articles Corporate /en/research-insights/articles/pulling-the-trigger content
BY CONTINUING TO USE THIS SITE, YOU ARE AGREEING TO OUR USE OF COOKIES. REVIEW OUR
PRIVACY & COOKIE NOTICE
Log in to other products

Login to Market Intelligence Platform

 /


Looking for more?

Request a Demo

You're one step closer to unlocking our suite of comprehensive and robust tools.

Fill out the form so we can connect you to the right person.

  • First Name*
  • Last Name*
  • Business Email *
  • Phone *
  • Company Name *
  • City *

* Required

In This List

Pulling the Trigger

Podcast

These ESG Trends will Shape 2019, Sustainability Experts Say

S&P Global Ratings

COP24 Special Edition Shining A Light On Climate Finance

S&P Global Ratings

S&P Global Ratings' Global Outlook 2019

S&P Global Platts

Energy: What to Watch in 2019


Pulling the Trigger

The Reserve Bank of India’s (RBI’s) Monetary Policy Committee (MPC), at the end of its review meeting today, raised policy rates by 25 basis points (bps). Rates had been kept on hold since the last rate cut in August 2017. With this, the repo rate stands at 6.25%, the reverse repo at 6%, and the marginal standing facility rate at 6.5%. All six members of the MPC unanimously supported the resolution.

The decision to hike is based on two factors: i) a sharper-than-anticipated pick-up in not just headline inflation, but also core inflation (headline excluding food and fuel), and ii) evidence on soundness of domestic growth revival.

  • The main worry is that core inflation (even after excluding the impact of house rent allowance revision) jumped 80 bps to 5.3% in April. This not only reflects the sharp increase in oil prices over that period, but also other input cost pressures faced by manufacturers due to firmer metal prices and a weaker rupee – which they have possibly begun to pass on to consumers as domestic demand conditions improve.
  • A note of caution was sounded on persistence and pass-through of input price shocks into generalised inflation given that headline inflation has been higher than MPC’s medium-term target of 4% for six successive months. This is also reflected in the latest survey of households’ inflation expectations, which saw a significant rise. Rising household inflation expectations pose a threat as these can potentially enter wage negotiations and become generalised.

The MPC accordingly raised its average inflation forecast up mildly, by 10 bps, to ~4.8% for fiscal 2019. The GDP forecast was left unchanged at 7.4%.

Despite the rate hike, the MPC maintained its neutral monetary policy stance with a focus on maintaining medium-term inflation at 4%. The neutral stance mainly implies that options are left open as uncertainty remains on the inflation trajectory. The MPC will therefore remain vigilant on this front.


Listen: These ESG Trends will Shape 2019, Sustainability Experts Say

Progress on corporate disclosures. A looming talent shortage. Climate change mitigation. These are among the top trends that sustainability experts predict will shape the ESG landscape in 2019. In the inaugural episode of ESG Insider, a new podcast from S&P Global, co-hosts Esther Whieldon and Lindsey White speak to several ESG leaders about the key themes they are watching this year, including Rakhi Kumar, State Street Global Advisors’ head of ESG investments and asset stewardship, Mindy Lubber, CEO and president of Ceres, and Libby Bernick, Trucost managing director and global head of corporate business.

"ESG investing is no longer a sideshow," State Street Global Advisors Inc.'s Rakhi Kumar said in the inaugural episode of ESG Insider, which will focus on environmental, social and governance issues.

Kumar, SSGA's head of ESG investments and asset stewardship, also highlighted the importance of leadership teams setting goals around issues like diversity to achieve progress toward building more sustainable businesses in the long term.

Some other takeaways:

Why companies are starting to pay more attention to the physical risks of climate change

Amid an increase in extreme weather events such as hurricanes, droughts and heat waves, companies are beginning to take a closer look at how climate change could threaten their operations and even their bottom line, said Libby Bernick, Trucost managing director and global head of corporate business.

"It's not just 'what's my company's impact on climate,' it's 'what's climate's impact on my company,'" Bernick said.

Trucost is a research group within S&P Global Market Intelligence that assesses business risks related to climate change and other ESG factors.

Companies are responding to investor pressure to tackle sustainability issues

Investor pressure has already prompted a number of companies to step up their environmental efforts, particularly those tied to climate change and water shortages, according to Ceres President and CEO Mindy Lubber. Ceres is an organization that helps coordinate sustainability discussions between major companies and shareholders.

Lubber expects the momentum will continue in 2019 with companies beginning to tackle climate-related issues in a "more concentrated, focused, systemic way."

To read more of S&P Global's coverage of sustainability issues, you can subscribe here to receive our weekly ESG Insider newsletter.

This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.



COP24 Special Edition Shining A Light On Climate Finance

Highlights

− Green loans are evolving, with the Climate Bond Initiative forecasting nearly $1 trillion in green bond issuance by 2020.

− Despite the uptick in green bond and loan issuance, the market still remains relatively small, especially compared to the universe of assets comprising CLO 2.0 transactions.

− In our view, a green CLO market has large growth potential, boosted by regulatory initiatives and emerging interest from both issuers and investors in 2018.

− We built a hypothetical rating scenario for a green CLO to compare and contrast the underlying portfolio and structure with a typical European CLO 2.0 transaction.

− Our hypothetical green CLO analysis showed that green loans may have different fundamental characteristics to corporate loans, such as lower asset yields, higher credit quality, and higher recovery rates assumptions.

The global collateralized loan obligation (CLO) market has experienced a rebirth (2010 in the U.S. and 2013 in Europe). New issuance continues to increase due to investor familiarity with the product, as well as low historical default rates. While a market for green assets, such as green loans and bonds has been established for a while, although still of a relative size, a sustainable securitization market is still in its infancy. Considering the challenge in financing the amounts, S&P Global Ratings expects green CLOs to play a role in increasing the private sector presence in the sustainable finance market.

Following the Paris Agreement that came into force in November 2016, 184 parties have ratified the action plan to limit global warming. For this purpose, developed nations have pledged to provide $100 billion (about €87 billion) annually until 2025. As part of this deal the EU has committed to decrease carbon emissions by 40% by 2030. In March 2018 the European Commission (EC) proposed the creation of environmental, social, and corporate governance 'taxonomy', regulating sustainable finance product disclosures, as well as introducing the 'green supporting factor' in the EU prudential rules for banks and insurance companies.

Read the Full Report
Download


S&P Global Ratings' Global Outlook 2019

 A deep dive into S&P Global Ratings’ insights on the credit outlook for 2019 and what are the risks and vulnerabilities to look out for.

Access all the Global Outlook
Read More


Energy: What to Watch in 2019

Highlights

S&P Global Platts Analytics Issues Two Special Reports

Pricing across the global energy markets will face headwinds in 2019, with a weaker and more uncertain macroeconomic framework deflating price formation in general, according to two special reports just issued by S&P Global Platts Analytics. Such headwinds will require the industry and portfolio managers to take a big-picture approach.

See the Executive Summary of the S&P Global Platts Analytics special report 2018 Review and 2019 here. Access the full S&P Global Platts Analytics Top Factors to Look Out For in 2019 for Energy here.

"One of the key lessons learned in 2018, painfully by some, is that market sentiment can shift violently without much change in fundamentals, requiring a steady, holistic perspective," said Chris Midgley, global head of analytics, S&P Global Platts. "It is clear that this volatility will remain a feature across the energy markets in 2019, particularly as IMO 2020 nears."

Particularly blustery headwinds are in store for markets where prices finished 2018 at elevated levels, and well above costs, such as North American natural gas and global coal. However, if the supply side can adjust to the reality of slowing demand growth, energy prices can find support. For natural gas liquids (NGLs), the ongoing logistical constraints at the US Gulf Coast are likely to manifest on continued price volatility, particularly for ethane and liquid petroleum gas (LPG), over the next year despite strong global demand.

LPG, such as propane and butane and used in transportation fuel, refrigeration, heating and cooking, is rapidly facing US export capacity constraints, especially along the US Gulf Coast. For LPG feedstock propylene, there is clear potential for high volatility globally over the next 12-18 months.

Analysts at S&P Global Platts see weakening prices of Henry Hub natural gas. The slowdown in US demand growth will exceed that of supply. But if winter temperatures prove to be colder than normal, near-term prices will need to move higher to bring on enough supply to replenish depleted storage levels.

For global liquefied natural gas (LNG), it will be end-user-backed LNG demand that faces particular struggle to cope with the speed and force of new supply entering the market in 2019. Non price-responsive demand in Asia will be easily met and JKM spot physical prices (reflecting LNG as delivered into Japan, Korea and China) will sag next year.

Access the full S&P Global Platts Analytics Top Factors to Look Out For in 2019 for Energy here. Among the 22 key take-away themes:

  • NGL supply growth will strain the North American energy system
  • Saudi Arabia will need to be nimble to balance 2019 oil supply
  • US oil supply limited by pipelines
  • Oil demand slowing: trade war, industrial slump
  • 2019 LNG supply additions largest since the Qatari mega-trains
  • US gas supply growth to exceed demand growth even with LNG exports
  • Global solar growth slowing
  • Shipping disruption looming - IMO 2020
  • New Russian gas pipeline advantage over Ukraine
  • US coal demand to decline again in 2019
  • Growth in new refineries and complex capacity likely to weigh on refinery margins especially in Asia

Year 2019 will certainly be one of transition for crude and refined oil products as it will lead into 2020 when roughly three million barrels per day of high-sulfur fuel oil must be “destroyed” (including enhanced usage of HSFO in power generation) due to the International Marine Organization (IMO) mandate of eco-friendly shipping fuels in use at sea. A similar amount of middle distillate/low sulfur fuel must be created (by refinery changes and by running more crude oil. The increase in refinery capacity between now and 2020 is large, but mostly needed to cover normal demand growth. Expect prices of light sweet crudes to be bid up in 4Q19.