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S&P Global — 22 Apr, 2022 — Global

Daily Update: April 22, 2022

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By S&P Global

Start every business day with our analyses of the most pressing developments affecting markets today, alongside a curated selection of our latest and most important insights on the global economy.

Despite New Climate Action, Risks Are Rising On The Road to Net-Zero

As the urgency to combat carbon emissions intensifies, investors are demanding transparency and policymakers and regulators are imposing disclosure requirements—which is supporting an increase in sustainable finance targeted toward environmental projects. But the continued disruption facing the global economy is adding additional risks on the pathway to net-zero. 

The international community has moved too slowly to reduce emissions, which has allowed climate change to already irreversibly affect the planet, according to the United Nation’s latest Intergovernmental Panel on Climate Change report. Climate-exacerbated disasters have cost companies and investors billions in recent years, and more damage is yet to come if the public and private sector can’t reduce greenhouse gas emissions before 2025 to avert global temperatures from exceeding 1.5 degrees Celsius. In response, more companies and countries are striving to take a stronger approach to identify climate risks and finance solutions

Will the economic realities of the pandemic recovery, rising inflation, the war in Ukraine, and other geopolitical shocks derail these efforts further?  

"It's Ukraine, COVID, inflation, and politics, and you put these ingredients together, it's not a good mix to be able to move forward," U.S. Special Presidential Envoy for Climate John Kerry said at an April 20 virtual Center for Global Development event, speaking about the roadblocks that recent geopolitical and economic factors are posing to global climate ambitions, according to S&P Global Commodity Insights. 

Policymakers are pledging new financing and proposing new mandates to protect the world’s biodiversity and push public companies to disclose their actions that hurt the planet, according to S&P Global Sustainable1. The European Union this month committed nearly €1 billion to protect the world's oceans after renewing its pledges on ocean preservation. The U.S. Securities and Exchange Commission introduced in March its climate disclosure proposal that would force companies to report their climate-related governance practices, expected risks and opportunities, transition plans, how climate change is already affecting their bottom lines, and their direct and indirect emissions. And central banks around the world are exploring how to recognize the role of nature in business decisions

Market participants are also taking more aggressive climate action. Last year, U.S. and Canadian venture capital and private equity firms invested nearly $6.8 billion into projects focused on energy efficiency, storage, and management and new technologies to reduce carbon emissions, according to an S&P Global Market Intelligence analysis. This amount of private investment in the energy transition marked a 10-year high. This year, climate change is now dominating shareholder resolutions at publicly-traded companies, with climate resolutions accounting for 20% of the total shareholder resolutions filed as of March 31, according to the Sustainable Investments Institute and Proxy Preview. 

Both public and private sector action is spurring a sustainable finance frenzy, with issuance of green, sustainable, and sustainability-linked bonds soaring. S&P Global Ratings expects global sustainable bond issuance to surpass $1.5 trillion this year, boosted by the booming sustainability-linked and green bond markets and despite global bond issuance overall stagnating. 

“The persistent difficulty reconciling immediate social and economic priorities with climate transition needs is creating and exacerbating disruptive risks. While this is of course a challenge for policymakers globally, we are also seeing this balancing act at a corporate level. Our interactions with board members and senior executives show the same calculus: while pressure from stakeholders to take decisive action to mitigate exposure to climate risk is growing, business leaders also cannot ignore the importance of their other priorities,” S&P Global Ratings said in its sustainable finance newsletter this month. “The most resourceful executives that we speak to try to understand these themes not in isolation, but as part of a broader pattern of disruption as the new normal.”

Today is Friday, April 22, 2022, and here is today’s essential intelligence.

Written by Molly Mintz. 


Economic Research: Which Emerging Markets Are Most Vulnerable To Rising Food And Energy Prices?

The Russia-Ukraine conflict has caused a storm across the commodity markets, triggering steep price increases for both food and energy. Brent oil prices are up 40% this year, and some agricultural commodities, such as corn, wheat, and vegetable oils, have seen similarly significant price spikes of up to 50%. There are various ways this situation could play out, but S&P Global Ratings believes that commodity prices are most likely to stay elevated for some time.

—Read the full report from S&P Global Ratings

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Capital Markets

The Russia-Ukraine Conflict: European Banks Can Manage The Economic Spillovers, For Now

European banks have sufficient resilience to manage the broader economic spillovers from the continuing Russia-Ukraine conflict, under S&P Global Ratings’ base case. For that reason, its outlook for European banks for 2022 remains broadly stable. Still, S&P Global Ratings expects lower loan and overall business growth this year, with a limited uptick in operational costs and cost of risk in selected corporate portfolios. However, if the events in its revised, more severe downside scenarios play out in whole or part, they could weaken the creditworthiness of some banking sectors or banks.

—Read the full report from S&P Global Ratings

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Global Trade

Russian Oil Exports Resilient To Sanctions, Boycotts For Now As Trade Routes Adjust

Russia's seaborne exports of crude and oil products appear to be more resilient to sanctions and boycotts than expected as India takes advantage of discounted crude and a few buyers reroute imports to Europe's Amsterdam-Rotterdam-Antwerp refining and storage hub, according to shipping analytics provider Kpler. Russian seaborne crude exports, excluding CPC flows, were little changed at 4.54 million b/d in the month to April 20, after just a 52,000 b/d fall from February to March, according to Kpler shipping data. Over the same period, exports of Russia's key clean and dirty oil products rose 273,000 b/d month on month in the first three weeks of April after shrinking 873,000 b/d in March, the data showed.

—Read the full article from S&P Global Commodity Insights

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ESG Regulatory Tracker – March 2022

Regulation is shaping the sustainability agenda and changing the way companies do business in different jurisdictions but keeping pace with constant regulatory updates has become a mammoth task for businesses and investors. In this recurring series, S&P Global Sustainable1 presents key developments on regulations and potential disclosure standards from around the world. This month’s update looks at the U.S. Securities and Exchange Commission’s sweeping climate disclosure proposal, how corporate sustainability reporting rules and a carbon border levy are making their way through the EU legislative process, and New Zealand’s efforts on developing its own climate disclosure standards by the end of 2022.

—Read the full article from S&P Global Sustainable1

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Energy & Commodities

Listen: How Has The Russia-Ukraine War Impacted Diesel And Gasoil Markets?

What exactly defines the origin of an oil product? How is self-sanctioning affecting Russian diesel and gasoil exports? And how is Russian-origin diesel being treated in the spot market? In the latest episode of the Oil Markets Podcast, Richard Swann, S&P Global Commodity Insights' director for clean refined products, discusses with Francesco Di Salvo, associate editorial director for European refined products, the question of origin of diesel imported into Europe and the different approaches taken by oil majors and trading companies to handle Russian-origin oil products.

—Listen and subscribe to Oil Markets, a podcast from S&P Global Commodity Insights

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Technology & Media

Netflix Changes Tack On Ads, Password Sharing After Historic Membership Loss

Netflix Inc. investors thought January was rough on the company's stock. Then came April. Year-to-date as of market close April 20, Netflix shares are down 62.5%, equating to a loss of about $166 billion in market capital in less than four months. Much of that drop occurred in the span of 24 hours, with Netflix's unexpected first-quarter results pushing the stock down 35% in the April 20 trading day. Not only did Netflix deliver a big miss on first quarter paid membership additions and guidance, but it also posted its first membership decline in a decade. Three months prior, Netflix said it expected 2.5 million membership additions in the first quarter, a figure considered soft that caused the company's shares to drop 25%.

—Read the full article from S&P Global Market Intelligence

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