Charlotte Street Partners

DAILY BRIEFING

DAILY BRIEFING

The first green gilt

Written Li-Ann Chin, associate
Edited by David Gaffney, partner
11 November 2020

Good morning,

Back in July when the chancellor first unveiled his summer economic update, Rishi Sunak’s £3bn green investment package – to be spent predominantly on improving the energy efficiency of public sector buildings – received a  lukewarm reception from green experts and industry figures alike. While many applauded his commitment to sparking a green recovery, there was a general consensus that more – much more – needed to be done. 

That was the context, then, for  Sunak’s announcement last Monday of plans by the UK government to issue Britain’s first green bonds, also known as gilts, in an attempt to capitalise on growing investor demand for assets that fund environmentally-friendly projects. Indeed, the market for green bonds has soared significantly in recent years, with about $250 billion sold globally last year, representing about 3.5% of global bond issuance

It has long been claimed that green recovery can only be achieved if and when the private and public sector work in tandem. With investment managers understanding that being profitable and environmental can in fact go hand in hand, the Chancellor’s move to issue the first UK green bond is significant, as it signals to investors a ringing endorsement from the government in providing political certainty to the sector.  

Requiring banks, insurers and pension schemes to disclose the threats to their business from climate change by 2025 represents yet another positive development, as it will effectively provide financial markets with the reliable climate-related financial information needed for better risk assessment and strategic planning.

In setting out his policies, the chancellor highlighted the critical role that financial services will play in enabling attempts by the UK to achieve a net-zero carbon target by 2050. While the green road to a post-crisis recovery will, realistically, be a long one, Sunak’s move to foster the flow of private capital towards facilitating a sustainable economy is undoubtedly an essential first step in the right direction.  

News

According to government figures, another 532 coronavirus-related deaths have been reported across the UK in the latest 24-hour period, marking the highest number of fatalities recorded since 12 May. 

Cardinal Vincent Nichols, the leader of the Catholic church in England and Wales, has been asked by Pope Francis to remain in his post, despite a damning report that criticised his leadership and concluded that the church repeatedly prioritised its reputation over the welfare of child sex abuse victims. 

The Welsh education minister, Kirsty Williams, has confirmed that Wales will be calling off end-of-year GCSE and A-level tests for its students. As an alternative, the government would work with schools and colleges to put in place teacher-managed assessments. 

Once the national lockdown in England ends, universities across the country are expected to work with their local public health bodies in allocating students travel slots during the week of 3 to 9 December, ensuring that they are able to get home safely for Christmas. There are also plans to offer as many students as possible a rapid result Covid test before they travel, with those testing positive being required to self-isolate before leaving for home. 

Business and economy

Boris Johnson is expected to unveil legislation which will enable ministers to intervene and block firms in hostile states from taking over UK companies. Under the National Security and Investment Bill, it will be mandatory for deals involving firms in 17 sectors deemed of strategic importance to be notified to officials, as concern grows inside Downing Street about China’s acquisitive influence in particular.

A Downing Street spokesperson confirmed that prime minister Boris Johnson has called to congratulate Joe Biden on his US election win, ahead of the leaders of other major European countries. He is also understood to have assured the preseident-elect that Brexit would not undermine the Good Friday Agreement on peace in Northern Ireland.

Yorkshire-based chemicals firm, Croda International, announced that it has inked an agreement with Pfizer to supply additives for the company’s breakthrough coronavirus vaccine, in a deal that could be worth as much as £75m. 

Columns of note

As we are approaching the end of week one of England’s second national lockdown, the fear of failing to make the most out of the situation this time around has once again reared its ugly head. In The GuardianEleanor Margolis urges us to be less hard on ourselves, noting that this pandemic has been challenging enough without the additional pressure of having to make time for self-improvement.

This week’s news that a vaccine created by Pfizer and partner BioNTech is thus far winning the race to prove efficacy in a large trial, a pertinent question remains: what happens to the other vaccines now? With 11 other vaccine candidates in late-stage testing and a number of promising ones not far behind, Faye Flam explains for Bloomberg how Pfizer’s success has created an ethical dilemma for other clinical trials. 

Cartoon source: Telegraph

Markets

What happened yesterday?

Stocks dropped on speculation that this month’s rally has outpaced prospects for an economic rebound amid a surge in coronavirus cases around the globe. Treasuries fell. 

The S&P 500 fell 0.3% at 1:22pm New York time while the Nasdaq 100 slumped as much as 2.7%. London’s FTSE 100, however, rallied as it ended up 1.8% to 6,296.85 extending Monday’s rally to end at the highest point since early June. 

In terms of commodities, West Texas Intermediate crude increased 2.3% to $41.21 a barrel, and gold strengthened 0.7% to $1,876.70 an ounce.  

 

In company news: 

Shares of Bisto gravy and Mr Kipling owner Premier Foods slumped 8.5%, despite the company reporting soaring profits and sales. 

US department store chain JCPenney has confirmed that it will be sold to Simon Property Group and Brookfield Asset for $1.75bn, in a deal expected to save about 60,000 jobs. 

Waitrose has this morning pledged to keep its meat, fish and deli counters open, taking on the supermarkets that have shuttered those services. 

What’s happening today?

Interims
Braemar Shipping
Great Eastern
Great Portland
Renold

AGMs
Hays
Innovaderma
Rank
Strategic Eqty
Supermarket Inc
Thinksmart Ltd

UK economic announcements
(07:00) Industrial Production
(07:00) Gross Domestic Product
(07:00) Index of Services
(07:00) Manufacturing Production
(09:30) Manufacturing Production

Int. economic announcements
(12:00) MBA Mortgage Applications (US)

Source: Financial Times

did you know

Alarm clock production in the United States was stopped in 1942 to redirect resources to the war effort. Production was restarted in 1944, as too many workers missed their shifts when their alarm clock broke and they could not purchase a new one.

Parliamentary highlights

House of Commons

Oral questions
Scotland
 
Ten Minute Rule Motion
Supported Housing (Regulation) – Kerry McCarthy
 
General debate
Remembrance, UK Armed Forces and Society
Covid-19
 
Adjournment
80th anniversary of the Coventry blitz – Colleen Fletcher

House of Lords 

Oral questions
Improving rural bus services – Baroness Randerson
Economic impact of the COVID-19 pandemic on foreign aid and development spending commitments – Lord Bruce of Bennachie
Government long-term funding plans to address domestic abuse – Baroness Bertin
Preventing damage caused by fireworks set off outside of organised events – Lord Greaves
 
Debate
House of Lords Commission Report ‘Rules relating to Parliamentary passes for Members’ Staff: follow-up report’ –  Lord McFall of Alcluith
 
Legislation
Covert Human Intelligence Sources (Criminal Conduct) Bill –  second reading – Baroness Williams of Trafford

 

Scottish Parliament 

Portfolio questions
Scottish Labour Party Debate: Routine COVID-19 Testing for all Health and Social Care Workers
Scottish Labour Party Debate: Additional Support for Scotland’s Tourism and Hospitality Sectors During the COVID-19 Pandemic
 
Business motions
 
Members’ Business — S5M-22640 Alasdair Allan: Concerns Regarding the Islands Housing Market

Share this post

Share on facebook
Share on twitter
Share on linkedin
Share on email

Copyright© 2020 Charlotte Street Partners