Ep 117 ft. Priscila Azevedo Rocha & Todd Gillespie
Oct 2, 2023
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Priscila Azevedo Rocha and Todd Gillespie discuss the investigation of sustainability-linked bonds, their effectiveness in combating climate change, risk allocation, alternative models, data adequacy, and the role of labels in investment decisions. They also explore retail markets, global youth activism, financial engineering, and the slow progress of the market.
Assessing issuer's ambition, targets, and strategies is crucial in understanding sustainability linked bonds.
Exploring the effectiveness of debt markets in driving sustainability is necessary as their impact on climate change is debatable.
Deep dives
Importance of Issuer's Approach to Sustainability Linked Market
The podcast highlights the significance of the issuer's approach to the sustainability linked bond market. It emphasizes the need to assess their ambition, targets, and the strategies they employ to meet those targets. The analysis points out that the market has matured, allowing for a deeper understanding of the results and progress in achieving sustainability goals.
Role of Debt in the Climate Fight
The podcast dives into the role of debt in addressing climate change. It raises the question of how influential debt markets truly are in driving sustainability. The discussion explores the assumption that the sheer size of debt markets can have a significant impact on climate change. It challenges the notion and highlights the need for further exploration on the effectiveness of debt as a climate finance tool.
Challenges and Questions Surrounding Sustainability Linked Bonds
The podcast uncovers various challenges and unanswered questions related to sustainability linked bonds. It delves into the confusion surrounding the basic logic and risk allocation of these financial instruments. The conversation questions the credibility and ambition of the climate-related commitments made by issuers. It also highlights the need for transparency, robust verification, and better alignment between targets and the actual actions taken by companies.
Market Evolution and Investor Perspectives
The podcast analyzes the evolving nature of the sustainability linked bond market and the investor perspective. It addresses the diminishing greenium (price advantage) associated with these bonds and how investors are attracted to the label rather than the potential environmental impact. The discussion raises concerns about the auditing industry associated with second-party opinions and emphasizes the importance of scrutinizing details in bond documents and refining the market via policy and innovative solutions.
Dodgy SLBs
We’ve been intrigued by the potential of sustainability-linked bonds. In theory, they should improve on green, “use of proceeds” bonds by providing incentives for issuers to invest in emissions reductions and other climate-related objectives. That’s why many in the green finance world were excited about them. But how are they working out in practice? Priscilla Azevedo Rocha and Todd Gillespie of Bloomberg talk to us about their in-depth investigation of these creatures (with Akshat Rana). We talk about how SLBs work (or don’t work) to help ameliorate climate change, how they conducted their investigation, how we might follow up on it, and what they think the future of the future of these products is.
Producer: Leanna Doty
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