Zurich Issues Digital Bond Using Wholesale CBDC

Energy News Beat

On Monday the Canton of Zurich issued a CHF 100 million ($113m) digital bond via the SIX Digital Exchange, Ledger Insights reported. While most of the bond terms were unexciting – it has an 11 year term and a coupon of 1.45%  – the most distinctive aspect is this transaction is that it settles using a wholesale central bank digital currency (wholesale CBDC) issued by the Swiss National Bank (SNB).

The joint lead managers on the issuance were Zürcher Kantonalbank, UBS and Raiffeisen Switzerland. Zürcher and UBS were announced as part of the CBDC pilot earlier this month, but Raiffeisen was not.

A Zurich spokesperson confirmed that wholesale CBDC settlement takes place on December 1 and only for the two pilot banks. Raiffeisen and the Canton of Zurich will receive conventional Swiss francs, not wholesale CBDC. At that point, the bond will be listed on both the SIX Digital Exchange and the main SIX Swiss Exchange.

While there have been plenty of wholesale CBDC trials, two things are distinctive about this pilot.First, the SNB is allowing the use of a live wholesale CBDC over an extended timeframe.Second, the SDX platform on which the SNB issues the CBDC is not a test platform. It is the same production platform that SDX has used for issuing tokenized Swiss francs used for previous SDX settlements.  

Meanwhile, in February the City of Lugano issued a CHF 100 million tokenized bond via SDX with investors able to invest via the SDX central securities depository (CSD) or the conventional SIS CSD. Enabling the use of the SIS CSD means that investors don’t need to be up to speed with DLT and hence significantly improves liquidity. It was the first digital bond to qualify for SNB’s repo.

Zurich confirmed it is similar, subject to the repo approval by the central bank, but it expects to qualify as HQLA Level 1. Additionally, it expects an S&P issuance rating of AAA.

How does settlement work given there are two CSDs?

One point of curiosity is how it’s possible to support settlement on both SIS (T+2 settlement) and SDX (T0) given the different settlement timeframes. The two CSDs are integrated, but because the bonds are natively digital, the SDX CSD is the primary registry.

Exchange trades executed on one exchange cannot settle on the other. Any trade executed on the SIX Digital Exchange settles atomically via the SDX CSD. On-exchange trades executed via the main SIX stock exchange settle in two days via the SIS CSD using x-clear, SIX’s pan-European central counterparty. One can assume that at the two day point, SDX’s blockchain logs the change in real time. Over the counter trades can settle on either CSD.

Loading…

 

The post Zurich Issues Digital Bond Using Wholesale CBDC appeared first on Energy News Beat.

 

Zurich Issues Digital Bond Using Wholesale CBDC

Energy News Beat

On Monday the Canton of Zurich issued a CHF 100 million ($113m) digital bond via the SIX Digital Exchange, Ledger Insights reported. While most of the bond terms were unexciting – it has an 11 year term and a coupon of 1.45%  – the most distinctive aspect is this transaction is that it settles using a wholesale central bank digital currency (wholesale CBDC) issued by the Swiss National Bank (SNB).

The joint lead managers on the issuance were Zürcher Kantonalbank, UBS and Raiffeisen Switzerland. Zürcher and UBS were announced as part of the CBDC pilot earlier this month, but Raiffeisen was not.

A Zurich spokesperson confirmed that wholesale CBDC settlement takes place on December 1 and only for the two pilot banks. Raiffeisen and the Canton of Zurich will receive conventional Swiss francs, not wholesale CBDC. At that point, the bond will be listed on both the SIX Digital Exchange and the main SIX Swiss Exchange.

While there have been plenty of wholesale CBDC trials, two things are distinctive about this pilot.First, the SNB is allowing the use of a live wholesale CBDC over an extended timeframe.Second, the SDX platform on which the SNB issues the CBDC is not a test platform. It is the same production platform that SDX has used for issuing tokenized Swiss francs used for previous SDX settlements.  

Meanwhile, in February the City of Lugano issued a CHF 100 million tokenized bond via SDX with investors able to invest via the SDX central securities depository (CSD) or the conventional SIS CSD. Enabling the use of the SIS CSD means that investors don’t need to be up to speed with DLT and hence significantly improves liquidity. It was the first digital bond to qualify for SNB’s repo.

Zurich confirmed it is similar, subject to the repo approval by the central bank, but it expects to qualify as HQLA Level 1. Additionally, it expects an S&P issuance rating of AAA.

How does settlement work given there are two CSDs?

One point of curiosity is how it’s possible to support settlement on both SIS (T+2 settlement) and SDX (T0) given the different settlement timeframes. The two CSDs are integrated, but because the bonds are natively digital, the SDX CSD is the primary registry.

Exchange trades executed on one exchange cannot settle on the other. Any trade executed on the SIX Digital Exchange settles atomically via the SDX CSD. On-exchange trades executed via the main SIX stock exchange settle in two days via the SIS CSD using x-clear, SIX’s pan-European central counterparty. One can assume that at the two day point, SDX’s blockchain logs the change in real time. Over the counter trades can settle on either CSD.

Loading…

 

The post Zurich Issues Digital Bond Using Wholesale CBDC appeared first on Energy News Beat.

 

Zurich Issues Digital Bond Using Wholesale CBDC

Energy News Beat

On Monday the Canton of Zurich issued a CHF 100 million ($113m) digital bond via the SIX Digital Exchange, Ledger Insights reported. While most of the bond terms were unexciting – it has an 11 year term and a coupon of 1.45%  – the most distinctive aspect is this transaction is that it settles using a wholesale central bank digital currency (wholesale CBDC) issued by the Swiss National Bank (SNB).

The joint lead managers on the issuance were Zürcher Kantonalbank, UBS and Raiffeisen Switzerland. Zürcher and UBS were announced as part of the CBDC pilot earlier this month, but Raiffeisen was not.

A Zurich spokesperson confirmed that wholesale CBDC settlement takes place on December 1 and only for the two pilot banks. Raiffeisen and the Canton of Zurich will receive conventional Swiss francs, not wholesale CBDC. At that point, the bond will be listed on both the SIX Digital Exchange and the main SIX Swiss Exchange.

While there have been plenty of wholesale CBDC trials, two things are distinctive about this pilot.First, the SNB is allowing the use of a live wholesale CBDC over an extended timeframe.Second, the SDX platform on which the SNB issues the CBDC is not a test platform. It is the same production platform that SDX has used for issuing tokenized Swiss francs used for previous SDX settlements.  

Meanwhile, in February the City of Lugano issued a CHF 100 million tokenized bond via SDX with investors able to invest via the SDX central securities depository (CSD) or the conventional SIS CSD. Enabling the use of the SIS CSD means that investors don’t need to be up to speed with DLT and hence significantly improves liquidity. It was the first digital bond to qualify for SNB’s repo.

Zurich confirmed it is similar, subject to the repo approval by the central bank, but it expects to qualify as HQLA Level 1. Additionally, it expects an S&P issuance rating of AAA.

How does settlement work given there are two CSDs?

One point of curiosity is how it’s possible to support settlement on both SIS (T+2 settlement) and SDX (T0) given the different settlement timeframes. The two CSDs are integrated, but because the bonds are natively digital, the SDX CSD is the primary registry.

Exchange trades executed on one exchange cannot settle on the other. Any trade executed on the SIX Digital Exchange settles atomically via the SDX CSD. On-exchange trades executed via the main SIX stock exchange settle in two days via the SIS CSD using x-clear, SIX’s pan-European central counterparty. One can assume that at the two day point, SDX’s blockchain logs the change in real time. Over the counter trades can settle on either CSD.

Loading…

 

The post Zurich Issues Digital Bond Using Wholesale CBDC appeared first on Energy News Beat.

 

Zurich Issues Digital Bond Using Wholesale CBDC

Energy News Beat

On Monday the Canton of Zurich issued a CHF 100 million ($113m) digital bond via the SIX Digital Exchange, Ledger Insights reported. While most of the bond terms were unexciting – it has an 11 year term and a coupon of 1.45%  – the most distinctive aspect is this transaction is that it settles using a wholesale central bank digital currency (wholesale CBDC) issued by the Swiss National Bank (SNB).

The joint lead managers on the issuance were Zürcher Kantonalbank, UBS and Raiffeisen Switzerland. Zürcher and UBS were announced as part of the CBDC pilot earlier this month, but Raiffeisen was not.

A Zurich spokesperson confirmed that wholesale CBDC settlement takes place on December 1 and only for the two pilot banks. Raiffeisen and the Canton of Zurich will receive conventional Swiss francs, not wholesale CBDC. At that point, the bond will be listed on both the SIX Digital Exchange and the main SIX Swiss Exchange.

While there have been plenty of wholesale CBDC trials, two things are distinctive about this pilot.First, the SNB is allowing the use of a live wholesale CBDC over an extended timeframe.Second, the SDX platform on which the SNB issues the CBDC is not a test platform. It is the same production platform that SDX has used for issuing tokenized Swiss francs used for previous SDX settlements.  

Meanwhile, in February the City of Lugano issued a CHF 100 million tokenized bond via SDX with investors able to invest via the SDX central securities depository (CSD) or the conventional SIS CSD. Enabling the use of the SIS CSD means that investors don’t need to be up to speed with DLT and hence significantly improves liquidity. It was the first digital bond to qualify for SNB’s repo.

Zurich confirmed it is similar, subject to the repo approval by the central bank, but it expects to qualify as HQLA Level 1. Additionally, it expects an S&P issuance rating of AAA.

How does settlement work given there are two CSDs?

One point of curiosity is how it’s possible to support settlement on both SIS (T+2 settlement) and SDX (T0) given the different settlement timeframes. The two CSDs are integrated, but because the bonds are natively digital, the SDX CSD is the primary registry.

Exchange trades executed on one exchange cannot settle on the other. Any trade executed on the SIX Digital Exchange settles atomically via the SDX CSD. On-exchange trades executed via the main SIX stock exchange settle in two days via the SIS CSD using x-clear, SIX’s pan-European central counterparty. One can assume that at the two day point, SDX’s blockchain logs the change in real time. Over the counter trades can settle on either CSD.

Loading…

 

The post Zurich Issues Digital Bond Using Wholesale CBDC appeared first on Energy News Beat.

 

Zurich Issues Digital Bond Using Wholesale CBDC

Energy News Beat

On Monday the Canton of Zurich issued a CHF 100 million ($113m) digital bond via the SIX Digital Exchange, Ledger Insights reported. While most of the bond terms were unexciting – it has an 11 year term and a coupon of 1.45%  – the most distinctive aspect is this transaction is that it settles using a wholesale central bank digital currency (wholesale CBDC) issued by the Swiss National Bank (SNB).

The joint lead managers on the issuance were Zürcher Kantonalbank, UBS and Raiffeisen Switzerland. Zürcher and UBS were announced as part of the CBDC pilot earlier this month, but Raiffeisen was not.

A Zurich spokesperson confirmed that wholesale CBDC settlement takes place on December 1 and only for the two pilot banks. Raiffeisen and the Canton of Zurich will receive conventional Swiss francs, not wholesale CBDC. At that point, the bond will be listed on both the SIX Digital Exchange and the main SIX Swiss Exchange.

While there have been plenty of wholesale CBDC trials, two things are distinctive about this pilot.First, the SNB is allowing the use of a live wholesale CBDC over an extended timeframe.Second, the SDX platform on which the SNB issues the CBDC is not a test platform. It is the same production platform that SDX has used for issuing tokenized Swiss francs used for previous SDX settlements.  

Meanwhile, in February the City of Lugano issued a CHF 100 million tokenized bond via SDX with investors able to invest via the SDX central securities depository (CSD) or the conventional SIS CSD. Enabling the use of the SIS CSD means that investors don’t need to be up to speed with DLT and hence significantly improves liquidity. It was the first digital bond to qualify for SNB’s repo.

Zurich confirmed it is similar, subject to the repo approval by the central bank, but it expects to qualify as HQLA Level 1. Additionally, it expects an S&P issuance rating of AAA.

How does settlement work given there are two CSDs?

One point of curiosity is how it’s possible to support settlement on both SIS (T+2 settlement) and SDX (T0) given the different settlement timeframes. The two CSDs are integrated, but because the bonds are natively digital, the SDX CSD is the primary registry.

Exchange trades executed on one exchange cannot settle on the other. Any trade executed on the SIX Digital Exchange settles atomically via the SDX CSD. On-exchange trades executed via the main SIX stock exchange settle in two days via the SIS CSD using x-clear, SIX’s pan-European central counterparty. One can assume that at the two day point, SDX’s blockchain logs the change in real time. Over the counter trades can settle on either CSD.

Loading…

 

The post Zurich Issues Digital Bond Using Wholesale CBDC appeared first on Energy News Beat.

 

Zurich Issues Digital Bond Using Wholesale CBDC

Energy News Beat

On Monday the Canton of Zurich issued a CHF 100 million ($113m) digital bond via the SIX Digital Exchange, Ledger Insights reported. While most of the bond terms were unexciting – it has an 11 year term and a coupon of 1.45%  – the most distinctive aspect is this transaction is that it settles using a wholesale central bank digital currency (wholesale CBDC) issued by the Swiss National Bank (SNB).

The joint lead managers on the issuance were Zürcher Kantonalbank, UBS and Raiffeisen Switzerland. Zürcher and UBS were announced as part of the CBDC pilot earlier this month, but Raiffeisen was not.

A Zurich spokesperson confirmed that wholesale CBDC settlement takes place on December 1 and only for the two pilot banks. Raiffeisen and the Canton of Zurich will receive conventional Swiss francs, not wholesale CBDC. At that point, the bond will be listed on both the SIX Digital Exchange and the main SIX Swiss Exchange.

While there have been plenty of wholesale CBDC trials, two things are distinctive about this pilot.First, the SNB is allowing the use of a live wholesale CBDC over an extended timeframe.Second, the SDX platform on which the SNB issues the CBDC is not a test platform. It is the same production platform that SDX has used for issuing tokenized Swiss francs used for previous SDX settlements.  

Meanwhile, in February the City of Lugano issued a CHF 100 million tokenized bond via SDX with investors able to invest via the SDX central securities depository (CSD) or the conventional SIS CSD. Enabling the use of the SIS CSD means that investors don’t need to be up to speed with DLT and hence significantly improves liquidity. It was the first digital bond to qualify for SNB’s repo.

Zurich confirmed it is similar, subject to the repo approval by the central bank, but it expects to qualify as HQLA Level 1. Additionally, it expects an S&P issuance rating of AAA.

How does settlement work given there are two CSDs?

One point of curiosity is how it’s possible to support settlement on both SIS (T+2 settlement) and SDX (T0) given the different settlement timeframes. The two CSDs are integrated, but because the bonds are natively digital, the SDX CSD is the primary registry.

Exchange trades executed on one exchange cannot settle on the other. Any trade executed on the SIX Digital Exchange settles atomically via the SDX CSD. On-exchange trades executed via the main SIX stock exchange settle in two days via the SIS CSD using x-clear, SIX’s pan-European central counterparty. One can assume that at the two day point, SDX’s blockchain logs the change in real time. Over the counter trades can settle on either CSD.

Loading…

 

The post Zurich Issues Digital Bond Using Wholesale CBDC appeared first on Energy News Beat.

 

Zurich Issues Digital Bond Using Wholesale CBDC

Energy News Beat

On Monday the Canton of Zurich issued a CHF 100 million ($113m) digital bond via the SIX Digital Exchange, Ledger Insights reported. While most of the bond terms were unexciting – it has an 11 year term and a coupon of 1.45%  – the most distinctive aspect is this transaction is that it settles using a wholesale central bank digital currency (wholesale CBDC) issued by the Swiss National Bank (SNB).

The joint lead managers on the issuance were Zürcher Kantonalbank, UBS and Raiffeisen Switzerland. Zürcher and UBS were announced as part of the CBDC pilot earlier this month, but Raiffeisen was not.

A Zurich spokesperson confirmed that wholesale CBDC settlement takes place on December 1 and only for the two pilot banks. Raiffeisen and the Canton of Zurich will receive conventional Swiss francs, not wholesale CBDC. At that point, the bond will be listed on both the SIX Digital Exchange and the main SIX Swiss Exchange.

While there have been plenty of wholesale CBDC trials, two things are distinctive about this pilot.First, the SNB is allowing the use of a live wholesale CBDC over an extended timeframe.Second, the SDX platform on which the SNB issues the CBDC is not a test platform. It is the same production platform that SDX has used for issuing tokenized Swiss francs used for previous SDX settlements.  

Meanwhile, in February the City of Lugano issued a CHF 100 million tokenized bond via SDX with investors able to invest via the SDX central securities depository (CSD) or the conventional SIS CSD. Enabling the use of the SIS CSD means that investors don’t need to be up to speed with DLT and hence significantly improves liquidity. It was the first digital bond to qualify for SNB’s repo.

Zurich confirmed it is similar, subject to the repo approval by the central bank, but it expects to qualify as HQLA Level 1. Additionally, it expects an S&P issuance rating of AAA.

How does settlement work given there are two CSDs?

One point of curiosity is how it’s possible to support settlement on both SIS (T+2 settlement) and SDX (T0) given the different settlement timeframes. The two CSDs are integrated, but because the bonds are natively digital, the SDX CSD is the primary registry.

Exchange trades executed on one exchange cannot settle on the other. Any trade executed on the SIX Digital Exchange settles atomically via the SDX CSD. On-exchange trades executed via the main SIX stock exchange settle in two days via the SIS CSD using x-clear, SIX’s pan-European central counterparty. One can assume that at the two day point, SDX’s blockchain logs the change in real time. Over the counter trades can settle on either CSD.

Loading…

 

The post Zurich Issues Digital Bond Using Wholesale CBDC appeared first on Energy News Beat.

 

Zurich Issues Digital Bond Using Wholesale CBDC

Energy News Beat

On Monday the Canton of Zurich issued a CHF 100 million ($113m) digital bond via the SIX Digital Exchange, Ledger Insights reported. While most of the bond terms were unexciting – it has an 11 year term and a coupon of 1.45%  – the most distinctive aspect is this transaction is that it settles using a wholesale central bank digital currency (wholesale CBDC) issued by the Swiss National Bank (SNB).

The joint lead managers on the issuance were Zürcher Kantonalbank, UBS and Raiffeisen Switzerland. Zürcher and UBS were announced as part of the CBDC pilot earlier this month, but Raiffeisen was not.

A Zurich spokesperson confirmed that wholesale CBDC settlement takes place on December 1 and only for the two pilot banks. Raiffeisen and the Canton of Zurich will receive conventional Swiss francs, not wholesale CBDC. At that point, the bond will be listed on both the SIX Digital Exchange and the main SIX Swiss Exchange.

While there have been plenty of wholesale CBDC trials, two things are distinctive about this pilot.First, the SNB is allowing the use of a live wholesale CBDC over an extended timeframe.Second, the SDX platform on which the SNB issues the CBDC is not a test platform. It is the same production platform that SDX has used for issuing tokenized Swiss francs used for previous SDX settlements.  

Meanwhile, in February the City of Lugano issued a CHF 100 million tokenized bond via SDX with investors able to invest via the SDX central securities depository (CSD) or the conventional SIS CSD. Enabling the use of the SIS CSD means that investors don’t need to be up to speed with DLT and hence significantly improves liquidity. It was the first digital bond to qualify for SNB’s repo.

Zurich confirmed it is similar, subject to the repo approval by the central bank, but it expects to qualify as HQLA Level 1. Additionally, it expects an S&P issuance rating of AAA.

How does settlement work given there are two CSDs?

One point of curiosity is how it’s possible to support settlement on both SIS (T+2 settlement) and SDX (T0) given the different settlement timeframes. The two CSDs are integrated, but because the bonds are natively digital, the SDX CSD is the primary registry.

Exchange trades executed on one exchange cannot settle on the other. Any trade executed on the SIX Digital Exchange settles atomically via the SDX CSD. On-exchange trades executed via the main SIX stock exchange settle in two days via the SIS CSD using x-clear, SIX’s pan-European central counterparty. One can assume that at the two day point, SDX’s blockchain logs the change in real time. Over the counter trades can settle on either CSD.

Loading…

 

The post Zurich Issues Digital Bond Using Wholesale CBDC appeared first on Energy News Beat.

 

What Is COP28 and Why Is It Important?

Energy News Beat

World leaders are due to gather for annual climate change talks in Dubai in December. On the agenda: the phase down — or even phase out — of fossil fuels, a global goal to help the world adapt to extreme weather events, trading carbon emissions and a new fund to pay for the loss and damage wreaked by global warming.

This year has once again seen the devastating effects of climate change on the planet. The summer season in the northern hemisphere was the warmest on record globally. At least 5,000 people were killed in Libya in the Mediterranean storm Daniel in September, while a wildfire on the Hawaiian island Maui killed at least 115 people.

When is COP28?

It starts on Thursday 30 November and is due to finish on Tuesday 12 December. While the talks are scheduled to last a fortnight, they are notorious for spilling over by an extra day or two as delegates argue over the final language of the communique.

Where is COP28 being held?

This year the rotating presidency is held by the United Arab Emirates and COP28 will be held at the Expo City in Dubai.

While eyebrows were raised when one of the world’s biggest oil producers was selected to lead the talks, the UAE argues it is in a strong position to convince other oil-and-gas-rich countries to go further and faster on cutting emissions.

What is COP28?

Emmanuel Macron, France’s president, addresses last year’s COP in EgyptPhotographer: Islam Safwat/Bloomberg

It’s the annual gathering of nearly 200 countries, hosted by the United Nations, to discuss ways of avoiding man made climate change and adapting to warming temperatures. The talks have been going for 28 years, giving this year’s talks the technical name of the 28th Conference of the Parties under the UN Framework Convention on Climate Change.

The original idea three decades ago was to create a multilateral process in which everyone got to have an equal say in how the world should best cut greenhouse gases. In reality, there are stubborn divides between rich and poor countries. Developing countries argue that developed countries got rich over the last century by creating industries founded on fossil fuels, and that they should be able to do the same.

The COP process made a breakthrough deal in Paris in 2015, when all countries agreed for the first time to ensure that temperature rises stay well below 2 degrees Celsius compared to pre industrial levels and they set a stretch goal to ensure warming doesn’t breach 1.5 C. To achieve that means emissions should fall to “net zero” by the middle of the century.

While the Paris Agreement was a landmark moment, countries have struggled to deliver on it. Each member must make pledges showing how they will contribute their fair share to keeping temperatures in check. But those plans aren’t good enough. This year, countries will hold their first official stocktake of progress so far.

How many people will attend COP28?

This year’s summit is expected to be the biggest yet with more than 70,000 people expected to show up. The UAE is well set up to manage a mammoth event with plenty of hotel rooms in Dubai and one of the world’s best-connected airports. Both COP21 in Paris and COP26 in Glasgow in 2021 had more than 40,000 registered participants, while 33,000 people registered to attend last year’s meeting in Egypt.

Who can attend COP28?

Delegates in traditional headdress attend the COP27 climate conference.Photographer: Islam Safwat/Bloomberg

At the heart of COP28 are the negotiators — civil servants from 197 countries, who spend two weeks locked behind closed doors thrashing out the details of the agreements that are supposed to drive action on tackling climate change. Negotiators are often accompanied by their ministers, and sometimes the heads of state who can help to seal a deal. Achieving a consensus is key to the COP process. Every country has an equal say regardless of their size.

But it’s not just governments who attend. Members of civil society groups as well as businesses all turn up too, to make their cases heard on the fringes of the event. And of course, the site is teeming with journalists reporting what’s happening to the wider world.

Why is COP28 Important?

This is the first year since the Paris Agreement was signed in 2015 that countries will take stock of the progress they’re making on tackling climate change. We already know the answer: that they’re not going fast enough in cutting emissions at the pace Paris promised. The review is supposed to put pressure on countries to speed things up.

After COP28, countries will have until 2025 to submit new national plans to fight climate change — which will truly determine if the world is heading in the right direction.

Some richer countries, particularly in Europe, are pushing for tougher commitments, such as phasing out fossil fuels and “peaking” emissions (stop them from climbing) by 2025. That’s a big ask for many developing countries, such as India that see fossil fuels as crucial to growing their economies.

This year’s COP will also be crucial for climate finance. Rich countries have now delivered on their promise to mobilize $100 billion a year to help poor countries deal with the worst impacts of climate change. But that is a tiny amount compared to the $2.5 trillion per year that will be needed by 2030. Negotiators will be seeking to reach a deal on a new, post-2025 collective goal for climate finance. Initially, wealthy nations responsible for the most historical emissions were asked to chip in, but now countries such as Ghana are calling for the pool of contributors to be widened to include major economies such as China, the world’s biggest source of climate-warming gases.

The first few days of COP28 will also see a flurry of announcements by world leaders on tackling potent methane emissions from oil and gas, making farming and food production more sustainable, and tripling renewable energy capacity. The host country is also expected to announce a multi billion dollar fund to invest in climate friendly technologies.

Is COP28 destined to be a flop?

A true COP flop is when no progress can be agreed at the end of the two weeks. This happened in Madrid in 2019, with COP25 ending in failure when the parties could not compromise on a final text in many areas. COP21 in Copenhagen in 2009 was also famously deemed a failure. Negotiators couldn’t reach a binding deal to cut greenhouse gases that was supposed to replace the Kyoto Protocol, which expired in 2012.

But even if a final text is agreed, many countries — particularly small island nations — will still see it as a failure unless it commits to strong language around phasing out fossil fuels and keeping global warming below 1.5C. The risk this year is that the COP president won’t be seen as impartial enough to broker a deal with all the parties.

It’s starting to look like the world’s biggest emitters may be in the mood to compromise. The leaders of China and the US agreed a deal in mid-November to step up climate action, back global efforts to triple renewable energy capacity by 2030, accelerate the domestic build out of green power to replace coal, oil and gas, and advance cooperation to limit emissions of nitrous oxide and methane, two particularly pernicious greenhouse gases.

Who is the COP28 president?

Dr Sultan Ahmed Al Jaber, this year’s COP presidentPhotographer: Aaron M. Sprecher/Bloomberg

The UAE has appointed Dr Sultan Ahmed Al Jaber as COP28 president. He also heads up the UAE’s state oil producer, Abu Dhabi National Oil Co., and that has led many environmental campaigners to question whether he can remain impartial as the negotiations heat up over the course of the conference. His supporters point out that he also chairs Masdar, the state renewable company and one of the world’s leading solar developer’s Al Jaber’s job is to bring together all 197 parties, using his diplomacy skills to help countries bridge their divides and final agreement over the line.

Source: Bloomberg Green 

1031 Exchange E-Book

ENB Top News 

ENB

Energy Dashboard

ENB Podcast

ENB Substack

The post What Is COP28 and Why Is It Important? appeared first on Energy News Beat.

 

ESG Moment of Truth Turns Tables for Big Oil

Energy News Beat
Deutsche Bank: Big Oil stocks should be included in ESG offerings because investors want them.
WSJ: investors were leaving these funds at such a pace that fund managers were changing the names of the funds, removing terms like “ESG” and “sustainable.”.
Oil and gas appear to remain essential for meeting the world’s energy needs, which in turn renders producers one again more attractive for investors who disillusioned with alternative energy investments dubbed environmentally responsible.

This week saw the release of the latest report from the International Energy Agency, which called for a fast reduction in oil and gas investments and production, embracing alternative energy sources instead to help advance the transition.

Also this week, media picked up another story that makes the ground for the IEA report a bit shaky. The story came from Deutsche Bank and took the form of a statement by a senior executive involved in the lender’s ESG business. The statement: Big Oil stocks should be included in ESG offerings because investors want them.

The IEA’s Fatih Birol called the present day a moment of truth for the oil and gas industry. In fact, transition-related industries are facing their own moment of truth, and investors are aware of it.

“When we think about clean energy, these are business models which are quite new and sensitive to interest rates,” Deutsche Bank’s Markus Mueller, chief investment officer ESG, told Reuters. “Investors are looking for traditional [energy] companies that have capex in renewables… They prefer the transition than to exclusions,” he explained.

Investors also appear to prefer larger rather than smaller profits, even if they come from what are commonly called renewable sources of energy, such as wind and solar farms. The Wall Street Journal addressed a substantial outflow from ESG funds in a recent article, which noted that investors were leaving these funds at such a pace that fund managers were changing the names of the funds, removing terms like “ESG” and “sustainable.”

Meanwhile, the IEA has told the oil and gas industry to forget about carbon capture as a way of continuing to produce the same amounts of oil and gas that it is producing now.

“The industry needs to commit to genuinely helping the world meet its energy needs and climate goals – which means letting go of the illusion that implausibly large amounts of carbon capture are the solution,” Birol said in the news release of the report.

However, based on investor behavior and stock performance in oil and gas, and wind and solar, it seems meeting the world’s energy needs still depends on hydrocarbons rather than devices capturing the energy generated by the sun and the wind. After all, the IEA itself said in its latest Oil Market Report that demand for the fuel is set to grow by 2.4 million bpd this year.

The end result, then, is that oil and gas appear to remain essential for meeting the world’s energy needs, which in turn renders producers once again more attractive for investors who are disillusioned with alternative energy investments dubbed environmentally responsible. The recent tremors in the carbon offsets market likely contributed to this disappointment and redirection of attention.

Perhaps this return of investor attention to oil and gas is spurring stronger pressure on the industry. A recent report by the Financial Times, for instance, cited S&P Global Ratings as saying oil and gas companies faced “virtually no extra borrowing costs compared with less polluting companies” despite a push by the UN and other entities to make them pay more than other industries.

In any other context, calls for essentially penalizing an industry for being what it is would smack of discrimination. Only in the context of the energy transition, which is trying to force higher borrowing costs on an industry, is this considered a perfectly acceptable and even highly desirable way to mitigate the risks that IPCC scientists say originated from the oil and gas industry.

“Environmental concerns seem to be far from the most important factor for funding oil and gas companies,” S&P Global Ratings analysts said, with one of the new report’s authors commenting that “It shows lenders are not really baking in premiums for [environmental, social and governance]-related factors.”

Indeed, they are not baking in such premiums. That’s probably for the same reason as the one investors away from ESG funds and into oil and gas: oil and gas are making money. They are making money because the world needs them, including the loudest cheerleaders of the transition, such as the UK and Germany, not to mention China, which is simultaneously the biggest investor in wind and solar and the biggest investor in coal.

The ESG investment movement has had a moment of truth, and things are changing fast. Investors are falling back on the certainty of oil and gas, even with the extra volatility, as OPEC grapples with economic growth worries that have substantially undermined its price control efforts.

This has worried the leaders of the transition because it means less money for transition industries—governments can’t shoulder the whole financial burden of total electrification. Confidence appears to be on the way in some parts of the transition world, and it would take time to restore it, risking a wider divide between Paris Agreement targets and actual developments. That was only to be expected. It’s what you get when you try to play government plans against the market.

By Irina Slav for Oilprice.com

The post ESG Moment of Truth Turns Tables for Big Oil appeared first on Energy News Beat.