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Sustainability

 
 

Governments and businesses face significant changes from megatrends like population growth, urbanization, climate change and natural resource constraints. We help our clients understand and act on these issues so they can thrive in this changing world.

 
 

The Top Sustainability Trends of 2014

December 15, 2014
 

As 2014 draws to a close, we revisit some of the year’s most important developments and stories in sustainability. The sheer volume of sustainability-related news can be overwhelming, and it’s often difficult to isolate the signal from the noise. Below is a summary of the biggest, most important developments over the past 12 months.

 

1. Green bonds gain popularity

Green bonds, pioneered by the World Bank in 2008, are used as a way of raising capital for a project with specific environmental benefits.

Globally, over US$32B in green bonds were issued in 2014 – almost triple what was issued in all of 2013. Some banks are forecasting that green bonds could account for 10-15% of the corporate bond market by 2020. The Province of Ontario successfully launched a green bond program with a bond issue of $500M, making it the first government in Canada to issue green bonds. While aiming the bonds initially at institutional investors, the Ontario government is now looking for ways to offer the bonds to retail investors as well. The proceeds will fund transit and other environmentally-friendly infrastructure projects, such as Toronto’s Eglinton Crosstown LRT.

Green bonds have been used to fund other Canadian public infrastructure projects, such as two hospitals on Vancouver Island. The B.C. government set the technical criteria for eligibility, which included LEED Gold certification and energy and greenhouse gas targets. The projects must also meet the global principles for green bonds.

Private companies also issued green bonds this year. Unilever, the world’s second-largest consumer goods firm, issued a $415M bond earmarked for reducing waste, water use and greenhouse gas emissions. Toyota is raising $1.75B to help finance sales of car loans for hybrid and electric vehicles. National Australia Bank recently launched Australia’s first climate bond in the local market with a $150M offering.

2. Portfolios are being benchmarked

Acceptability of portfolio-scale sustainability benchmarking continues to grow amongst institutional investors. Participation in GRESB, the most widely accepted standard used by institutional investors to measure and benchmark the environmental, social, and governance (ESG) sustainability performance of their real estate portfolios, seems to confirms this. In 2014, 637 companies and funds were ranked through the GRESB survey, compared with 543 in 2013 and 443 in 2012. The 2014 Survey also showed a number of improvements to real estate sustainability performance and management amongst its respondents. For example, 84% now disclose their sustainability performance, and over 40% now include sustainability-specific requirements in their standard lease contracts.

3. The supply chain is going green

Tracking performance, setting targets and reporting on sustainability have become standard for most companies. Still, most of these activities have focused on internal operations. Recently, however, companies have shown a greater interest in improving the sustainability performance of their supply chain, upstream operations, and their service providers.

Wal-Mart, for example, launched a new initiative to improve the sustainability of the largest part of their business: food. Working with a variety of partners, Wal-Mart is seeking to reduce the environment impacts of its food products and openly disclose those impacts with customers. The company has also sponsored a challenge to farmers that rewards them for reducing emissions and fertilizer use. As the U.S.’s largest grocer, Wal-Mart wields a significant influence, not only amongst their own suppliers, but also throughout the wider retail industry.

Whole Foods, too, has launched a ratings and labelling program for produce, which aims to give consumers more information about pesticide and water use, waste management and the treatment of farm workers. The company will rate the produce of suppliers electing to participate in the program as “good,” “better,” or “best.”

4. Building products and materials get “nutrition” labels

2014 saw a maturing of the market for increased transparency and public disclosure of material ingredients in consumer and building products. This is partly due to the release of LEED v4, the newest version of the US Green Building Council’s green building rating system. LEED v4 introduced several new concepts and significant changes to the way the environmental impact of building materials can be measured. To foster greater transparency, LEED v4 rewards projects that use products whose full environmental impacts and ingredients are disclosed in an Environmental Product Declaration.

While the positive benefits of having a fully-transparent materials economy have yet to be realized, it will certainly grow in importance as the as the LEED v4 rating system becomes more widely adopted.

 

Contact:

Mark Bessoudo
Mark Bessoudo Analyst
+1 416 644-1252, 348