SustainaWeekly - What the transition means for electricity prices
In this edition of the SustainaWeekly, we start by assessing how electricity prices will be impacted by the transition. We go on to review ESG sovereign score methodologies and argue that particular attention should be paid to the ‘E’ pillar. Meanwhile, we look into the Dutch government’s Green Bond Framework, which has been updated and is the first to be aligned with the new EU Taxonomy. Finally, we analyse the amendments to European Green Bond Standard regulation. Enjoy the read and, as always, let us know if you have any feedback!
Economics Theme: Average electricity prices in the EU will continue to fall as renewable energy capacity increases. Oversupply combined with a lack of flexibility occasionally leads to negative prices. In the long run, the number of hours with negative prices will decrease so the average price will not drop to zero.
Strategy Theme: We reviewed and analysed various ESG sovereign score methodologies to assess how they can complement traditional analysis. ESG scores tend to have a very high correlation with traditional credit ratings because they overweight the ‘G’ pillar. A ranking of countries based on metrics from the ‘E’ pillar leads to significant differences in rankings.
ESG Bonds: The Dutch state will reopen its inaugural green Dutch State Loan 2040 on 14 June. The Green Bond Framework has been updated and is now aligned with the new EU Taxonomy. The green DSL 2040 is the first EU sovereign green bond linked exclusively to expenditures that map to the economic activities currently covered by the EU Taxonomy.
Policy & Regulation: ECON reached an agreement on the amendments to the European Green Bond Standard regulation. We highlight a few of the key changes, such as the proposal to expand the regulation to the wider green bond market, as well as the permission to now include nuclear and/or gas under the EU GBS label.
ESG in figures: In a regular section of our weekly, we present a chart book on some of the key indicators for ESG financing and the energy transition.