news & views of the week....

Here is a summary of some key topics that have been in the news this week that might be of interest to those in the funding & financing markets and beyond. The focus continues in the areas of financial stability, sustainable finance as well as the continuation of the intersection of finance and technological advancements....

Week ending 5th November 2021: This week’s highlights include the FSB progress report on enhancing resilience of Non-Bank Financial Intermediation; IOSCO issued sustainability-related practices, policies, procedures and disclosures for asset managers; the IFRS Foundation announced the formation of International Sustainability Standards Board; on COP26 Finance Day 'Finance Goes Green and Resilient' - the details behind the most important initiatives expertly guided by Nigel Topping; Climate Bonds Initiative release Q3 report - Green bonds reach USD354.2bn at end Q3 2021, surpassing 2020 total and now likely to reach half a trillion by year end; BIS Innovation Hub & HKMA announced updates on Project Genesis and its prototypes for digital platforms for green bond tokenization; Goldman Sachs to use Digital Asset technology to build open platform for tokenised assets....

FSB updates the G20 on its work to enhance resilience in non-bank financial intermediation The Financial Stability Board published a report describing the progress over the past year and planned work to enhance the resilience of non-bank financial intermediation. NBFI has grown considerably over the past decade – to almost half of global financial assets – and become more diverse. However, the March 2020 market turmoil underscored the need to strengthen resilience in this sector, to ensure a more stable provision of financing to the economy and reduce the need for extraordinary central bank interventions. The FSB’s NBFI work programme includes analytical and policy work that builds on the lessons from the turmoil. The report provides an overview of the NBFI ecosystem and a framework for analysing the availability of liquidity and its effective intermediation under stressed market conditions….?

Sustainability-Related Practices, Policies, Procedures and Disclosure in Asset Management IOSCO published a set of recommendations about sustainability-related practices, policies, procedures and disclosures in the asset management industry. There have been challenges associated with the growth of ESG investing and sustainability-related products in recent years, including a greater need for consistent, comparable, and decision-useful information and the risk of greenwashing. The report, which reflects the feedback received in response to the consultation report that was published in June 2021, focuses on these investor protection issues and covers five areas: asset manager practices, policies, procedures and disclosure; product disclosure; supervision and enforcement; terminology; and financial and investor education. The report also recognizes a clear need to address the challenges associated with the lack of reliability and comparability of data at the corporate issuer level and the ESG data and ratings provided by third-party providers to enable the investment industry to properly evaluate sustainability-related risks and opportunities. The recommendations also address the risk of greenwashing through other areas, including supporting sustainability-related financial and investor education initiatives and ensuring that there are adequate supervisory and enforcement tools to monitor and assess compliance with requirements in this area and address breaches of such requirements….

IFRS - Global sustainability disclosure standards for the financial markets Erkki Liikanen, Chair of the International Financial Reporting Standards Foundation Trustees delivered a speech at COP26 on 3 November 2021 speaking at the UN climate-change summit’s Finance Day Presidency event titled ‘A Financial System for Net Zero’. Capital markets can have an essential role to play in reaching net zero. But that can only happen when sustainability information is produced with the same rigour, assurance of quality and global comparability as financial information. In response to overwhelming demand for global sustainability standards, we are setting out our plans. First, we are announcing the formation of the International Sustainability Standards Board, or ISSB. Its purpose is to develop, in the public interest, a comprehensive global baseline of sustainability disclosures for the financial markets, IFRS Sustainability Disclosure Standards. This is what the G20, IOSCO and many others asked for. The ISSB will sit within the IFRS Foundation, alongside the International Accounting Standards Board, and will work closely with it. Second, we are today announcing a commitment to consolidate two investor-focused international sustainability standard-setters into the ISSB. The Value Reporting Foundation, which is home to SASB Standards and Integrated Reporting, and the Climate Disclosure Standards Board will become part of the IFRS family. Third, we are publishing two prototypes: one on climate-related disclosures and the other on general sustainability disclosure requirements. This is the outcome of the work by the Taskforce for Climate-related Disclosures, the VRF, the CDSB, the World Economic Forum and the IASB, supported by IOSCO. The aim is to consolidate key aspects of this content into an enhanced, unified set of recommendations for consideration by the ISSB. All these actions together create the necessary institutional arrangements for a global sustainability disclosure standard-setter for the financial markets. The ISSB will focus on meeting the sustainability information needs of investors for assessing enterprise value and making investment decisions. Its standards will help investors understand how companies are responding to ESG issues, like climate, to inform capital allocation decisions. The standards will form a comprehensive global baseline of sustainability disclosures. They can be used on a standalone basis or integrated into jurisdictional requirements to serve broader stakeholder or other public policy needs. The ISSB will feature a global and multi-office structure: Offices in Frankfurt (the seat of the Board and the office of the Chair) and in Montreal will be responsible for key functions supporting the new Board and deeper co-operation with regional stakeholders. In addition, there will be offices in San Francisco and London providing technical support and platforms for market engagement and regional stakeholder co-operation. Further discussions are also ongoing in relation to proposals from Beijing and Tokyo to establish the new Board’s footprint in the Asia Oceania region….

Finance Day at COP26: Finance Goes Green and Resilient Nigel Topping summarises the events on Finance Day at COP26: The race is on for private finance towards net-zero emissions by 2050 and new partnerships are set to drive exponential growth in resilience investments. Glasgow Financial Alliance for Net Zero: over $130 trillion of private capital is now committed to transforming the economy for net zero. GFANZ has grown 25-fold since April to 450 firms from 45 countries, according to a progress report it publishes today. GFANZ commitments can deliver the estimated $100 trillion of finance needed for net zero over the next three decades. That’s 70% of total investments needed, according to new analysis commissioned by the UN High-Level Climate Action Champions. Global Resilience Index launched to improve the way insurers, financiers and investors measure the resilience of countries, companies and supply chains. A number of grants and investments are also going towards building resilience in at-risk countries, including $100 million from the Green Climate Fund to support new technologies. The UN’s Net Zero Asset Owner Alliance, responsible for $10 trillion in assets, commits to phase out most thermal coal assets by 2030 for industrialized countries and worldwide by 2040. Thirty-three GFANZ members are now part of the Powering Past Coal Alliance, with 11 new firms joining at COP26. UK Chancellor Rishi Sunak announced new requirements for firms in the UK to publish plans for decarbonising through 2050….

Sustainable Debt Summary Q3 2021 | Climate Bonds Initiative Total volumes for the sustainable debt market – including labelled Green, Social and Sustainability bonds, Sustainability-linked bonds and Transition bonds – are well on their way to an annual trillion. Key Highlights: Combined labelled issuance of Green, Social, and Sustainability, Transition, and Sustainability-linked reached USD767.5bn in the first three quarters of 2021; September – largest issuing month ever, USD130.6bn of total labelled issuance; Cumulative total labelled issuance stood at USD2.3tn at end Q3 2021; cumulative green at USD 1.2tn; Green bonds reach USD354.2bn at end Q3 2021, surpassing 2020 total and now likely to reach half a trillion by year end; Trillion in annual green bond issuance within reach for 2023….

Project Genesis: Prototype digital platforms for green bond tokenisation The BIS Innovation Hub and the Hong Kong Monetary Authority successfully developed two prototype digital platforms that bring to life the vision that an investor can download an app and invest any amount into safe government bonds, which will develop a green project. Over the bond's lifetime, the investor can not only see accrued interest, but also track in real time how much clean energy is being generated, and the consequent reduction in CO2 emissions linked to the investment. Further, the investor can sell the bonds in a transparent market. The Innovation Hub and HKMA completed two prototypes in conjunction with private sector consortiums: The first prototype simulates the life cycle of a typical bond on a permissioned distributed ledger platform, including origination, subscription, settlement and secondary trading. The prototype was able to considerably streamline these processes. A second prototype tested the same procedures using a public permissionless blockchain infrastructure. It also managed to streamline the investor onboarding and facilitated the direct payment and settlement between the issuer and investor. BIS and HKMA conclude the project to build prototype digital platforms that aim to enable green bond issuance with higher transparency and greater access to retail investors….

Goldman Sachs to use Digital Asset’s technology to build open platform for tokenised assets - The TRADE Goldman Sachs will work with Digital Asset’s core technology to develop its end-to-end tokenised asset infrastructure supporting the end-to-end digital life cycle across multiple asset classes on permissioned and public blockchains. The investment bank will use Daml – Digital Asset’s platform for building multi-party applications that run across new technologies and legacy infrastructure – to move its tokenisation plans forward, a concept the financial services community sees as creating efficiencies and opportunities in the future for both traditional and illiquid assets. The move for the investment banking giant is a major development in its digital assets endeavours under the leadership of Mathew McDermott. “As we continue to build out our tokenisation capabilities, we needed solutions that could rapidly capture the full complexity and diversity of assets at the heart of our business for both digitally native or tokenised traditional assets, and interoperable across multiple blockchains. It is critical to create distributed networks and digitisation workflows across financial institutions and clients, interconnecting traditional and new market infrastructure. Daml-driven solutions, selected by leading market operators, could be an accelerator for us to achieve this.” For Digital Asset, the agreement underscores its growing impact across financial services as incumbent players tap its smart contract language and distributed ledger technology capabilities for their own digital evolutions. Last month, Deutsche B?rse announced it had partnered with the tech firm to build a fully digital post-trade platform called D7….

Closing thoughts....

I am sure this brief collection of topics doesn’t reflect everything you are working on but I hope it reflects some of the things you should be interested in….and I hope you find it of use!

Until the next time, I would be pleased to receive your views on any areas of mutual interest.?