ESG Round Up: Chile becomes first sovereign sustainability-linked bond issuer

The latest developments in sustainable finance: ISS ESG opens up corporate ratings and fund scores; ASIC goes looking for greenwashers; loan market bodies issue guidance

Chile has become the first sovereign issuer to raise money from a sustainability-linked bond, raising $2bn from a 20-year note. Orders for the bond reached $8.1bn, leading it to price at 4.346%, 200bp over US treasuries. Chile will pay an extra 12.5bp per target if it fails to reduce its absolute GHG emissions, or increase the share of non-conventional renewables in its energy mix. The issuance is a significant milestone for the sustainability-linked bond market, and other sovereign issuers may follow suit. Uruguay is reportedly also working on a sustainability-linked financing framework.

ISS has called upon investors to integrate the threat of climate litigation within assessments of climate-related financial risks and financial modelling. According to commentary published yesterday, the proxy advisor noted “a clear upward trend in the use of climate litigation”, which it said would become an increasingly material risk as companies are held to account for their climate pledges and performance. Robust climate reporting is one way the legal risks could be mitigated, it added.

ISS ESG, the responsible investment arm of Institutional Shareholder Service, has freed up thousands of its “high-level corporate ratings and scores as well as fund ratings” via new online platform called ISS ESG Gateway. The new portal will initially include public access to ratings for approximately 30,000 funds spread across 45 jurisdictions and ratings and scores on more than 6,100 corporations across the globe.

The Australian Securities and Investment Commission (ASIC) is conducting a review to establish “whether the practice and promotion of managed investment and superannuation funds that offer ‘ESG’ or ‘green’ products are actually aligned.” In a speech yesterday, Chair Joe Longo added that ASIC is also encouraging board to look out for any greenwashing.

Global loan market associations have published two ESG guidance documents for green, social, and sustainability-linked loans. The first sets out a checklist for the external review of such assets, including second-party opinions, verification and certification; while the second expands on the requirement and criteria of the Social Loan Principles (SLPs), which was published last year. Together with the SLPs, the bodies – which comprise of the Loan Market Association, the Asia Pacific Loan Market Association and the Loan Syndications and Trading Association – oversee two other voluntary frameworks for green and sustainability-linked loans which are considered the de facto market standard.

The International Energy Agency (IEA) has published a 10-point plan to reduce the EU’s dependency on Russian natural gas.  According to the intergovernmental body, its proposals, which include accelerating the deployment of new wind and solar projects, could bring down gas imports by over one-third.