not meaningfully combat either issue. Such matters have undermined progress towards SDGs on food security and life below water. Aquaculture investors should adopt policies to increase transparency, reduce fish mortality rates, implement good fish welfare standards and eliminate the use of wild-caught fish in feed by 2025, the report recommended.