sustainability

Summary: Chia altcoin is not a new coin, but it is the first new Nakamoto coin since Bitcoin launched in 2009. The Nakamoto consensus. Chias new blockchain programming language, Chialisp. Chias price correlation with other cryptocurrencies. Chia believes that by using the unused space already in circulation, they believe they will be more energy efficient. Chia cryptocurrency is a type of crypto that aims to use the space already in circulation (proof of space and time), their mission statement aims to build a more sustainable, more secure and more powerful blockchain. Chia believes that by using the unused space already in circulation, they will be more energy efficient. The coin is based on an innovative consensus algorithm which leveraged the over-allocated hard drive space to create the first new Nakamoto consensus since Bitcoin in 2009. Read next: A Reward For A Transaction!? What Is Kishu Inu Coin? ($KISHU) Let's Take A Look At This New Altcoin  We have the Nakamoto consensus to thank for the cryptocurrencies we have today. We have the Nakamoto consensus to thank for the cryptocurrencies we have today, it is a set of rules that verifies the legitimacy of a blockchain network. The crypto uses the ‘proof of space and time’ which allows coin farmers to prove that they allocate unused harddrive space to the network. The proof of time and space improves the attack resistance of the network by 51%. Chia is as secure as other proof of work cryptos whilst being less energy intensive. Chia delivers a high quality coin, with the safety and security inline with Bitcoin along with the functional benefit of a purpose built and more secure on chain smart coin environment. Read next: (KO) Coca-Cola Earnings Posted Exceeding Expectations, Elon Musk’s Target on Twitter (TWTR) Coming To Life!? | FXMAG.COM Chia has created a new innovative blockchain programming language called Chialisp, it is secure, powerful and easy to audit. Chia claims the Chialisp is a superior on-chain smart transaction development environment that will unlock the transparency, security and ease of use that cryptocurrencies promise. There are also downsides to this coin, one being that there is the possibility that the harddrives get stressed and break. In addition the Chia coin sucks energy, they use energy for storage, networking for the coin and other aspects, in a 2017 report Chia reported that they produce 15.04 metric tons of CO2 per year. Although this coin is more energy efficient than Bitcoin and other crypto coins, it has a long way to go before becoming more environmentally friendly and more sustainable. In January Chia announced its plans to launch a native peer-to-peer exchange service for its wallet holders. They will launch a new coin which will be a us-dollar denominated stablecoin and will act as a support to the new exchange. The market sentiment for this coin is reflecting as bearish as of today. The price of Chia coin is negatively correlated with the top 10 crypto coins by market cap - excluding Tether (USDT) and negatively correlated with the top 100 crypto coins by market cap - excluding all stablecoins. According to coindesk.com, the price of Chia Crypto is only expected to increase in the coming weeks. Chia Network Price Chart Summary of the advantages of Chia coin: The coin uses 0.12% of the energy that Bitcoin uses and 0.23% of the energy that Ethereum uses. Better security due to its more decentralized blockchain. More eco-friendly than other crypto coins. Read next: Elon Musk-Twitter (TWTR): What Will It Be Musk?  Sources: coindesk.com, chia.net, coinmarketcap.com, datacenterdynamics.com, coindesk.com

New York Climate Week acknowledged the challenges the energy crisis has brought but emphasised the importance to roll out clean energy faster under this context. Businesses need to think long-term, target short-term, disclose quality sustainability data, collaborate to decarbonise the value chain, and ensure environmental justice. Lots to chew on New York Climate Week was held from 19-25 September 2022   Lots happened in 2022. Just as the world continued to recover from the pandemic, the invasion of Russia in Ukraine – the former being one of the largest natural gas exporters in the world – sparked an energy crisis, heightened inflation, and added a new wave of supply chain disruptions. These geopolitical events and macroeconomic headwinds have prompted the sustainability community – including corporates, investors, and governments – to rethink the energy transition and sustainable finance within a widened context of energy security. We saw a flavour of this at the New York Climate Week too. In contrast to last year’s events, which spent quite some time on showcasing commitments and efforts, this year’s Climate Week emphasised the importance of keeping up with the decarbonisation efforts during such times of uncertainty. It has become evident that the path to net-zero is not linear. Along the way, there have been and will continue to be disruptions that can temporarily frustrate immediate ambitions, but these disruptions also remind us that walking away from decarbonisation is not an option. Clean energy should be accelerated faster despite the short-term need for fossil fuels The war has reignited discussion on how much fossil fuel the world actually needs – now or in the future, under peaceful or turbulent times. Ahead of winter, participants at the Climate Week acknowledge that governments and companies need to ensure the demand for energy is met, even if that might come from (temporary increases in the use of) fossil fuels, but they also emphasise that the energy crisis should not become an excuse to structurally expand use of fossil fuels and downplay the urgency to decarbonise the fossil fuel industry. Moreover, the war has demonstrated that significant reliance on natural gas from one importer imposes huge risks if that supply is suddenly turned off. The solution is not only to diversify natural gas supply sources, but also to roll out renewable energy more aggressively. The solution, as echoed during New York Climate Week, is not only to diversify natural gas supply sources, but also to roll out renewable energy more aggressively. Germany, a country heavily dependent on Russian gas and at the forefront of gas shortages, saw the share of conventional fuel (including nuclear) in its electricity generation mix during the first half of 2022 decline from 56% to 52%, despite an increase in the use of coal. That decline was driven by less use of gas and nuclear, but the key takeaway here is that renewable energy managed to play an important role in replacing some of the drop in gas and nuclear electricity generation. At least in the short to medium term, the development of renewable energy can slash emissions and boost energy security, which is defined as secured access to reliable fuels (fossil fuels for now). Yet it is worth noting that the notion of energy security will eventually switch to having secure access to and control over the renewable energy supply chain, as a few countries, such as China, produce most of the raw materials for renewable equipment such as solar PVs. What should businesses focus on in their sustainability efforts? Under such a context, the pressure on business leaders to decarbonise will only grow. How can they do it? Climate Week speakers, who were from consultancies, non-governmental organisations (NGOs), and leading companies in managing sustainability, listed a few action points. Here are the key ones: Setting interim goals in addition to the long-term net-zero target: Data shows that more than a third of the Forbes 2000 companies have set net-zero targets by June 2022, up from a fifth at the end of December 2020. However, of those with net-zero targets, two-thirds have not disclosed how they plan to achieve their goals. Having interim targets will help hold companies accountable for their climate commitments, while also providing them with a better guidance to decarbonise.   Establish long-term sustainability strategies as opposed to only short-term progress measurements: Having a forward-looking climate strategy can help companies allocate capital to areas that are more important throughout the path to net-zero. It can also more effectively mobilise natural and human resources toward achieving sustainability targets. And this can lead to long-run radical changes. As captured by a nice turn of phrase; this decade needs to be ‘the decade of delivery’, not the just the ‘decade of disclosure’. Green supply chains in partnership with other players in the business ecosystem: Companies need to more actively engage with suppliers to decarbonise their entire value chain (Scope 3 emissions). This can help suppliers develop decarbonisation know-how, and advance product innovation that can not only cut emissions but also expand revenue growth drivers. Better manage climate risks: In addition to reducing emissions, another imperative task for companies is to set up a game plan to map the physical and transition climate risks that are likely going to affect their businesses, embed these risks into their cost projections, and improve operations to mitigate these risks. Don’t forget about environmental justice: Climate change is going to increasingly affect the disadvantaged, and the transition to clean energy might also disproportionally burden them. To tackle this, companies can develop support programmes for the local community where they conduct business. For instance, up-skilling and re-skilling the local community can both ensure a just energy transition and accelerate supply chain decarbonisation. Sustainable finance faces tougher scrutiny but remains a crucial tool Global sustainable finance has experienced a special year so far as well. After several years of phenomenal growth, global issuance of green, social, sustainability, and sustainability-linked bonds totaled $561bn between January and August 2022, down from $689bn during the same period last year. However, as pointed out at the Climate Week, if we only look at corporate bond issuance (excluding financial institutions, sovereigns, supernationals, and agencies), the slowdown in Environmental, Social and Governance (ESG) bond issuance is not as deep as vanilla bond issuance. For the first eight months of 2022, ESG corporate bond issuance is estimated to have fallen by 17% compared to the same period in 2021, versus a 31% drop in global corporate bond issuance. This is evidence that corporates have been capable of advancing their sustainability agenda during some quite testing times. Global corporate ESG bond issuance vs. total corporate issuance Source: Bloomberg New Energy Finance, Informa Financial Intelligence, ING Research   In addition to the issuance volumes, we think that this year has prompted the sustainable finance market to think more deeply about green credentials. We have seen several regulators around the world investigating companies’ and asset managers’ ESG-related practices and claims. We have also seen more regulating entities start the process toward mandating climate-related data closure. This will in a way reduce greenwashing, while also providing the sustainable finance market with an achievable pivot from high-speed growth to quality growth. Still, much remains to be done to ensure this pivoting. First, disclosing detailed sustainability data will be key in helping investors better assess an issuer’s progress. Quality reporting is then linked to interim target setting, as the latter can not only lay a solid groundwork for reporting, but also enhance investor confidence on an issuer’s sustainability commitments. Moreover, timely and transparent communication is needed between issuers and investors, especially under fast-changing macroeconomic and geopolitical conditions. It works best when capital is dedicated in a way that can boost the efficiency of the decarbonisation process. Finally, the Climate Week also touched on how sustainable finance can and should help with energy transition. We think that it works best when capital is dedicated in a way that can boost the efficiency of the decarbonisation process – this means investing simultaneously in clean energy deployment, hard-to-abate sector emissions reduction, and the emerging technologies that can achieve the previous two. The US is catching up on climate change and clean energy policy The Climate Week also focused on the enhanced policies of the US to realize its climate targets. At Climate Week 2021, we heard many speakers say that the US was falling behind compared to major economies, whereas this year, companies and investors were euphoric that the US was taking a more meaningful stand, with the signing of the Infrastructure Investment and Jobs Act and the Inflation Reduction Act. And the proposal from the SEC on mandating climate-related data disclosure was noteworthy too. Market players believe and we agree that these measures are putting the US on a level playfield with jurisdictions such as the EU, and in some cases, like carbon capture and hydrogen, the US are set to claim a leading role. Of course, these measures alone will not get the US to net-zero, but they are likely to snowball – the two bills are forecast to be able to together cut US emissions by 31%-44% by 2030. US Senate’s proposed clean energy investment reaffirms climate ambition Biden’s billions – a sustainable shift? Why the US SEC’s proposed climate disclosure rules are a game changer US greenhouse gas emissions (historical and forecast) Source: Rhodium Group, Climate Action Tracker, ING Research   One thing is clear from the point of view of those at Climate Week: there is no way back – both from a climate science point of view and a business/investment point of view – but to work toward deep decarbonisation. Sustainability has not only gone mainstream, but also front and centre when companies think about mitigating risks and growing businesses. Accelerated efforts from all parts of the global economy are needed to deliver commitments this decade – deemed a crucial decade if the catastrophic results of global warming are to be avoided. Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Blending sustainable aviation fuels (SAFs) needs to grow massively to meet ambitions for 2030 and beyond. Demand is there, but supply is limiting uptake. Ramping up capacity investments is critical to meet the aspired goals. Airlines (purchase grants) and suppliers (production, delivery) have a joint role here, but more policy support will help In this article SAF supply is the critical factor to reach the targets Not on track yet – blending goals require much more SAF-production locations The US is taking the lead in developing SAF production capacity SAFs gain from scaling, but will continue to trade at a premium Using SAF will eventually push up airline ticket prices Increased climate awareness leads to scrutiny of SAF feedstocks Synthetic SAF is expected to be the accelerator from 2030 onward       Ambitions and goal-setting for using sustainable aviation fuel (SAF) by authorities and governments, as well as airlines and corporates, have gained traction over the last two years. This created the conditions for the take-off of SAFs from the demand side. But what is the current state of play in supply? What are the critical factors and what is expected in terms of growth?   Global jet fuel demand expected to recover and continue to increase The global consumption of conventional jet fuel by commercial airlines totalled 360 billion litres in 2019, according to the trade association IATA. Consumption dropped following the Covid-19 pandemic, but airline activity is expected to recover and fuel burn is bound to exceed pre-pandemic consumption levels again by 2025. Over the following decades, an average annual global growth of passenger aviation (RPK) of around 3-3.5% is estimated. Operational efficiency measures (such as in taxiing, flight and arrival optimalisation) and aircraft replacements are likely to offset a significant part of the additional fuel consumption, but not all. So annual jet fuel consumption is expected to continue increasing. Given the lack of mature and commercially viable low-carbon technologies, this means aviation will rely heavily on SAFs to pave the way for decarbonisation over the next two decades. SAF production and delivery on the brink of acceleration SAF production capacity per year in billion litres based on publicly-announced intentions BNEF, ING Research   SAF production to reach 1% of jet fuel consumption in 2023 and almost 3% in 2026 The usage of SAFs has been under discussion for quite a while, but on a global scale production hasn’t made a large difference yet. That’s about to change, though. If all publicly-announced initiatives to start and expand production by the summer of 2022 come to fruition, available global SAF capacity will increase fivefold in 2023 and continue to rise in the years after. Production capacity could reach a 1% share of global consumption in 2023, more than 2% in 2025 and nearly 3% by 2026. SAF supply is the critical factor to reach the targets Despite the higher costs of SAF, supply is currently still the most critical factor to secure further uptake. The investment case requires long-term cooperation and commitment between airlines, manufacturers (like Neste, Gevo and World Energy) and distributors (like SKY-NRG – which also develops production partnerships – and World fuel services). Planning and development of production facilities can easily take several years before delivery starts off. This means 2030 targets are already around the corner. Much more production is required to reach ambitious targets for 2030 Development global SAF capacity based on publicly-announced intentions and future blend ambitions Not on track yet – blending goals require much more SAF-production locations Although SAF production is about to accelerate, 2030 targets from IATA (6%) and the corporate initiatives Clean skies for tomorrow and One world group (10%) require more progress, especially when taking into account the expansion risks, such as project delays. The industry targets require strong growth, but they still fall short of what IEA deems necessary for a global net-zero scenario pathway. This implies we’re just at the start of the required surge and we face a long haul to push growth. Market analysts estimate that ultimately 5,000-7,000 SAF facilities may be required to achieve the global SAF blending goals of the aviation industry by 2050 (ATAG/ICF).   Global challenge is also a regional challenge – locations availability at airports is key There’s also a regional puzzle of supply and demand as airlines are dependent on available SAFs at local airports. This means supply networks will need to be unrolled and developed. Currently, SAF supply in the US is concentrated in San Francisco and Los Angeles, and in Europe it is mostly at Amsterdam-Schiphol, London Heathrow, as well as Scandinavian airports, whereas supply at the Asian hubs Singapore and Hong Kong is expected shortly. Local production and diversification are obviously crucial to fueling airline aircraft with more SAF and avoiding long lead times. Europe and US take the lead in SAF production capacity, Asia follows SAF capacity per year in billion litres per region based on publicly-announced intentions BNEF, ING Research The US is taking the lead in developing SAF production capacity European market players seemed to be most ambitious in developing SAFs, but the US now leads the way thanks to efforts made by the Biden administration in the US. America has adopted a different approach to Europe’s demand targeting by subsidising $1.25-1.75 per gallon of bioSAF ($0.33-0.46 per litre) and stimulating supply. Production capacity in the US is expected to surpass Europe’s potential in 2023 or 2024. Examples of recent agreements include Aemetis's delivery to eight members of the One World group at San Francisco Airport. The Asian-Pacific region falls behind despite air travel in Asia expanding at the highest pace over the last decade, and it will continue to do so post-pandemic.    SAFs gain from scaling, but will continue to trade at a premium SAFs production entails significantly higher costs than conventional jet fuel. Based on WEF figures and a fixed production cost of $600 per MT (which is relatively low but still provides a relevant comparison), we have detailed the relative cost ranges for the four distinguished eligible SAF production pathways over time. As a result of economies of scale, production costs are expected to come down significantly in the following decades. But they are unlikely to drop below conventional jet fuel before 2050. This means SAFs will keep trading at a premium, leading to higher fuel costs for flights fueled by SAF blends, as well as higher ticket prices.    HEFA is the cheapest production option, but ultimately synthetic SAF is expected to be most competitive Development of production costs per SAF route (upper and lower boundary) as multiple of jet fuel WEF, ING Research   HEFA is most competitive, but ultimately synthetic SAF is expected to be the most cost-efficient The HEFA production route which has bio-oils and recycled fats as feedstocks (bioSAF) is the most mature and most competitive, with an estimated price range of 1.8-2.7 the cost of conventional jet fuel. The other biogenetic pathways are still significantly more costly at this point. Synthetic SAF currently has the largest cost range, depending on the production costs of hydrogen and the origin of carbon (waste sources, direct carbon capture). With the expected global surge in green energy supply, the costs are expected to drop below the bioSAF in the long run. Most cost efficient HEFA is dominant, but other SAFs are increasingly needed as well to supply sufficient SAF Forecasted SAF capacity per year in billion litres per technology based on publicly-announced intentions BNEF, ING Research   HEFA dominates, while the development of other SAF pathways is also needed to meet future demand HEFA is the cheapest pathway for SAF and is also expected to represent the vast majority of global production this decade. Availability of feedstocks enables HEFA production to expand towards 2030, but expanding bioSAF will increasingly need to be accommodated by alternative feedstocks like cellulosic (paper) and municipal waste (MSW). For the US, feedstock from fats and oils (HEFA) won’t be enough to meet SAF demand. Other production methods are technically feasible but more expensive. Nevertheless, feedstock availability, increasingly stringent requirements, as well as regional differences leave little choice. Development and upscaling of Alcohol to Jet (AtJ), Gassification+FT as well as synthetic SAF are also required to meet future demand. Using SAF will eventually push up airline ticket prices The fuel cost for airlines usually varies between 15-30% of operating costs. Assuming a 25% fuel cost share, an average SAF blend of 10% in 2030 would push total operational costs up by 2.5-5%. For a ticket from London to New York, this initially means an increase of some €15-25. After 2030, the step up in blending rates will push fuel costs up further, despite the expected price decrease. In the low margins airline industry, this will quickly be reflected in higher ticket prices.  Increased climate awareness leads to scrutiny of SAF feedstocks With respect to decarbonisation efforts, corporate sustainability actions are increasingly under scrutiny. The Science Based Target Initiative (SBTI) approach is also increasingly used as a reference. This may not only lead to a shift away from carbon offsets but also encourage the shift to more advanced SAF feedstocks. Sustainability-linked loans with SAF targets have also been introduced. Palm oil blends are already controversial because of deforestation, but the use of (by)products of food crops like corn for SAF (alcohol to jet fuel) will have adverse effects on food or feed supply chains and this might also push up food prices. In the EU, there’s a push for the use of advanced feedstocks and the European Commission also considers a cap on waste oil feedstocks and focuses on more advanced waste and residual sources. But limited availability also leads to tensions. In the US, corn is still seen as an important source for bioSAF going forward.   CO2 reduction potential ranges of the SAF pathways ING Research   Large contribution from synthetic SAF needed to maximise decarbonisation The aviation sector is expected to require hundreds of billions of litres of SAF in 2050. At the same time, demand for biofuels and bio feedstocks from sectors including road transport, shipping and the chemical industry is also increasing. On a global level, an estimated 41-55% of SAF could potentially be provided from biogenic origin. In Europe, bio feedstock supply for SAF is expected to lack ambitions from 2035 onward. This means the remainder should eventually be provided by synthetic fuels. Synthetic SAFs also have the highest potential for decarbonisation when using (almost) 100% green electricity. However, producing synthetic SAFs is energy-intensive and requires more electricity than it contains. It requires large areas of land or sea to produce and intensified competition with other sectors is expected. Consequently, synthetic SAF will depend on the availability of sufficient green energy to convert into the required green hydrogen. Synthetic SAF is expected to be the accelerator from 2030 onward In Europe, several low-volume production facilities for synthetic SAFs (including in the Netherlands and Sweden) are planned to come online between 2025 and 2030. The EU already includes a sub-mandate for synthetic SAFs as part of general targets, which starts at 0.7% of total fuel consumption in 2030, increasing to 28% in 2050. In the US, the introduced production subsidies currently only apply to bioSAFs.   Generally, the rise of synthetic SAF requires a significant reduction in the three cost drivers: green energy, electrolyser technology and direct air capture – and this takes time. Once the global availability of green energy has expanded significantly and the production of synthetic SAF can be scaled, the production costs of synthetic SAF are expected to come down. Eventually (in 2050) synthetic SAF is also expected to be the cheapest option.   Some regions have a competitive edge in producing synthetic SAFs The success of SAFs also has a regional element to it, as previously explained. Countries with an abundance of solar energy and space such as Australia, and Saharan countries, as well as European countries like Spain, could benefit from a competitive advantage as locations for the future production of synthetic SAF as low renewable energy costs are a critical pillar of the business case.   Corporate cooperation required to accelerate SAF supply, more policy support would help SAFs have higher production costs and trade at a premium. Imposing mandatory global blending rates enforced by ICAO would probably be most effective to ramp up supply, although that's not easy to achieve. From a market perspective, subsidies for scaling up production, such as in the US, could improve the business case and push up investments in global supply in the short run. Pricing emissions on a global scale can generally be an efficient measure to structurally improve the market position of SAFs, especially if revenues are (partially) redistributed for decarbonisation. ICAO's CORSIA programme takes a start by increasing obligations for carbon offsets, but only from 2027 and it’s not yet clear how this will eventually play out for the SAF market. In Europe, continental flights are already subject to the European emission trading scheme (ETS), but due to free allowances the impact is currently still limited. Thus, policy changes to support and speed up SAF supply are possible. Demand for SAFs is already there, but supply needs to catch up with the blend ambitions in the coming years. Viable alternative technologies in commercial aviation are still a long way off and SAFs, therefore, have a critical role in emission reductions. Manufacturers, distributors, airlines and corporate users are challenged to team up to develop and secure even more SAF supplies and more policy support can be helpful. TagsSustainability Fuel Air travel Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

HP Q2 23 – 30/05 The last 2 quarters have seen the HP share price undergo a decent recovery in the wake of its full year results back in November when the PC and hardware manufacturer announced the loss of 6,000 jobs over 3 years, due to a slowdown in the PC and laptops market. HP hasn't been alone in this regard with Dell also announcing similar reductions in headcount. Revenues have been in decline over the last few quarters with weak PC demand very much a headwind.   At the end of its last fiscal year annual revenues slowed to $62.98bn, with consensus for 2023 for this to slow to $55.2bn. In Q4 revenues came in at $14.8bn and slowed to $13.8bn in Q1 of this year, while profits came in slightly ahead of expectations at $0.75c a share. For Q2 the company was slightly more optimistic given the lifting of lockdowns in China, keeping its fiscal year 2023 guidance of full year adj.   EPS expected to come in between $3.20 and $3.60c a share. For Q2 profits are expected to remain steady at $0.76c a share, although revenues are expected to plunge from $16.49bn a year ago to $13.04bn, with computers and notebooks still forecast to be a drag.

Crypto Industry News: El Salvador recognized BTC as legal tender in 2021. According to the authorities, this has led to increased interest in the country in terms of tourism. Added to this is the renewable energy development program at Metapan, which aims to use solar and wind energy to power bitcoin miners. Now it turns out that Tether is one of the investors in the mentioned renewable energy project. As part of it, Volcano Energy, a 241 megawatt (MW) renewable energy center, was created in Metapan.   It is expected to generate 169 MW of solar energy and 72 MW of wind energy. The energy produced will power the BTC mines in El Salvador. Tether estimates that the park's computing power will exceed 1.3 exahash per second. This would mean that Volcano Energy would be one of the largest cryptocurrency mines in the world. Tether's chief technology officer, Paolo Ardoino, said the investment fits into a broader vision.   The company wants to invest in the production of renewable energy, as well as in mining infrastructure. Volcano Energy CEO Josue Lopez added that "over 52% of bitcoin is currently issued sustainably." It is not known exactly how much Tether invested.   The total cost will be USD 1 billion. Technical Market Outlook: The ETH/USD pair has bounced back above the level of $1,839 and is trading above the 50 and 100 MA. The next target for bulls is seen at the level of $1,913 and then possibly at the last swing high located at $1,928. The intraday technical support is seen at the level of $1,839 and $1,822. The strong and positive momentum on the H4 time frame chart supports the short-term bullish outlook for ETH.     Weekly Pivot Points: WR3 - $1,962 WR2 - $1,919 WR1 - $1,894 Weekly Pivot - $1,877 WS1 - $1,851 WS2 - $1,834 WS3 - $1,791   Trading Outlook: The Ethereum market has been seen making lower highs and lower low since the swing high was made in the middle of the August 2022 at the level of $2,029. This is the key level for bulls, so it needs to be broken in order to continue the up trend. The key technical support is seen at $1,368, so as long as the market trades above this level, the outlook remains bullish.  

We recently had the opportunity to speak with an analyst from Squared Financial to discuss the current market situation. With the crypto market showing resilience and gaining 3.9% in the past 24 hours, reaching a capitalisation of $1.18 trillion, it has diverged from the downward trend seen in stock indices due to expectations of a rate hike.  Bitcoin, in particular, has experienced a surge of over 15% in just two days, revisiting the April highs. However, as we delve deeper into the market dynamics, doubts arise regarding the sustainability of the cryptocurrency rally amidst the challenging environment created by the stock indices.   FXMAG.COM: How will a mid-term Fed and ECB decision last week affect EUR/USD? The Federal Reserve delivered a hawkish pause. Markets were anticipating a pause with a possibility of one more rate hike in July followed by a rate cut by the end of the year. However, the Federal Reserve hinted at two more hikes and no rate cuts this year. Markets had to price in such a scenario. However, the ECB was more hawkish than the Federal Reserve, keeping the door open for further hikes on higher inflation expectations, sending the Euro over 1.09. In the meantime, the Dollar Index is showing signs that the downside trend has resumed. Yet it needs more time to confirm. Another weekly close below 102.60's would confirm that. On the other hand, this would be a confirmation that the Euro's upside trend has resumed as well, which could be targeting 1.11 within two weeks. FXMAG.COM: How will Thursday's (22.06) SNB interest rate decision affect CHF quotes? Switzerland's Core Inflation rate ticked below 2.0% in its latest release, which is the lowest core inflation rate since November of last year. The annual inflation rate in Switzerland eased to 2.2% in May 2023 from 2.6% in the previous month in line with market forecasts. There is no reason for any surprise by the Swiss National Bank. A 25bps is highly possible, but what matters the most is if the SNB hints at a pause. If so, CHF is likely to weaken. FXMAG.COM: Is there a chance that the U.S. SEC oversight will finally approve the application of some investment company to authorize the creation of an ETF with exposure to BTC, and how will that affect the price of this cryptocurrency and others? It is highly possible that the SEC will authorize crypto-related ETFs especially those with exposure to BTC. Despite all the headwinds the Crypto market had over the past few months, we saw some stabilization. Moreover, when it comes to the price and time method, it suggested that BTC ended its bear market back in March. The application of major investment companies sparked another wave of optimism, yet tough regulations are still needed.

Costs of house improvement slightly higher than inflation Monthly price development of all consumer goods (HICP) and renovation (maintenance and repair of dwellings) eurozone, (Index Jan 2018=100)     Optimism remains The R&M market is likely to show future growth driven by sustainable and energy-related factors. Many governments support sustainability measures, and high energy prices act as an extra trigger. As mentioned above, R&M data are often scarce. However, we can look at the specialised construction sector to know how the R&M market is currently doing. This subsector consists of many construction branches that are active in R&M, such as installation, plasterers, carpenters, painters and glaziers. The data are a bit blurred as many of these companies are likewise also active in the construction of new buildings. Nevertheless, if we consult the EU construction confidence indicator, we see that specialised construction companies have been optimistic for a long time. In June it was a bit lower, but still neutral and not negative. Whereas the confidence of companies in the building sector as a whole has been in negative territory for almost a year.   Confidence indicator neutral in specialised construction Development EU confidence indicator     New EU regulation EPBD IV will be a structural growth driver The European Union has set a goal of achieving climate neutrality by 2050. To reach this target, particular attention is being given to buildings. Buildings currently contribute to 40% of energy consumption and 36% of greenhouse gas emissions in the EU. However, the current rate of building renovation in Europe is inadequate to meet the required targets. To address this, the European Parliament passed a comprehensive revision of the 2010 Energy Performance of Buildings Directive (EPBD IV) in March. This proposal aims to increase the renovation rate by introducing significant changes. One key change involves replacing the existing energy performance certification system with a more comprehensive assessment of a building's environmental performance. The proposal places a strong emphasis on ambitious targets for renovating existing buildings, including the establishment of minimum energy performance requirements that all buildings must meet within a specified timeframe. However, the scope of the proposal extends beyond merely improving energy efficiency. It also introduces a new certification system for evaluating the environmental performance of buildings throughout their entire life cycle. This certification considers emissions generated during the production of construction and insulation materials, the construction process itself, as well as the renovation and operation of buildings. These regulations will stimulate the renovation market in the EU, as they will trigger a wave of renovations and create a greater demand for energy-efficient upgrades.      

Ambitions scaled back Secondly, while growth in activity is fuelling tax receipts, Belgian public finances continue to create problems. The measures taken to support households and businesses in recent years have weighed heavily on public finances and so far have not been offset. Given the deterioration in public finances, the government will have to take the first steps towards fiscal consolidation in order to comply with the requirements of the European Commission. However, with just one year to go before the elections and given that the coalition in place brings together parties that are opposed in socio-economic terms, coming up with clear and effective measures will likely prove a challenge. Even so, we believe that consolidation will have to take place sooner or later. Most of the effort will probably be made after the elections and will follow the formation of a new majority, which is likely to weigh on the dynamics of the economy over the next few years. On top of this, the federal government had originally planned to carry out two major structural reforms (pensions and fiscal). A pension reform was agreed at the beginning of July, but political hurdles have greatly reduced the initial ambitions included in the final agreement. In a nutshell, there will be an incentive to keep employees at work longer, and at the same time, the highest additional pension schemes will be required to contribute more to the legal pension system. This should satisfy the European Commission, which requested certain measures before releasing funds from the Recovery and Resilience Facility (RRF). This agreement is certainly not the major structural reform that was announced. Moreover, it's becoming increasingly clear that the tax reform will not be achieved. Instead, it will be left to the next legislature, which once again limits the ability of the current majority to put public finances back on a sustainable track.   Further decline in inflation story Inflation peaked at 12.3% in October 2022, and fell back to 4.2% in June, thanks mainly to lower energy prices (gas bills down by almost 64% YoY, and electricity bills down by more than 29%). We're now also seeing signs of easing in other areas – and particularly for food products. Overall, our leading inflation indicator (Net Acceleration Inflation Index – see chart below) tends to show that inflation should continue to fall over the coming months. This indicator uses all the categories of goods and services that are included in the consumer price index in order to determine whether upward pressure on inflation is broad-based or not. In June, the proportion of the consumer price index in a deceleration phase now far exceeds the proportion in an acceleration phase, which is a strong sign that the bulk of the inflation wave is behind us.   Leading indicator shows further decline in inflation   The Belgian economy in a nutshell (% YoY)

EUR/SEK: Riksbank’s back in hawkish mode, but for how long?       We had signalled the Riksbank needed to rebuild a hawkish tone to re-establish confidence in SEK and avert more severe sell-offs. In June, the RB offered a solid package to support the krona: a 25bp hike, pledge of another one (likely in September) and an acceleration in quantitative tightening. EUR/SEK followed the dollar lower lately, but had stayed around all-time highs for some time after the RB meeting, a signal that: a) domestic tail risks remain relevant; b) there are concerns those risks may pose a threat to the sustainability of further tightening. SEK is undervalued in the medium term and there is still room to recover, but remains the G10 currency with the greatest exposure to real estate pains and domestic risks in general  

Steel from 'green' hydrogen cannot compete with coal-based steel Indicative unsubsidised and pre-tax cost of steel in €/kg for different steel production technologies.    Steel is a very cheap product. With coal-based technology, it only costs about 50 euro cents per kilogram – cheaper than a kilogram of potatoes or a litre of milk. Another surprising fact about steel is its marginal role in the price of the end product. Take, for example, a car and an offshore windmill. Both contain a vast amount of steel – about one ton of steel per car and 1,000 tons for a windmill. Switching from conventional steel to green steel doubles the cost, but it makes hardly any difference in the final pricing of steel-heavy products. It raises the price of a car by just 1% to 2%, depending on the sale price. The capital needed for the investment in the windmill increases by 2% to 6% depending on the location of the wind farm (shallow or deeper waters).   Switching to green steel has little impact on product prices Indicative price impact of a switch from conventional coal-based steel to hydrogen-based steel which is assumed to be twice as expensive     For a typical car, the price increase from green steel translates into a couple of hundred euro only. That doesn't seem such a big deal, given the thousands that consumers spend by ticking the options list in the showroom. If ‘green steel’ was an option, it would cost far less than the option of additional features like alloy wheels. An increasing amount of consumers indicate their willingness to pay more for green products. The cost increase for a car and offshore windmill falls well within estimates for the green premium. In this view, the steel sector is very different than transportation sectors. Steel often represents a minor share of the total cost of the end product. Flight tickets in aviation or shipping rates in marine shipping are much more sensitive to fuel costs. Take aviation as an example. Substituting traditional jet fuel by a hydrogen-based synthetic fuel would raise the cost of a two-way ticket from Amsterdam to London by about +150%, to New York by +400% and to Sydney by +450%. Taking this into account, it isn't too surprising to see companies like Volkswagen partnering up with large steelmakers like Salzgitter AG to source green steel. Volkswagen plans to use the low-CO2 steel from the end of 2025 in important future projects such as the Trinity1 e-model, which will be produced in Wolfsburg from 2026 onwards.  

Supply chain challenges signal a bumpy road ahead for electric vehicle adoption With net zero ambitions now at the forefront of many governments’ political agendas, electric vehicle sales are breaking new records. Soaring demand for EVs is driving the growing market for related critical minerals, and supply chains are rapidly expanding – but for now, China remains in the lead for battery manufacturing   Could supply chain issues slow down the pace of EV adoption? Decarbonising the transportation sector is key for reducing greenhouse gas emissions – and with the global light-duty vehicles fleet of almost 1.29 billion cars reflecting the largest fraction of transport emissions, moving progress along has become more crucial than ever. The EU aims to phase out almost all combustion engine-driven car sales by 2035, while over in the US, plans are already in motion for half of all sales to be electric by the end of this decade. With a growing coalition of countries now pledging to reach net zero by 2050, we take a look at the current state of global supply chains and the ways in which they could hinder progress moving forward.

The dynamics of tightening supply and soaring demand for electric vehicle batteries are becoming increasingly fragile. Battery manufacturers are now looking into new technology with advanced chemistry compositions to ensure long-term metals supply, but progress will be impacted by the outlook for metals prices.   More minerals are used in electric cars compared to conventional cars   Surging battery metal prices pose challenges to the EV industry The rapid increase in electric vehicle sales during the Covid-19 pandemic has exacerbated concerns over China’s dominance in lithium battery supply chains. Meanwhile, the ongoing war in Ukraine has pushed prices of raw materials – including cobalt, lithium, and nickel – to record highs.   The dependence on specific suppliers is not the only concern. Batteries make up a big part of an EV’s total cost and typically account for 30% to 40% of their value, but this proportion increases with larger battery sizes. Rising demand for EVs amid tightening supply chains has also pushed prices of battery materials (including cobalt and lithium) to multi-year highs. This impacts prices, which in turn makes consumers more hesitant to make the shift to electric vehicles. While prices for nickel and cobalt have come down in the first half of 2023, they are still higher than they have been in previous years. For example, Chinese prices of lithium carbonate (a refined form of the metal that goes into EV batteries) jumped more than 1000% from the end of 2020 to reach a high in November last year. They then lost more than two-thirds of their value through late April, according to data from Asian Metal.       What does the EV battery supply chain look like?   The five key materials for lithium-ion batteries (Li-ion) are lithium, cobalt, nickel, manganese, and graphite, all of which provide the battery with the power to store and release energy for boosting EVs. Most of the key materials used in electric vehicle production are mined in resource-rich countries, including Australia, Chile and the Democratic Republic of Congo (DRC). There are likely sufficient reserves of minerals in the earth’s crust to satisfy future demand for EV batteries, but scaling up mining is a long and expensive process. For battery production alone, a conservative estimate from the International Energy Agency (IEA) suggests that by 2030, we will need 50 additional lithium mines and 60 for nickel. We will also need to add 50 new cathode and 40 new anode active material manufacturing plants to produce high-performance battery materials. Currently, it can take between two and seven years to build a new factory, depending on the technology and member state. It takes 10 years on average until a new mine comes online.     Top battery raw materials producing countries in 2022   Lithium Batteries are now the dominant driver of demand for lithium. For Li-ion batteries, lithium is irreplaceable. Over 70% of global lithium production comes from just two countries: Australia and Chile. Australia is the world’s largest supplier and produces most of its lithium by mining hard rock spodumene, unlike Argentina, Chile and China, which produce it mostly from brine. Chile comes in second, holding more than 40% of the world’s known reserves. Cobalt The intensity of cobalt in Li-on batteries has decreased significantly over recent years, with battery makers moving to higher nickel content chemistries. Cobalt is mainly mined as a by-product of copper or nickel mining, and more than 70% of it is produced in the DRC. Artisanal and small-scale mining is responsible for around 10-20% of the DRC’s cobalt production. Refining is concentrated in China, accounting for around 80% of global capacity, although the country has little of the raw material. Nickel In Li-ion batteries, the use of nickel lends a higher energy density and more storage capacity to batteries. Class 1 nickel (>99.8% purity) is required in battery production, while class 2 nickel (<99.8% purity) cannot be used without further processing. Nickel is primarily found in two types of deposits: sulphide and laterite. Sulphide deposits are mainly located in Russia, Canada and Australia and tend to contain higher grade nickel. Russia is the world’s largest supplier of Class 1 battery-grade nickel, accounting for around 20% of the global supply. Trade restrictions on Russia would therefore pile pressure on prices. Laterite, which contains lower grade nickel, is mainly found in Indonesia, the Philippines and New Caledonia. Indonesia, which holds almost a quarter of global nickel reserves, prohibited the export of nickel ore in January 2020 and is now attracting investments into higher-value processing, mostly from China.   Approximate mineral composition of different battery cathodes   Impact of Russia’s invasion of Ukraine on battery supply chains Lithium and cobalt were relatively unaffected by the supply disruptions following Russia’s invasion of Ukraine. For nickel, it's a different story. Russia is the third-largest producer, supplying around 9% and processing around 6% of global nickel in 2021 – but most importantly, it is the world’s largest Class 1 nickel supplier and accounts for around 20% of global supply, most of which is supplied by Norilsk Nickel. Volatility in the nickel market has become increasingly common over the past year. We've seen reduced liquidity ever since the short squeeze seen back in March, when fears of sanctions on Norilsk Nickel (following Russia’s invasion of Ukraine) coincided with a huge short bet by the world’s largest stainless steel producer, Tsingshan. This caused prices to more than double in just a matter of days. The LME was forced to suspend trading for a week and cancel billions of dollars worth of nickel trades.   LME volumes have declined since then, with many traders reducing activity or cutting their exposure due to a loss of confidence in the LME and its nickel contract in the aftermath of the March short squeeze. These low levels of liquidity have left nickel exposed to sharp price swings – even amid small shifts in supply and demand balances. But as the exchange introduced daily price limits and margin requirements fell, volumes started to pick up. The resumption of Asian trading hours has also encouraged more volumes and improved liquidity, which in turn has reduced volatility in the contract. While volumes have stabilised over the past few months, they remain at lower levels than before the nickel crisis last year.        

Chile’s lithium move is the latest in the global resource nationalism trend Earlier this year, Chile announced that it would nationalise its lithium industry to boost its economy and protect its environment. The move would in time transfer control of Chile’s lithium operations from Albemarle and SQM, the world’s number one and number two lithium producers, respectively, to a separate state-owned company, posing fresh challenges to EV manufacturers scrambling to secure supplies, with more countries seeking to protect their natural resources. Albemarle and SQM supply Tesla and LG Energy Solution, among other EV and battery manufacturers. Chile is just part of the global trend with several other countries having taken greater control of their resources. Mexico nationalised its lithium deposits last year, while Indonesia banned exports of nickel ore in 2020.     Current efforts to strengthen EV battery supply chains EU – The Critical Raw Materials Act (CRMA) The EU’s Critical Raw Materials Act is one of the cornerstones of the EU’s Green Deal Industrial Plan, together with the Net-Zero Industry Act, which sets a target for the EU to produce 40% of its own clean tech by 2030, such as solar power or fuel cells, partly by streamlining the granting of permits for green projects. The bloc also announced a goal for carbon capture of 50 million tonnes by 2030. Europe is responsible for more than one-quarter of global EV assembly, but it is home to very little of the supply chain apart from cobalt processing at 20%, according to the IEA. Global investment in the green energy transition is set to triple by 2030 from $1 trillion last year, the EU said. The bloc will need €400bn of investment a year to decarbonise and meet its target of net-zero emissions by 2050, it estimated. As part of the Critical Raw Materials Act, the EU has set targets for the region to mine 10% of the critical raw materials it consumes, like lithium, cobalt, and rare earths, with recycling adding a further 15%, and increased processing to 40% of its needs by 2030. The EU also said that no more than 65% of any key raw material should come from a single third country. The EU is almost entirely dependent on imports of these raw materials, particularly from China, with 100% of the rare earths used for permanent magnets globally refined in China and 97% of the EU’s magnesium supply sourced from China.   US – The Inflation Reduction Act (IRA) The US IRA has established policies that aim to strengthen the entire domestic EV value chain. Under the IRA, battery cells can receive a tax credit of up to $35 per kWh of energy produced by a battery cell, while battery modules can get up to $10/kWh. In the case where battery modules don’t use cells, a maximum of $45/kWh is provided. Moreover, the tax credits for EVs, with the highest level at $7,500, have important qualifying requirements that are tied to battery components and origins. This means that EV manufacturers looking to qualify for the tax credits will need to reroute supply chains and form new business partnerships with new suppliers. The IRA can also encourage more battery recycling in the US because established battery recycling capacities can help EV manufacturers bypass any sourcing origin requirements for critical minerals. The government is also setting money aside to encourage the research and development of batteries and battery recycling. It will be time and money-consuming, but the IRA’s policies would in the long-run lead to a more resilient EV supply chain in the US. The IRA has spurred $45bn of announced private-sector investment in the entire value chain as of late March, with more to be expected in the future.   EV criteria: price, income, assembly and sourcing The retail price cannot exceed $80,000 for an electric van, SUV, or pickup truck, and $55,000 for any other type of EV. EV buyers' gross annual income cannot exceed $150,000 for a single taxpayer, $225,000 for a head of household, and $300,000 for a married couple filing jointly. Qualifying EVs' final assembly must be in North America. 50% of the value of the battery components must be manufactured or assembled in North America. 40% of the value of the critical minerals needs to be extracted or processed in the US or a country with which it has a free trade agreement (FTA), or be recycled in North America.   Investments key to combating China’s dominance in EV supply chains Investment is key to combatting China’s crucial role in the EV supply chain. But even as the US and Europe continue to ramp up investment, China’s dominance in processing and production is set to continue to grow. Bloomberg New Energy Finance (BNEF) is expecting China’s dominance to continue, with the country accounting for 69% of the world’s battery manufacturing capacity in 2027. Combating China’s dominance in the EV supply chains will be an expensive process. According to BNEF, the US and Europe will have to invest $87bn and $102bn, respectively, to meet domestic battery demand with fully local supply chains by 2030.   More attention needed on battery recycling and emissions reduction Recycling and emissions reduction along the EV battery supply chain is an area that has not yet received sufficient attention but will become increasingly important for companies to manage. Battery electric vehicles (BEVs) on average show significant environmental advantages compared to internal combustion engine (ICE) vehicles when life-cycle emissions are calculated. The portion of BEV life-cycle emissions coming from battery mining and processing is relatively low, but the pressure to decarbonise battery mining and production will only grow as the demand for EVs increases.   Comparative life-cycle GHG emissions of a mid-size BEV and ICE vehicle   There are several common practices to reduce emissions in EV battery mining and processing. First, companies are trying to use clean electricity to power their operations. This primarily includes buying Power Purchase Agreements (PPAs) from renewable developers. Second, mining companies are also taking initiatives to switch to low-carbon fuels – such as biodiesel – for their truck fleet. Third, both mining and battery production companies have been engaged in boosting circularity for their product value chains. Today, the global capacity for battery recycling remains limited. In general, lithium-ion batteries' lifespan can last between 100,000 and 200,000 miles, or about 15 to 20 years of driving, after which it needs to be recycled in some way. In the US, lower than 5% of lithium-ion batteries were recycled in 2019. For instance, US start-up Redwood Materials has been partnering with automakers Ford and Toyota, as well as battery producer Panasonic Holdings, to establish a closed-loop battery ecosystem. Redwood Materials recently obtained a $2bn loan commitment from the US Department of Energy to build and expand its pilot battery recycling facility. In Europe, Renault is collaborating with optimised resource management company Veolia and science-based company Solvay to advance EV battery metal closed-loop recycling. Recycling EV batteries and decarbonising battery production will help companies boost company environmental, social, and governance (ESG) credentials. Recycling, specifically, can also help enhance supply chain security. Over the next few decades, we will see recycling become more mainstream among battery and EV manufacturers. McKinsey forecasts that EV battery recycling capacity will grow at 25% per year until 2040. Recycling lithium-ion batteries is increasingly becoming a priority for many countries and EV companies in order to reduce their dependencies on the mining of raw materials.     Policy and politics will continue to play a role in EV supply chains Policy and politics will play an increasingly large role in the future of EV supply chains. To secure battery metal supply, we expect to see countries and regions such as the US and EU forge new trade partnerships. We expect governments' EV policies to focus more on batteries and metals, and we also expect EV companies to further partner up with battery manufacturers and mining companies. The sustainability of mining and battery manufacturing will affect company decisions in the long term, but its impact will be limited until there has been a huge uptake in EV adoption.        

Green bonds have been the driving force for growth Of particular note, use of proceed bonds (or UoP bonds, which include green, social, and sustainability bonds) are seeing exceptional growth this year. During the first half of 2023, use of proceed bond issuance – especially green bond issuance – beat the records set in the second half of 2021. There has been mounting awareness that companies need to carefully avoid greenwashing behavior, and use of proceed bonds are gaining ground because the financing is directly tied to specific green or social projects under an issuer’s sustainable finance framework. For green bonds specifically, strong policy support across regions for energy transition technologies will provide an extra boost for issuance.   Global sustainable finance issuance by product   While green bonds have been holding strong, we are seeing issuers become more cautious with sustainability-linked products, especially sustainability-linked loans (SLLs). In the first half of 2023, SLL issuance dropped by 57% compared to the second half of 2022. The drop is partly a result of fewer large-size SLL deals. In 2022, there were 11 SLLs of at least $4bn, while in the first half of 2023, there was only one. Indeed, the drop in the first half comes to 63% when compared to the average of first half and second half issuance in 2022, while the decrease in the number of deals was slightly lower, at 59%, for the same period. In APAC, specifically, a substantial decline in the number of SLL deals is led by China and Australia, the two largest countries by volume issued. In China, one transaction in the first half of 2022 of $4.5bn accounted for 25% of the total first half SLL volume.   An interesting nuance is that there has also been a trend of smaller issuance volumes. Globally, the share of SLL deals of less than $0.05bn has gone up from 8.1% in the first half of 2019 to 28% in the first half of 2023. And the size of an issuing company is also trending smaller. In the Americas, the average revenue of corporate SLL issuers decreased in the second half of 2022 and first half of 2023 to $2.5bn and $3bn respectively, compared to an average size of $4.9bn in the second half of 2021 and first half of 2022, when issuance volume of SLLs was at a much higher level. Both of these seem to indicate that SLLs are gaining ground among smaller companies after the initial wave of adoption among large corporates.   We have also observed that for both SLLs and use of proceed bonds, there is strong product stickiness with repeat issuances as a percentage of total issuances growing over the past few years. This could partly be due to the potential negative perception regarding an issuer’s ESG ambitions from going back to vanilla financings. There is also a marked difference with UoP bond deals made up almost entirely by repeat issuers whereas new issuers make up the majority of SLLs. For many issuers, SLLs are the first step in engaging in sustainable finance as the companies develop their ESG capex plans to benchmarkable size sufficient for UoP issuances.   Share of repeat issuances from a company as a percentage of total market issuances of the same product type

US spending surges, but it’s not sustainable US consumer spending is on track to drive third quarter GDP growth of perhaps 3-3.5%. However, this is not sustainable. American consumers are running down savings and using their credit cards to finance a large proportion of this. With financial stresses becoming more apparent and student loan repayments restarting, a correction is coming.   Inflation pressures are moderating Today’s main data release is the July personal income and spending report and it contains plenty of interesting and highly useful information. Firstly, it includes the Federal Reserve’s favoured measure of inflation, the core Personal  Consumer Expenditure deflator, which is a broader measure of  prices than the CPI measure that is more widely known. It rose 0.2% month-on-month for the second consecutive month, which is what we want to see as, over time, that sort of figure will get annual inflation trending down to 2% quite happily.   Services PCE deflator (YoY%)   The slight negative is the core services ex housing, which the Fed is watching carefully due to if being more influenced by labour input costs. It posted a 0.46% MoM increase after a 0.3% gain in June so we are not seeing much of a slowdown in the year-on-year rate yet as the chart above shows. With unemployment at just 3.5% a tight jobs market could keep wage pressures elevated and mean inflation stays higher for longer so we could hear some hawkishness from some Fed officials on the back of this. Nonetheless, the market is seemingly shrugging this off right now given signs of slackening in the labour market from the latest job openings data and the Challenger job lay-off series.

Europe's construction sector set to slow as demand plummets High interest rates and soaring building costs have drastically reduced the demand for new buildings in Europe. So far, ongoing projects and a heightened focus on sustainability have prevented construction volumes from shrinking, but we're expecting to see a steep decline begin to emerge in 2024.   Zero growth in 2023 We’re expecting zero growth for EU construction volumes this year, an upgrade of our previous forecast which is mainly due to a better-than-expected first half of the year. Construction volumes still remain high. In June, EU construction production was at the same level as in the same period last year. Firms still have a healthy backlog of work, with 8.9 months of guaranteed projects at the beginning of the third quarter of this year. However, there are clear signs that volumes will start to shrink soon as the late cyclical nature of the sector begins taking effect. Home buyers and firms are reluctant to invest in new premises due to the weaker economy, high interest rates and increased building costs. Due to long lead times, it's likely to take a while before these effects are reflected in construction output volumes.   Construction volume still stable but fall in building material production Development EU Construction sector volume (Index February 2020=100, SA)   Looming slowdown on the cards for 2024 Manufacturers of cement, bricks and concrete – those right at the beginning of the value chain – are already facing sharp production declines. Building material suppliers of these materials are registering an average fall in production of 13% in June compared to the same period last year. The highest declines are faced in Austria (-15.0%), Germany (-15.6%), and The Netherlands (-19.5%). A decline in building permits, confidence and demand are also indicators for lower volumes in the construction sector in the second half of 2023 and into 2024. However, we only expect a modest decline for the EU construction of -1% in 2024.   Renovation market counterbalances decline in new building sectorThe construction sector will not see as much of a decline in production volumes as the building materials sector. Building material suppliers mainly deliver to new building projects, which are more susceptible to economic development than the renovation sector. The demand for renovation and maintenance – more than 50% of total construction production – is less affected by economic cycles. Interestingly, the demand for R&M may even increase during an economic crisis. For instance, homeowners who are unable to sell their houses often opt to enhance their existing living spaces in order to meet their changing housing needs. As a result, this can lead to an increase or at least sustainment of demand for R&M. In addition, the R&M market will likely show future growth driven by sustainable and energy-related factors. Many governments support sustainability measures, and high energy prices act as an extra trigger. Since energy prices have started to moderate this year, interest in energy-saving measures has slowed but still remains at a high level.   The confidence of the different subsectors is slowly decreasingAnother sign that the decline in the construction sector will be a small one is the slowly abating confidence indicators in different subsectors. Specialised construction companies have been optimistic for a long time, but in June, indicators were marginally negative for the first time in more than two years. This subsector consists of many construction branches that are active in R&M, such as installation, plasterers, carpenters, painters and glaziers. The confidence of companies in the non-residential building sector as a whole has been in negative territory for almost a year. Lastly, confidence in the infrastructure sector has remained positive for quite a while and only initially touched negative territory in August. Many infrastructure projects are driven by public investments, the availability of EU funds, the need for upgrading existing roads and required environmental investments such as the extension of electrical grids.

In the ever-evolving world of finance, recent developments have brought about significant changes in the banking sector. From historic profits to a shift away from remote work, these developments are reshaping the industry. Let's explore the key events that are making waves in the financial world.   Historic Profits at UBS One of the standout events in the financial sector is UBS's remarkable Q2 profit of $28.8 billion. This achievement can be largely attributed to the bank's acquisition of Credit Suisse, marking it as a historic milestone. This financial juggernaut's success underscores the importance of strategic acquisitions in the banking industry.   Return-to-Office Initiatives In a noteworthy shift, banks are taking a tougher stance on employees who prefer remote work. The era of widespread remote work, necessitated by the pandemic, is slowly coming to an end. Banks are now urging their staff to return to the office, signaling a return to pre-pandemic work norms. This change carries implications for work culture and the future of office spaces in the banking world.   Carbon Credit Market Uncertainty Confidence in the carbon credit market is waning. Carbon credits have been a vital tool in mitigating climate change, but recent events have raised concerns. As major players step back from the market, questions are being raised about its future effectiveness. The uncertainties surrounding carbon credits could have far-reaching consequences for environmental policies and sustainability efforts.   China's Economic Boost China, a key player in the global economy, is actively taking steps to boost its economic standing and strengthen its currency. As the world watches China's efforts to stimulate its economy, the implications for global markets are significant. The strategies employed by China could influence trade, investment, and currency dynamics on a global scale.   Airline Earnings Under Pressure The airline industry is facing headwinds as earnings outlooks dim. Factors such as rising fuel costs and economic uncertainties are impacting the profitability of airlines. As travelers cautiously return to the skies, airline companies are navigating a complex and challenging landscape.   NYC's Pension CIO Perspective In the realm of investment, the Chief Investment Officer (CIO) of New York City's Pension Fund provides insights into the impact of Wall Street's Environmental, Social, and Governance (ESG) pullback. Despite the recent trend of ESG considerations in investments, NYC's Pension Fund remains resilient, shedding light on the varying responses of institutional investors to ESG factors. The banking and financial sector is undergoing a period of significant transformation. UBS's historic profit, the return-to-office trend, carbon credit market concerns, China's economic endeavors, airline industry challenges, and the nuanced response to ESG factors are all contributing to a dynamic landscape. These developments not only shape the industry but also have broader implications for the global economy. As the financial world continues to evolve, staying informed and adaptable is key to navigating these changes successfully.    

The global financial markets have witnessed significant turbulence in recent times, with a confluence of factors contributing to this uncertainty. As we delve into the intricate web of market dynamics, we'll explore the implications of events such as Lego's surprising decision to abandon oil-free bricks, China's gold buying spree affecting bullion pricing, and Morgan Stanley's prediction that the Federal Reserve has paused its interest rate hikes. These developments, among others, have sent shockwaves through various sectors, leaving investors and analysts grappling with what lies ahead.   A Rollercoaster Week for US Stocks The past week saw US stocks experiencing their most challenging period since March, triggered by the Federal Reserve's update. Both the S&P and Nasdaq indexes retreated by 2.9% and 3.6%, respectively. This downturn in the market was mirrored globally, with the MSCI World Index recording a 2.67% slide, its sharpest decline since March. The MSCI Asia ex-Japan Index also suffered a substantial setback, losing 2.3%, positioning it for a 3% loss in the third quarter. These declines have sent shockwaves through the investment world, raising concerns about the overall health of the global economy.   Bond Yields and the Fed's Stance One of the key indicators of this market turbulence is the surge in 10-year US yields, marking their most substantial weekly rise since July. Over the last ten weeks, yields have risen in eight, and 10-year real yields have surpassed 2%. Morgan Stanley's Ellen Zenter has stated that the Federal Reserve is likely done with its rate hikes for the time being. These developments have left investors wondering about the impact on various asset classes and the broader economic landscape.   Earnings Reports to Watch As we navigate these turbulent financial waters, several earnings reports are on the horizon. Companies such as Costco, Cintas, Micron Technology, Jefferies, Nike, Accenture, BlackBerry, and Carnival Corporation are set to release their financial results. These reports will shed light on the performance and outlook of various sectors, providing critical insights into market trends.   Paradigm Shift in Bullion The bullion market is experiencing a paradigm shift driven by Chinese gold buying. This shift is having a profound impact on the pricing and demand for gold. Understanding this shift is crucial for investors and central banks alike, as gold has historically been a safe-haven asset during times of economic uncertainty.   Thailand's Tech Investment Expectations Thailand is gearing up for substantial investments from tech giants like Tesla, Google, and Microsoft, with expectations totaling $5 billion, according to the Prime Minister. This influx of tech investment could transform the country's tech landscape and create opportunities for growth in the Southeast Asian region.   Lego's Surprising Decision In a surprising turn of events, Lego has decided to abandon its efforts to produce oil-free bricks. This move has garnered attention due to the increasing focus on sustainability and environmental responsibility in the corporate world. The implications of this decision go beyond just the toy industry, as it reflects broader concerns about the use of fossil fuels.   The recent market turbulence, influenced by various global factors, highlights the interconnectedness of the financial landscape. As we navigate these uncertain waters, staying informed about developments such as central bank policies, corporate decisions, and geopolitical events becomes increasingly critical. Investors and financial analysts must remain vigilant and adapt to changing market conditions to make informed decisions in these challenging times.

New York Climate Week: It's all about acting faster and together Increased severe weather events have alerted us to act faster against climate change. We think New York Climate Week adds value by emphasising value chain partnerships, infrastructure building and quality reporting. And there needs to be more alignment between corporate sustainability teams and the C-suite to future-proof decarbonisation efforts.   This year has shown us that it is more imperative than ever to accelerate efforts against climate change. The summer of 2023 was the hottest since the National Aeronautics and Space Administration (NASA) started recording in 1880, which has largely increased the chances of average temperature of 2023 exceeding the 1.5-degree-Celsius threshold of global warming. Primarily driven by human activities, the record temperatures have resulted in heatwaves in Europe, the US, Japan, and South America. What is more, wildfires in Quebec more than doubled this year compared to the past decade, leading to severe air pollution in Canada and the northeast US. Meanwhile, severe flooding happened in California, Brazil, Malaysia, Libya, South Korea, China, and more. Extreme weather events are becoming more frequent, more diverse, and more impactful. These are going to increasingly affect our lives and businesses around the world. To name a few, heat and flooding will likely undermine labour productivity in apparel hubs in Asian countries. Extreme weather can affect operations in the agriculture sector. Hurricanes and sea level rises will pose greater risks to the real estate sector. All these will put higher pressure on the insurance sector. It is estimated that global economic losses from extreme weather events mounted to $125bn in the first half of 2023, up 41% from the previous ten-year average, and only half of the loss was insured. Therefore, not only do we need to act, but we need to act faster to keep the door to limiting 1.5 degrees Celsius of global warming open. More challengingly, we need to execute climate ambitions in an environment where uncertain economic conditions are keeping interest rates elevated, and policy inconsistencies are adding complexity to corporate decision-making. The urgency to act is emphasised at New York Climate Week. We are glad to see businesses, investors, policymakers, NGOs, and consultancies go beyond celebrating achievements to identify areas of improvement to decarbonise the global economy, mobilise capital to facilitate changes, and deploy policy to speed up a just energy transition. Below we have summarised what we think are the most important takeaways from Climate Week.   Decarbonise the value chain not siloed sectors A very popular phrase used at the New York Climate Week is ‘value chain’. Scope 3 emissions make up the ballpark of most sectors’ total emissions, and companies have realised that decarbonisation needs collective efforts from themselves as well as their suppliers and consumers.   Scope 1, 2, and 3 emissions by sector   For instance, in the steel industry, automotive companies are large end-use consumers. Globally, 12% of the steel produced goes to car manufacturing. To decarbonise, car manufacturer Volvo is collaborating with steelmaker SSAB to expand the production and use of green steel produced from hydrogen. Steel company ArcelorMittal has been partnering with automotive suppliers such as Gestamp and Snop to produce low-carbon steel car parts. More industries are doing the same. In food and agriculture, Walmart launched ‘Project Gigaton’ aiming to reach a gigaton of avoided emissions through providing resources to support suppliers’ decarbonisation efforts. In petrochemicals, demand for low-carbon plastics from consumer goods and food & beverage companies is driving product innovation. One commonly mentioned challenge of these initiatives comes from the consumer side, as many companies find it relatively hard to convince consumers to pay a higher price – even slightly – for a product that is ‘done right’. To tackle that, there needs to be more customer communication about a company’s sustainability stance and belief, which can then help enhance brand trust and loyalty. Governments also have a crucial role here to incentivise lower-carbon production and/or customers that purchase those products.  

ESG supply by banks set to stay strong in 2024 ESG primary market activity by banks is set to remain strong in 2024, but isn't likely to be quite as prosperous as in 2023 due to slower lending growth.   Sustainable bank bond supply on track to reach new highs in 2023 Banks remained very active in the sustainable bond market this year. By the end of October, credit institutions across the globe had issued over €70 billion in EUR sustainable bonds. This is more than €10bn ahead of the sustainable supply over the same period in 2022. We expect green, social and sustainability issuance of banks to reach €80bn this year, up €8bn versus 2022. While banks will still issue notable amounts of sustainable debt in 2024, slower lending growth will probably make it difficult for them to continue to issue at the same pace as this year. We expect to see slightly less sustainable supply next year, despite our forecasted modest rise in total bank supply.   Banks issued €19bn in 2023 YTD (27%) in sustainable debt via the covered bond market, €19bn (28%) in preferred senior, €30bn (43%) in bail-in senior and €2bn (3%) in T2 bonds. This confirms the dominant focus of the ESG issuance on bail-in senior this year. This has been more than a reflection of the general supply dynamics alone. Banks printed 31% of their bail-in senior supply with a sustainable use of proceeds. This compares with much lower shares of 19% in preferred senior, 11% in covered bonds and 10% in T2 bonds. The better observable funding cost advantages of sustainable issuance further down the liability structure form one of the reasons. Besides, the broader investor base for sustainable bonds has supported banks in issuing bail-in senior deals against a backdrop of sometimes volatile market conditions.   Sustainable issuance in bank bonds continues to rise   Green issuance continues to dominate, even though the pickup in social supply is probably more noteworthy. At €13bn YTD, social issuance is up €4bn versus last year year-on-year and on track to beat the peak year 2021 (€14bn in social bonds). The YTD rise in social issuance almost matches the €5bn rise in green supply, while green supply is in total four times as high as social issuance. The supply of bonds with proceed allocations to both green and social projects (i.e., sustainability supply) remains low at €2bn YTD.   Social issuance will continue to become more dominant   Factors driving sustainable bank bond supply in 2024 Slower lending growth (-) Bank lending growth is stagnating against the backdrop of the rise in interest rate levels. This makes it difficult for banks to substantially grow their sustainable loan portfolios. That said, against the backdrop of the evolving ESG regulation and wider investor and societal push for companies and banks to become more sustainable, the sustainable loan books will still see better growth dynamics than the less sustainable loan portfolios.  Few sustainable bond repayments (-) Redemption payments in the sustainable bank bond segment remain low, with only €18bn in EUR bonds maturing in 2024. This frees up little space for banks to refinance maturing bonds against the same pool of sustainable assets. Moreover, part of the sustainable loans that fall free may not be refinanced via new sustainable bonds. Either because issuers have strengthened their loan eligibility criteria, or because the loans do no longer fall within the look-back periods that issuers apply for new issuance.        

What to expect from the European Green Bond Standard On 23 October, the European Council adopted the European Green Bond legislation, eight months after the EU reached a political agreement on the standard in February. The regulation will be signed and published in the EU’s Official Journal and will enter into force 20 days after publication in the Official Journal. The European green bond regulation should then apply 12 months after entry into force, so likely from November to December 2024 onwards. This means that towards the end of next year, issuers can officially start marketing bonds as European Green Bonds.     The European Green Bond Standard – the requirements in a nutshellThe proceeds of bonds marketed as European Green Bonds should be allocated before the maturity of the bond conforms to the requirements from the EU Taxonomy. Issuers may apply a portfolio approach. They can allocate the proceeds of multiple green bonds to a portfolio of taxonomy-aligned assets. When the bond proceeds are allocated to financial assets such as loans, the loans should in principle not be created later than five years after issuance of the European green bond, unless the portfolio approach is used. The European green bond regulation provides for a so-called flexibility pocket. Up to 15% of the proceeds can be allocated to economic activities that comply with the EU taxonomy apart from the technical screening criteria, for instance because these criteria have not entered into force yet. The activities funded should still contribute substantially to one of the taxonomy’s environmental objectives. The relevant generic ‘do no significant harm’ provisions should also be met. Importantly, if the technical screening criteria are amended before the maturity of the European green bond, the bond will keep its European green bond status if the proceeds were allocated based upon the old technical screening criteria. Only the unallocated proceeds and proceeds covered by a CapEx plan assuring their forthcoming taxonomy alignment will have to be allocated to conform to the new technical screening criteria within seven years. When a portfolio approach is applied, the assets not meeting the amended technical screening criteria can stay part of the green portfolio for seven years at most. The European green bond regulation also subjects issuers of European green bonds to stricter transparency requirements by requiring the publication of a (pre-issuance) green bond factsheet and a (post-issuance) allocation and impact reports. To facilitate comparability, public disclosure templates will be established for other environmentally sustainable bonds and sustainability-linked bonds, including on the taxonomy alignment. For this purpose, the European Commission will establish guidelines for voluntary pre-issuance disclosure and a delegated act for periodic disclosures, in line with the European green bond factsheet and allocation report.

What can explain stagnating ESG bond supply across the globe? We have been used to seeing green, social, sustainability and sustainability-linked bonds to expand their footprint over the years. The reality is that, despite robust demand from investors, ESG bond supply also responds to external challenges: Projects pipeline: Corporates’ ESG issuance was extremely strong in 2021 and 2022, with a notably lower interest rate environment boosting bond supply. Corporates need the time to allocate the proceeds to new green projects. 2023 and 2024’s ESG issuance, therefore, suffers from the existing projects pipeline. Higher costs: The Covid-19 pandemic, the post-pandemic recovery and the war in Ukraine all led to hyperinflation. Higher costs of materials, higher funding costs and supply chain disruptions have resulted in delayed and sometimes cancelled projects, as seen within the utilities sector. Lower capital expenditure: With higher interest rates and higher costs of materials, most sectors have curbed their capital expenditure ambitions in 2023 (although they are still growing vs. 2022). This is particularly the case for the real estate sector, which has concentrated its efforts on balance sheet management in an environment where asset valuations were negatively impacted. Globally, for most industries, next year will see another capex growth reduction compared to 2023. Slower lending growth: Bank lending growth is stagnating against the backdrop of the rise in interest rate levels. This makes it difficult for banks to grow their sustainable loan portfolios substantially. That said, against the backdrop of evolving ESG regulation and a wider investor and societal push for companies and banks to become more sustainable, the sustainable loan books will still see better growth dynamics than the less sustainable loan portfolios. Inflows into ESG funds: Counterbalancing the negative elements cited above, demand for ESG bonds continues to be strong. We have seen continuous inflows into ESG funds, adding further demand for ESG products. From October 2022 to October 2023, flows into EUR IG ESG accumulated to c.13%. Additionally, during times of outflows from credit, ESG funds generally remain positive. New initiatives to prevent greenwashing in 2024 Sustainability financial products and markets have grown remarkably over the years. Several measures have been deployed by the European Union to ensure market integrity, investors’ protection and a trusted environment for sustainable investments. Greenwashing allegations have been growing in numbers, targeting both financial and non-financial entities. This has also resulted in the increasing attention of securities markets’ regulators to this phenomenon. Industry players and retail investors also seem to share the concern that greenwashing risks have increased.    

What companies and investors should know about COP28 COP28 will focus on ramping up efforts and investment in climate mitigation, adaptation and loss and damage control. It's now crucial that companies and investors invest in clean technologies, harness climate finance opportunities and contribute to systems change. Moving forward, they can expect more policy support – but also more policy dilemmas. COP déjà vu? Do you remember the first COP meeting held in Berlin in 1995? We don’t, so we won’t blame you either. We definitely remember the epic 2015 meeting, however, when the Paris Climate Agreement was signed. It was this meeting that put climate change on the agenda of corporate decision-makers and investors. So, what can they find out from this year’s meeting in Dubai?  COP28 puts the climate challenge in the spotlight once again The fight against climate change consists of three pillars. Climate mitigation, or bending the global emissions curve towards net zero emissions by 2050, is the first pillar and first priority as global warming continues as long as the concentration of carbon dioxide in the atmosphere increases. So, mitigation policies to reach the Paris Climate Goals will be a central theme for this year's COP as a warning against insufficient ambition and a call to close the cap.   Averting, minimising and addressing loss and damage from climate change Indicative yearly costs for mitigation, adaptation and loss and damage up to 2030   Climate change adaptation Adaptation to climate change is the second pillar and is all about minimising climate costs from extreme weather events such as droughts, floods, storms and tropical cyclones. Countries in the global south are expected to be severely impacted, and the 2023 UN Climate Adaption Report expects adaptation costs for developing countries to be around $400bn per year up to 2030.   Even if these mitigation and adaptation policies get financed and are able to materialise, the world will experience loss and damage from climate change – which for developing countries are of equal size as the adaptation costs. So, addressing the loss and damage from climate change is the third pillar of the fight against climate change.  Policymakers, corporate leaders and investors are likely to leave COP28 with the task of increasing investment in low-carbon technologies. Think of more renewables in the power sector, carbon capture and storage in industrial clusters, energy efficiency measures in housing, manufacturing and transportation, and the growth of the hydrogen economy. They will also leave COP28 with the task of speeding up climate-friendly behaviour. This could include increasing recycling rates, sharing cars, getting more people in trains and on bicycles as their primary way of transport, and even encouraging them to eat less meat. Both technology and behavioural changes are crucial in averting loss and damage from climate change and will require about $5,500bn in investment per year globally up to 2030, according to Bloomberg New Energy Finance. The $400bn annual damage and loss from climate change by 2030 in developing countries represents about 1% of the size of their economies. This number increases to 2-3% by 2100 if global warming is limited to 1.5 degrees Celsius, which seems a manageable cost. However, this number increases to 10-15% if global warming reaches 2.5-3.0 degrees Celsius by 2100 (the current pathway for global warming). Not only is this a large economic loss, but it also requires profound changes in the economy as similar amounts of spending on healthcare or education need to go towards restoring loss and damage from climate change. Not as a one-off, but year after year – and this is a conservative estimate as it does not include the costs of climate tipping points that could accelerate global warming. It also only focuses on CO2 emissions, not a loss of biodiversity or other forms of pollution.  So, we can safely say that the cost of inaction is extremely significant and that there's a high payoff of mitigation policies for society. Climate scientists point out that every dollar invested in mitigation and adaptation policies yields $1.5 to $4 in terms of less damage and loss from climate change.    Can companies and investors harness opportunities from COP's climate finance targets? In 2009 at COP15 in Copenhagen, developed countries set a target of providing $100bn per year by 2020 to help developing countries combat climate change. That target has already been missed. Despite an increase in the pace of capital mobilisation, a recent OECD report suggests that by 2021, developed countries were still about $10bn short of the target. While the same report also estimates that the $100bn target is likely to be met between the end of 2022 and 2023, there has clearly been a delay in offering assistance to developing countries.   Target of $100bn in climate finance for developing countries by 2020 was not met Climate finance mobilised and provided by developed countries for developing countries in 2016-2021 in billion dollars per year   Given the size of the challenge and slow progress – as well as new targets entering the picture – climate finance will feature prominently at COP28 too. A key outcome of last year’s COP27 is that developed countries agreed to form a new fund to specifically help developing countries cope with the loss and damage of climate change. But as the amount, form, and timeframe of this fund are undecided, there could be a few years before the money starts coming in for developing countries. There also remains the big question of whether developed countries will reach the (now undecided) target on time. These climate finance targets may seem to only concern governments from developed countries. However, they can also provide opportunities for the private sector. Alongside a recognition of the need for a higher level of private-sector involvement in climate financing in developing countries, there are also calls for governments and international institutions (such as multilateral banks) to support, incentivise and de-risk projects in those countries. Supporting mechanisms include loan guarantees, risk insurance and syndicated loans. From the private sector perspective, companies and investors would benefit from building new businesses in developing countries, as well as harnessing opportunities for new technologies. This would also enhance a ‘just transition’ as they would be working to reduce emissions not only in their home countries but also in developing states.  However, this is easier said than done. Companies and investors that hold a more international view of pursuing projects in emerging economies may run up against the current geopolitical discourse. So, discussions on risk mitigation strategies from the tense geopolitical landscape and those on climate support and opportunities in developing countries will feature prominently in boardrooms. As a result, companies and investors need to think about how to better balance the opportunities, risks, and potential resistance. Governments and international institutions need to provide consistent policy and support to minimise uncertainty which would slow down climate finance progress.     COP28 is about mitigation and adaptation, but companies and investors have a broader view COP’s main focuses are centred on preventing climate change (mitigation), adapting to climate change (adaptation), and dealing with the negative impacts of climate change (loss and damage). But there’s still more to be done. The footprint of companies and investors needs to stay within the planetary boundaries, which is broader than reducing CO2 and protecting from global warming. According to the Stockholm Resilience Centre, planetary boundaries refer to the limitations within which human activities need to stay to ensure the Earth can maintain the stability and resilience of operation. The centre has pointed out that six of the nine planetary boundaries – including climate change, biodiversity loss, freshwater, and novel entities, e.g., plastics pollution – have already been breached as of 2023. This means that the Earth may have already permanently lost the ability to self-regulate and operate in these areas. And that action is needed to operate within the planetary boundaries again.   Currently, six out of nine planetary boundaries have been crossed The concept of nine planetary boundaries within which humanity can continue to develop and thrive for generations to come   Many companies and investors are already actively tackling some of these problems beyond the core factors of climate change. For instance, petrochemical companies and their corporate customers down the supply chain are advancing plastics recycling technologies to tackle climate pollution. There has also been a surge in efforts from the private sector investing in preserving biodiversity. If carried out correctly, they can go hand in hand with the goal of reducing CO2 emissions. In order to effectively address the different planetary impacts of global warming more comprehensively, we need to see a significant step up in these efforts. Finally, there needs to be a closer, more critical look at ESG from both the private sector and the government. Climate disclosure policies are being developed in various jurisdictions, with a harmonisation of standards on the horizon. More transparency will incentivise corporates to act, but climate disclosure policies will only be effective if they are supported by government policies facilitating changes to the real economy to stay within the planetary boundaries. This means that companies need to better understand how they can best align their own strategies with relevant government policies.   The fossil fuel debate continues at COP28 The run-up to COP meetings is often far from cheerful – and this year is no exception, with the UN publishing the global stocktake report which clearly shows that much more needs to be done to reduce global emissions. The phasing out of fossil fuels in general – and coal in particular – will feature prominently at COP28. As will efforts to reduce methane emissions and stop deforestation, two other sources of greenhouse gasses. On the fossil fuel front, we expect more guidance on the topic of unabated versus abated fossil fuels. This could have important consequences for the design of transition pathways for sectors and individual companies. Carbon capture and storage (CCS) could gain more traction if the importance of unabated fossil fuels is stressed, particularly for hard-to-abate activities like cement, steel, plastic and fuel production. Green technologies that reduce fossil fuel use or aim to phase it out completely will feature more prominently if COP28 takes a more negative stance on both unabated and abated fossil fuels and stresses the need to phase out fossil fuels.   COP28 to trigger discussion about progress on green technologies... So far, progress on green technologies has been mixed over the past two years. Progress on solar panels, electric vehicles, batteries and heat pumps was more or less in line with scenarios for a net zero economy, although the pressure is on to accelerate towards 2030 and beyond.   But progress on energy efficiency, electrification, wind turbines, CCS, green hydrogen and nuclear power is not on track. Technologies for increasing energy efficiency are proven and mature; they just need to be implemented at a higher pace. Companies and investors should expect a lot more policies on that front if policymakers are serious about fighting climate change. The same applies to wind energy – although the sector is suffering from tough market conditions, so policymakers need to step in if they want to speed up the rollout of wind farms.   Other technologies such as large-scale electrification (think of industrial heat pumps), green hydrogen, and recycling technologies are often less mature but are much needed to green the energy-intensive sectors. Companies and investors need to invest in R&D and pilot projects so that these emerging technologies can be scaled up faster, and policymakers can provide support if they intend on following through with the greening of hard-to-abate sectors. Think of sustainable aviation fuels in shipping and aviation or increased recycling and green hydrogen use in steel and plastics production.    Important technology and policy milestones towards a net zero economy IEA’s milestones in its’ updated 'net zero scenario'   ...and system change In addition to speeding up green technologies, the private sector also needs to think about decarbonisation from a systemic perspective. Currently, they tend to only focus on investing in clean technologies that make existing production less carbon-intensive. While greentech solutions are much needed, their impact is often significantly lowered by rebound effects. The electrification of light-duty vehicles, for example, goes hand in hand with the production of larger and heavier cars that are less energy-efficient. The greening of homes often encourages people to increase their comfort levels, as it's easy to turn the thermostat a little higher when the energy bill is lowered with better insulation. This is why the transition towards a net zero economy requires system changes that go beyond technical solutions. For example, companies can promote environmentally friendly behaviour and implement accompanying supporting policies. The topic of system change has not featured prominently on the COP agenda yet, but we’ll expect more calls for it as governments, companies and investors try to close the emissions gap.   Low expectations for a smooth and linear transition In the long term, companies and investors should expect policies to support new technologies and system change. But in the short to medium term, there are possibilities of policy uncertainties and even detours, depending on jurisdictions. Europe is a pioneer in climate policymaking and has the highest level of policy consistency. However, there could be discussions about whether the region’s targets are too ambitious, especially given the many challenges in terms of labour shortages, congestion in power grids and long permitting procedures. And there might be a backlash when parties on the right wing of the political spectrum win elections, as we have seen recently in Italy and the Netherlands. The picture in the US is far more mixed, where administration changes could continue to result in a back-and-forth on climate policy. Thus, companies and investors need to be prepared for policy disruptions and set up more resilient long-term strategies if they are serious about staying within the planetary boundaries. In Asia (where there's a large percentage of developing countries) we would continue to expect pushback on climate target setting, with arguments that these economies still need fossil fuels (abated or unabated) to power economic development. In Asia, corporates and investors can expect a dual track of development with fast renewables adoption but continued reliance on fossil fuels.   Companies to become key players in closing the global warming gap Despite increased efforts, there is still a huge gap between what is needed and what has been done to keep global warming within a 1.5 degrees Celsius increase. The consequences of climate change – including extreme weather conditions and related health and migration challenges – will become more evident in the coming years, fuelling the debate on mitigation and adaptation policies and measures to cope with loss and damage. Governments are the main players at COP, but companies and investors also have a significant role to play. We expect more companies at COP28 than last year – a trend that is likely to continue at future COP meetings.