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Updated Proposal for a Green Bond Evaluation

Multiple Operators Suffer Damage to Fiber Networks from Hurricane Michael

Factbox Energy demand impacts to linger in wake of Hurricane Michael

Factbox: Hurricane Michael Impact Turns from Production Loss to Demand Destruction

Fast-moving Michael destroys gas demand across US Southeast


Updated Proposal for a Green Bond Evaluation

On Sept. 2, 2016, S&P Global Ratings proposed a Green Bond Evaluation Tool that would provide a second opinion(1), plus a relative green impact score on capital market instruments targeted at financing environmentally beneficial projects. The Green Bond Evaluation is not a credit rating. The proposed framework evaluates the governance and transparency of the bond and provides an analysis of the environmental impact of the projects financed by the bond's proceeds over their lifetime, relative to a local baseline. When evaluating environmental impact, the approach would consider both climate change mitigation and adaptation projects.

Mitigation projects aim to bring environmental benefits and target areas of concern, such as natural resources depletion, loss of biodiversity, pollution control, and climate change. Adaptation projects aim to take practical steps toward reducing the exposure to and managing the impacts of natural catastrophes, such as building the resilience of communities and critical infrastructure against an increased risk of extreme weather events due to climate change.

The output of the Green Bond Evaluation would include at least three scores (a transparency score, a governance score and a mitigation and/or adaptation score, as relevant,) which combine into an overall final score as follows:

  • The transparency score would focus on the quality of disclosure, reporting, and management of bond proceeds.
  • The governance score would assess what steps have been taken to measure and manage environmental impact of the use of proceeds of the bond, including certification, impact assessment, risk monitoring, and risk management.
  • The mitigation score would consider the key environmental impacts of the use of bond proceeds, taking into account environmental impacts beyond reductions in greenhouse gas emissions and water use. It is proposed to be based on a consideration of key variables determining the level of environmental impact in each category (such as technology and location), supporting a quantitative assessment of sustainability.
  • The calculation considers a range of quantifiable environmental impacts, termed environmental key performance indicators or eKPIs, such as carbon dioxide, water, and waste.
  • The impact calculation would be done on a net benefit basis, meaning both negative and positive environmental impacts of the project are considered relative to the appropriate local baseline (for example, a new renewable energy project compared to the conventional grid) for each eKPI.
  • The net benefit for each individual eKPI would be compared against a range of modeled net benefit outcomes derived from a universe of relevant countries in order to derive a relative score. For example, green energy generation projects are compared against a range of net benefit calculations for every green energy generation type (wind, solar, hydroelectricity etc.) in 61 countries that produce over 95% of global generation capacity(2).
  • The resulting score is proposed to be a weighted average across eKPIs, and is labelled the unadjusted green impact score, a best-in-class assessment of the bond's green impact.
  • The adaptation score would reflect the estimated reductions in the costs of expected damages achieved by the initiatives financed. To determine the environmental resilience benefit that may be achieved through the use of bond proceeds, we propose to analyze and assess the benefit studies prepared for the project.

In addition to the unadjusted green impact score for mitigation projects, a hierarchy of sector positions relative to one another would be overlaid in order to transform the score from a best-in-class approach to a sector-relative approach. The adjusted green impact score will place the bond's mitigation activities within the broader context of different sectors and indicate its relative contribution to the ongoing effort to avoid and cope with climate change.

This relative hierarchy would imply that projects that are financing climate change solutions, such as renewable energy, for example, would have a higher adjusted environmental benefit than projects looking to improve conditions within conventional technologies (such as coal-to-gas). The resulting mitigation score would provide a flexible and user-friendly assessment of the relative importance of net benefit impacts and broader sector-level considerations. For example, if a bond were financing coal-to-gas switching, the mitigation score would reflect how the bond compared to best-in-class bonds within this project type, while also providing information on the difference between these and more advanced renewable projects.

The proposed approach would evaluate the bond's financing against each category, with the resulting scores weighted and amalgamated into an overall final Green Bond Evaluation.



Multiple Operators Suffer Damage to Fiber Networks from Hurricane Michael

Communications providers are working to restore services in areas impacted by Hurricane Michael, but storm debris, power outages and significant fiber damage are hindering progress in those counties most devastated by the storm.

As of Oct. 14, a number of counties along the Florida Panhandle had more than half of their cell sites down, including Bay County — home of Panama City and Mexico Beach, described as "ground zero" of the storm by U.S. Federal Emergency Management Agency administrator Brock Long — where 66.1% of cell sites were down. Similarly, neighboring Gulf County had 69.6% of cell sites down, according to data from the U.S. Federal Communications Commission.

Based on the amount of damage in the area and ongoing power outages, it could be weeks before services are restored. Long said Oct. 12 that after search and rescue, restoring communications in impacted counties is among FEMA's top priorities.

"You have to be able to communicate to appropriately respond and we are trying to do everything we can to get the private sector vendors, the Verizon [Communications Inc.]'s of the world, to get in to try to get their systems back up and running," he said.

Long added, however, that the process is not easy. "There was a tremendous amount of debris. When you look at the damage in Mexico Beach, that is where the ocean rose potentially 14 feet … and shoved buildings out of the way. When you have that type of damage, it takes time to get in and go through," he said.

Hurricane Michael made landfall Oct. 10 near Mexico Beach as a Category 4 hurricane with 155-mile-per-hour winds.

For its part, Verizon said the "vast majority" of Florida and Georgia service has been restored, with 99% of the company's network in Georgia in service and 97% of its network in Florida. But the company noted there are pockets, particularly near Panama City, where the damage is severe.

"The storm caused unprecedented damage to our fiber, which is essential for our network — including many of our temporary portable assets — to work. Our fiber crews are working around the clock to make repairs, and while they are making good progress, we still have work to do to get the fiber completely repaired," the company said Oct. 14.

Fiber is the connecting component of a network that carries data from point to point. It is necessary for Verizon's permanent and temporary cell sites to be operational. The company noted that while it has multiple fiber paths to carry data, "The severity and intensity of the storm caused damage to all duplicate routes in the Panama City and Panama City Beach area."

In terms of wireline services, the FCC said 291,300 subscribers remain out of service as of Oct. 14, including 205,643 subscribers in Florida. The figures were down from a day earlier, when a total of 337,223 subscribers were without service, including 233,843 in Florida.

The top residential video and broadband provider in Bay County is Comcast Corp., according to MediaCensus data from Kagan, a research group within S&P Global Market Intelligence. Comcast, the largest cable operator in the U.S., said in an Oct. 12 statement that it is working to get Xfinity services back online.

"As power returns … and it becomes safe for our technicians and restoration crews, we will work to repair any damages affecting our network," the company said.

As of Oct. 15, more than 162,000 customers in Florida remained without power, including all 27,275 customers served by Gulf Coast Electric Cooperative. The cooperative said in an Oct. 12 Facebook Inc. post that its distribution system "suffered catastrophic damage"

In Gulf County, the top residential video provider is AT&T Inc.'s satellite video service DIRECTV, according to MediaCensus data, while the top residential broadband provider is Mediacom Communications Corp., the fifth-largest cable operator in the U.S.

Mediacom said Oct. 14 that its recovery efforts are underway but its network in Florida has 14 miles of severely damaged fiber near Walton County, as well as 25 miles of damaged fiber east of Panama City that is obstructing video transmission from Gulf County to Walton County.

"Our current priority remains focusing on repairing damage to our high-speed data transport network and main transmission facilities and repairing downed lines where we have access to the area. We have outages from widespread loss of commercial power along with downed lines, and structural damage throughout our systems," the cable operator said.



Factbox: Hurricane Michael Impact Turns from Production Loss to Demand Destruction

Houston, Oct. 11 2018 — Hurricane Michael made landfall at the Florida panhandle as a Category 4 hurricane Wednesday with 155 mph winds, quickly destroying demand for power, natural gas and refined oil products. Shut-in oil production rose modestly from Tuesday to over 700,000 b/d, but the storm has stayed east of much of the region's production, which means supply should be back online quickly.

Meanwhile, the severity of the storm has surprised to the upside, which could a mean longer lasting and more severe impact on demand for power, natural gas, refined products and ultimately crude oil.

"We expect the impact on refined products demand to be below that of previous hurricanes in the Gulf Coast such as Harvey in 2017, as the region impacted by Michael has lower population density than Houston ... Nevertheless, the impacts are favoring the high side of our estimates given the sheer severity of the storm," said Claudio Giamberti, Head of Demand and Refining at S&P Global Platts Analytics.

As of 7 pm EDT, the eye of Michael was moving over southwestern Georgia with maximum sustained winds still at 100 mph, according to the National Hurricane Center. The storm is expected to move northeast across the Carolinas before heading back out to sea Friday morning.