汇丰银行-全球-信贷市场-绿色债券洞察：债券“过渡”时间到了-2019.6.25-37页.pdf

Disclosures&Disclaimer This report must be read with the disclosures and the analyst certifications in the Disclosure appendix,and with the Disclaimer,which forms part of it.Issuer of report:HSBC Bank plc View HSBC Global Research at:https:/ AXA IM is calling for a new transition bond label,on top of the green,social and sustainability labels that already exist Transition bonds could unlock significant CO2 emission cuts,but safeguards would be needed to ensure rapid transition Meanwhile,many existing green bonds have strong transition features;and currently lie in a sweet spot AXA IM has proposed that a new transition bond label be introduced,to sit alongside green,social and sustainability.Like a green bond,a transition bond would fund CO2 emission reduction projects.But unlike green bonds,transition bonds might fund fossil fuel technology at least temporarily such as coal to gas fuel switching,as well as energy efficiency projects for industrial and energy firms.Safeguards would be needed,we think Transition bonds could unlock significant CO2 emission cuts.Transition bonds may be anathema to investors who want to invest in wholly green projects.But they may appeal to impact investors aiming to fund decarbonisation.In our view,safeguards would be needed to ensure projects aid rapid transition,rather than locking an economy into a fossil fuel like gas for the long term.Similarly,transition bonds should not prop up polluting technologies via energy efficiency projects if they could be replaced with clean alternatives.But many existing green bonds support transition,we think We do not expect a transition bond label to be launched soon.In the meantime,many existing green bonds have significant transition-like features we call them alignment green bonds.Currently these alignment green bonds appear to be in a sweet spot,offering climate benefits with credit spread compression potential.Trading calls We close one trading call on the Banco Costa Rica BNALCR USD 5.875%of 2021.We open a trading position on the green sukuk from real estate firm Majid Al Futtaim,the MAFUAE USD 4.638%of 2029.Open trades are set out in Figure 8.YTD2019 green bond supply 2.1%of all YTD supply YTD 2019 green bond supply is up 57.3%versus the same period in 2018.We raise our 2019 green bond expectation to USD180bn to USD240bn,from USD140bn to USD180bn(Green Bond Insights:2019 market outlook,9 January 2019).YTD2019 green bond supply made up 2.1%of all bond supply;this is a rise on the 1.3%share experienced in 2018.25 June 2019 Michael Ridley Green Bonds&Corporate Credit Analyst HSBC Bank plc +44 20 7991 5918 Peter Barnshaw Analyst,Credit Strategy HSBC Bank plc +44 20 7991 5022 Green Bond Insights Fixed Income Credit Global Time for transition bonds?Fixed Income Credit 25 June 2019 2 Time for transition bonds?3 Benefits and dis-benefits of a transition bond label 4 Safeguards needed if transition bonds are to be introduced 6 Will transition bonds see the light of day?6 Investment strategy and calls 9 Open positions and trading calls 10 EU moves on sustainability 13 Enhancing green bonds 14 Innovative green bonds 15 Green bond supply 18 Green bonds make up 2.1%of YTD2019 bond supply 19 Social,sustainability supply 21 Appendices 23 A:EUR-denominated(EUR750m)green bonds 24 B:USD-denominated(USD750m)green bonds 26 C:Other currency denominated(USD750m equiv.)green bonds 28 D:Corporate green bonds,by use of proceeds 29 E:Closed trades 32 Disclosure appendix 33 Disclaimer 36 Contents 3 Fixed Income Credit 25 June 2019 Green bond supply has reaccelerated in 2019,with year to date supply up 57.3%versus the same period in 2018(Figures 15 and 16).But while supply growth is healthy,issuance is small compared to the amount of money that needs to flow to cut emissions and fund appropriate climate change adaptation.1 AXA IM is proposing a transition bond label Partly in order to try to accelerate the flow of funds towards new emission reduction projects,some market participants have suggested a new form of bond label is needed.2 Indeed AXA IM has formally proposed the creation of a new transition bond label.3 AXA IM argues that green bonds do a good job,but that a different label is required when firms want to undertake emission reduction in non-green sectors,for example firms in greenhouse gas intensive industries or in extractive sectors like oil and gas.AXA IM expects that the transition bond could be heavily used by energy,transport or industrial firms.4 Why is AXA making this proposal?According to the green bond principles,a firm does not need to be green to issue a green bond.But in fact we have seen many instances of companies issuing green bonds,only to see them criticised for example when the industrial firm Unilever and the fossil fuel firm Repsol issued green bonds,they were heavily criticised(see Green Bond Handbook:Clarity and confusion:whats unresolved in green bonds 2 May 2018).Indeed,we have begun to see firms begin to issue use of proceed bonds that they do not label as green.For example Castle Peak Power issued an energy transition bond while Snam called its bond a climate action bond.Effectively a second tier of transition bonds is already beginning to establish itself(Green Bond Insights:The temperature is rising,21 March 2019).We think this confusion abounds because there are two views about the type of projects that green bonds can fund.One view is that green projects need simply to cut CO2 emissions.Another view is that green projects need to cut CO2 emissions by funding wholly green projects.AXA IM seems to think there would be more clarity with two labels rather than one._ 1 The Intergovernmental Panel on Climate Change estimates than an annual expenditure of USD2.4trn is required on the energy system alone between now and 2040 to meet the ambition of keeping global warming at only 1.5 degrees Celsius above pre-industrial times;Lost in transition:the climate revolution needs a new type of bond,AXA Investment Management,11 June 2019.2 Snams bond should trigger a discussion about transition bonds,says BNP,Environmental Finance,March 2019;see also,Clean transition bonds could unlock USD1T+in oil sands opportunities,Corporate Knights,The Magazine for Clean Capitalism,24 October 2018.3 Lost in transition:the climate revolution needs a new type of bond,AXA Investment Management,11 June 2019.4 Financing brown to green:guidelines for transition bonds,Environmental Finance,12 June 2019.Time for transition bonds?AXA IM has proposed a new transition bond label For emission reduction projects using non-green technology The label could prove popular among EM issuers,we think Two views of what is green Fixed Income Credit 25 June 2019 4 How would transition bonds differ from green?Both green bonds and transition bonds would attempt to cut CO2 emissions.How then would green and transition bonds differ from one another?The main difference between them is that while the green bond will invest wholly in green technology,the transition bond would be able to invest in non-green technology(Figure 1)5.The second difference would be that only firms that are transitioning to green should be allowed to issue transition bonds.AXA IM made this proposal as it thinks if transition bonds can finance non-green technology,these bonds should only be issued by firms transitioning to a green future;this additional condition is added to prevent the transition bond label being misused.The requirement that only transitioning firms can issue transition bonds would be stricter than for green bonds,in our view.Figure 1.Schematic depicting difference between green bond and transition bond Source:HSBC So a transition bond would aim to cut CO2 emissions but it would be able to support fossil fuel technologies.Because the transition bond would not support wholly green technology,AXA IM proposes that only firms transitioning to green be allowed to issue transition bonds.Benefits and dis-benefits of a transition bond label We see several potential advantages and disadvantages of a proposed transition bond label.Benefits Transition bonds may fund projects that achieve large amounts of CO2 emission reduction.We think that the label would be used by coal to gas switching projects in the EM and in energy efficiency projects in hard to abate sectors globally.Currently green bonds are not being used to fund projects like coal to gas.So introducing the transition label likely would fill a gap and may accelerate the flow of funds to projects cutting emissions.Boosting flows of funds to the emerging markets is important because a great deal of energy,transport and industrial investment will be needed over the next decade or so.Remember that the ten countries with the largest annual rises in CO2 emissions in 2018 were all emerging markets:Vietnam+14.8%,Iraq 13.3%,Kazakhstan 12.9%,Bangladesh 9.3%,Turkmenistan 9.3%,Ecuador 7.8%,India 7.0%,Peru 6.2%,Algeria 6.0%and Iran 5.5%6.The transition bond label could perhaps unlock fund flows to cut CO2 emissions sharply in these countries._ 5 For example a transition bond could fund a coal to gas fuel switching project.Closing a coal fired power plant and opening a gas fired power plant would achieve emission reduction.But one is still investing in fossil fuel(gas)technology and one risks locking an economy into reliance on this fuel.Similarly a transition bond could fund energy efficiency in the cement sector:the project would cut CO2 emissions,but one will still be working within and potentially extending the life,of a dirty sector like cement.6 BP Statistical Review of World Energy 2019,68th Edition,BP BondproceedsGreen BondTransition BondTransitioning to greenProjects that cuts CO2 emissionsDoes not use green technologyTechnologyIssuerProjects that cut CO2 emissionsUses green technologyDoes not have to be transitioning to greenTwo differences between green and transition bonds 5 Fixed Income Credit 25 June 2019 Figure 2.Top 10 risers in 2018 all EM Figure 3.Europe and N.America share falling,APAC rising Source:BP Statistical Review of World Energy 2019 Source:BP Statistical Review of World Energy 2019 Another argument in favour of a transition bond label is that emissions from sectors like steel,transport and cement known as hard to abate sectors are rising sharply and at the same time there are few or no alternatives to these sectors today.The Energy Transition Commission defines the hard to abate sectors as cement,steel,plastics,heavy road transport,aviation and shipping,and says they account for around 10 Gt of annual emission currently,30%of global emissions:but this could rise to 16 Gt of 60%of total global CO2 emissions by 2050(see Green Bond Insights:2019 market outlook:Rise of the ESG investor,pages 6 and 7).So cutting emissions in these sectors is critical.We think that the transition bond label would offer particular value if it were used in the EM context.Bond labels effectively lower the cost of bringing buyers and sellers together.The label alerts the buyer to the fact that the bond funds green projects(in the case of a green bond)or a transition project(in the case of a transition bond).This information would be particularly valuable in the EM space,we think,given that good information flows in the EM space can be lacking.Introducing a transition label might also widen the range of bonds that green bond investors can buy.Over the past two to three years a number of dedicated green bond funds have been created in Europe.But they face a lack of variety in the type of green bond they can buy.Historically green bond issuance is heavily skewed towards utilities and banks,with a shortage of issuance by industrial,energy and manufacturing firms.So a new supply of transition bonds from a wide range of issuers might benefit these investors.Introducing a transition bond label,so long as it was done well,might also serve to maintain the integrity of a green bond label.If too many projects that achieve significant CO2 emission reduction,but which involve non-green technology,are labelled as green,this risks downgrading the value of a green bond label.In the past we have tried to resist the green bond market fragmenting between a European market with a high quality green bond and a rest of the world(US plus EM)lower quality green bond label.Now we think that,rather than just allowing for a split like this to occur in an unplanned way,it might be better to take control of the situation and to formally draw up a distinction between a green bond and a transition bond,and to allow these two labels to be applied globally.Dis-benefits The main drawback of a transition bond label we think is that it might support too many transition projects that lock an economy into a fossil fuel for the long term.The classic example here is coal to gas switching.While replacing coal fired power plants with gas fired power plants can achieve significant CO2 emissions,at the same time one risks locking that economy into gas for many decades.0%2%4%6%8%10%12%14%16%VNIQKZ BD TM ECINPE DZIR2018 CO2emissions growth0510152025303508 09 10 11 12 13 14 15 16 17 18CO2 emissions(tonnes bn)EuropeN.AmericaAsia PacMid.EastCISLatAmAfrica Fixed Income Credit 25 June 2019 6 Many market participants could become confused as to the difference between green and transition bonds.While we think we are clear in our minds about the distinction(Figure 1)others may have different interpretations.There may be some overlap between green and transition projects,leading to some confusion.We also think that the proliferation of labels green,social,sustainability and transition could add so much complexity that some market participants could be put off,as a result of which the value of the labels is downgraded.A problem with introducing a new label is that this could lead to confusion or label inflation,with the value of each label being reducted.A final problem is that if a poor quality transition project was shown to fail or involve green wash,potentially this would not only damage the putative concept of a transition bond,but also potentially scar the whole burgeoning labelled bond concept,which involves not only green bonds,but social and sustainability bonds too.The labelled bond concept could be brought into disrepute.Safeguards needed if transition bonds are to be introduced On balance we regard the idea of a transition bond label as a good one.But safeguards would need to be put in place to ensure that only the appropriate projects were described as transition bonds,and to ensure that transition projects did not last too long.A key question would be,if we are going to allow investment in a fossil fuel sector like gas,or energy efficiency in sectors like cement,how quickly will the transition take place?Are we in fact locking an economy into a fossil fuel technology,with no transition actually in sight?One idea to overcome this problem would be to only allow a transition bond under certain circu