Marfrig issued a Sustainable Transition Bond in September 2019. The framework outlined strong steps the company was taking in addressing sustainable cattle sourcing and management. The projects that were “tagged” to the deal were the acquisition of cattle from suppliers that meet their environmental criteria. However, the bond failed to meet our criteria because we felt the policies outlined in the Transition Bond Framework were social standards that should be met across the firm and not specified to a transition bond. In addition, the bond focused on operating expenditure rather than creating long term impactful assets and the broader environmental impact of the company and its governance standards did not meet our “do no harm” criteria for our Sustainability Fund.  We have provided this feedback to the company and hope to see enhancements to their criteria in future issuance.

We met representatives from FMO’s treasury team to discuss their Green and Sustainability Bond Framework. We were encouraged by the depth of knowledge of the representatives on climate and sustainability matters.  We supported and encouraged them to continue their good work on thinking through how to formulate an approach to considering the bank's alignment to 2 degrees but also to push for a 1.5 degree pathway. Their framework was particularly interesting to us as it not only met our green bond criteria, but we felt the social impact was also very strong because they help manage the local currency risk to end recipients who are often the people least able to manage it - a limitation of many USD denominated social bonds. We participated in the bond deal, however we did feel the organisation could improve the additionality of the bond and have encouraged them to consider this for future issuance.

We met with senior management of Hanwha Energy USA, its Korean parent Hanwha Energy and lenders from its guarantor bank (KDB) to discuss the issuance of a green bond tagged to the activity of Hanwha Energy USA. We did not participate in the deal because it did not meet our criteria due to the activities of the parent entity and a failure to demonstrate a ringfencing of proceeds at the US operating company. The US business and tagged activities are clearly green and consistent with a cleaner world, however the parent entity has substantial activities in coal generation and could not demonstrate a sustainability strategy or the ability to provide any data or reporting on environmental impact.  

We met with representatives from the Government of Hong Kong (Deputy Chief Executive of HKMA and Assistant Director of Enviromental Protection Department) to discuss their green bond framework and approach to environmental sustainability. Our key concerns were air pollution levels in the city and harbour area as well as strategy to commitments under the Paris Accord. Even though the bond could have performed better under some of our criteria (stronger shorter-term targets to meet longer term ambitions), there were some strong positives (use of capital expenditure was high versus other sovereign bonds).  We did not participate in the bond deal as it was revealed after the meeting that there would be a tax incentive for domestic investors only.