Kay McCarthy, Head of Jersey Office at The International Stock Exchange (TISE), explains how its launch of a transition offering within its sustainable finance segment supports wider efforts to tackle climate change.
During November we saw leading politicians from across the world gather in Sharm El-Sheikh, Egypt for the United Nations’ Climate Change Conference, COP 27.
In marking the end of the UK’s Presidency of COP, this conference was an opportunity to measure the progress towards meeting the commitments made a year earlier at COP 26 in Glasgow (and prior to that, the Paris Agreement signed at Cop 21 in 2015).
What has been notable in the last year is the increased focus on the significant amount of investment required to transition to a lower carbon and more sustainable way of life (and that this is achieved in a fair and equitable manner i.e. there is a Just Transition).
"A key part of this transformation is providing financial support to help companies operating in more carbon-intensive industries to implement changes which enable them to become greener..."
For example, a report published at the start of 2022 by McKinsey estimated that annual average spending on physical assets will need to increase by $3.5 trillion to a total of $9.2 trillion to complete the transformation of the global economy to net zero emissions by 2050.[i]
A key part of this transformation is providing financial support to help companies operating in more carbon-intensive industries to implement changes which enable them to become greener, including meeting any net-zero commitments. Indeed, transition finance was one of the key topics discussed at October’s OECD Forum on Green Finance and Investment.
It is within this context that we at The International Stock Exchange (TISE) have extended our support for a lower carbon future by launching a transition offering within our sustainable finance segment, TISE Sustainable.
TISE is a Partner Exchange of the United Nations’ Sustainable Stock Exchanges Initiative (UN SSE) and today, more than £13 billion worth of listings on TISE support environmental, social and sustainable initiatives.
TISE Sustainable was established in July 2021 as a reputable market segment which promotes the flow of capital into initiatives which support a more sustainable future. With a straightforward application process and no specific segment admission fees in addition to those for listing, TISE Sustainable is available to all TISE-listed issuers and securities which demonstrate their qualifying credentials.
"The addition of the transition offering to TISE Sustainable means that it now also caters for transition bonds and transition issuers."
Since launch, brands which have come to be associated with TISE Sustainable include the world’s largest recycler of aluminium, Novelis; telecommunications companies VodafoneZiggo and Virgin Media O2; the largest sustainable property developer in the UK, Canary Wharf Group; and sovereign sustainable bond issuer, The Isle of Man Treasury.
Admissions to the segment have included green bonds, (sovereign) sustainable bonds, sustainability-linked bonds and a humanitarian catastrophe bond. The addition of the transition offering to TISE Sustainable means that it now also caters for transition bonds and transition issuers.
The qualifying credentials for TISE Sustainable have been extended beyond those issuers or securities which have been verified by an independent party against a recognised environmental, social or sustainable framework or those which hold a suitable ESG rating, and they now also cater for those issuers or securities who have been assessed to have credible transition plans.
Either the issuer’s business (or that of its wider group), or the use of proceeds raised by the issuance of a security, must have been verified by an independent party against a recognised transition framework. These include the transition frameworks provided by the Climate Bonds Initiative (CBI), the International Capital Markets Association (ICMA) and the Transition Pathway Initiative (TPI).
As such, TISE Sustainable now caters for a wider range of products including green bonds, social bonds, sustainable bonds, sustainability-linked bonds and transition bonds, as well as green funds, ESG-rated companies and transition issuers.
"TISE Sustainable now caters for a wider range of products including green bonds, social bonds, sustainable bonds, sustainability-linked bonds and transition bonds, as well as green funds, ESG-rated companies and transition issuers."
The CBI has reported that the new and developing transition bond market grew by 33% year on year in 2021, with total issuance reaching a cumulative $9.6 billion.[ii] With TISE a leading European stock exchange for the listing of international bond listings, the expansion of our sustainable finance segment to encompass transition bonds further supports the proposition of our Qualified Investor Bond Market (QIBM).
Adding this transition offering to TISE Sustainable means that we offer a comprehensive sustainable finance segment for environmental, social, sustainable and transitional initiatives. We expect that this new offering will be particularly attractive to those companies operating in more emissions-intensive industries and who are seeking to demonstrate their role in the transition to net zero.
In doing so, our new transition offering not only complements the other work being done within the financial services industries of the Channel Islands to help finance the transition to net-zero, but it also extends the role which we are playing in supporting international efforts to tackle climate change.
This article was originally published in Connect Jersey, December 2022 / January 2023
[i] McKinsey Sustainability, The net-zero transition: What it would cost, what it could bring
[ii] Climate Bonds Initiative, Sustainable debt tops $1 trillion in record breaking 2021