BRICS Gathering Spotlights Peril of Currency Impacts in Climate Finance Approach

In the realm of global finance and sustainability, several significant events have taken place over the past few months.

BRICS Declaration Emphasises Local Currency Green Bonds and Climate Finance

The latest BRICS declaration has highlighted progress in local currency green bonds, which are enabling growing cross-investment among BRICS members in each other's sustainable finance ecosystems. The declaration also acknowledges the cost of foreign exchange risks as a challenge to cross-border investments in developing countries.

Emissions Targets Fall Short Due to Increased Nitrous Oxide Emissions

A 1.3% rise in absolute GHG emissions in 2023, largely from increased nitrous oxide emissions tied to synthetic nitrogen fertiliser use in agriculture, has contributed to a shortfall in emissions targets.

Copper Tariff and Its Implications

President Trump's announcement of a 50% copper import tariff has sent copper futures surging, putting significant price pressure on green mineral supply chains. The tariff has created a 25% premium for US copper over London Metal Exchange prices, effectively creating a bifurcated global market. This move could pose a risk to renewable energy supply chains and overall price stability, according to LSE researchers.

Sustainability Reporting Standards on the Rise

The Department for Business and Trade in the UK has released exposure drafts for the inaugural UK Sustainability Reporting Standards. Meanwhile, the Accounting Standards Board (ASB) Nepal is consulting on the development of Nepal Sustainability Reporting Standards (NSRS), aligned with IFRS S1 and S2. Japan's Sustainability Standards Board (SSSJ) is considering delaying its planned implementation of International Sustainability Standards Board (ISSB) requirements, following the European Union’s omnibus simplification package that has delayed key ESG reporting requirements by two years.

Sovereign Sustainability-Linked Bonds

Uruguay has released its third annual report for its US$2.2bn sovereign sustainability-linked bond (SSLB). The bond, which has a step-up/step-down coupon structure tied to environmental performance, has seen Uruguay achieve a 46% reduction in greenhouse gas emissions intensity per GDP unit compared to 1990, but is still 4 percentage points short of the 50% target.

Emerging Markets and Developed Markets Embrace Sustainability

Latvia's central bank, Latvijas Banka, has strengthened its integration of sustainability across its non-monetary policy portfolios. As a result, the developed markets equity portfolio of Latvijas Banka achieved a 73% reduction in carbon footprint since 2022, and the emerging markets fixed income portfolio's ESG score improved by 11% after a benchmark shift favouring stronger ESG issuers.

Praise for the New Development Bank

The BRICS declaration praises the NDB as a robust and strategic agent of development and modernization in the Global South. The NDB President, Dilma Rousseff, has warned of the risks developing economies face when borrowing in US dollars.

Call for Expanded Use of Local Currencies

BRICS leaders have called on their development finance institution, the New Development Bank (NDB), and other multilateral development banks to expand the use of local currencies to reduce this burden.

The search results do not specify which countries belong to the Sustainability Standards Board or indicate that this board is considering a delay in implementing the International Sustainability Standards Board standards. ING Bank commodities strategist Ewa Manthey has said the tariff is unlikely to boost US production.

BRICS Gathering Spotlights Peril of Currency Impacts in Climate Finance Approach