At the beginning of this year Elizabeth King added the newly created role of president, sustainable finance at ICE to her position as chief regulatory officer to enable more collaboration across climate, data, markets and index teams.
The new role is part of ICE’s initiative to bring together its sustainable finance products and services to better serve the needs of clients and enable them to meet their own sustainable finance goals according to King.
“One of the things we are doing at ICE is to collaborate more effectively across our climate, data, markets and index teams to inform clients’ decision making,” she added.
King continued that ICE is looking to develop new products and grow sustainable finance offerings with its existing assets. She said: “However, if we see innovative companies that can add to our product offering, then we will make acquisitions.”
In December last year ICE bought risQ and Level 11 Analytics which enabled ICE to turn physical climate data into actionable insights, starting with municipal bonds and then mortgage-backed securities. In July this year ICE announced the acquisition of Urgentem, which provides Scope 1, 2 and 3 greenhouse gas emissions data, analytics and tools for more than 30,000 publicly-listed and privately-held securities, allowing ICE to widen its climate risk offering to corporate transition risk.
“Putting these assets together allows ICE’s clients to measure the full range of climate risk to companies, sovereigns and municipalities,” said King.
In July this year ICE launched ESG Geo-Analyzer, which uses ICE’s geospatial data modeling to provide physical climate risk metrics on multiple hazards including wildfires, hurricanes, droughts and floods, as well as social impact data on community demographics and affluence on a property or group of properties in the US and their related securities such as U.S. municipal bond and mortgage-backed securities.
The social impact opportunity data shows the impact of investing in one particular municipal bond over another, and this an area where ICE is looking to expand according to King. In addition, the ICE ESG Geo-Analyzer will expand globally in 2023.
As a result, King asserted that ICE maps fixed income securities in a way that others cannot, especially with the Level 11 and RiskQ acquisitions as they were focusing on municipal and mortgage-backed securities. ICE has a large mortgage business and interesting data on mortgage-backed securities so this is an area where the firm feels very well placed to uniquely serve fixed income investors.
“ICE’s unique business entity hierarchy data links equity and fixed income securities with their issuing companies and its ultimate parent companies,” she added. “This is very valuable as clients are developing both equity and fixed income portfolios that are aligned with their ESG objectives.”
Carbon markets
In addition to fixed income, King argued that ICE has a unique position in carbon markets. ICE said it traded an estimated $1 trillion in notional value equivalent of carbon allowances in 2021, equal to over half the world’s estimated total annual energy-related emissions footprint.
“ICE is the leader in environmental markets, where for almost two decades, we have offered trading for the European Union Emissions Trading System (ETS), and more recently the UK ETS,” King said. “To serve the efforts of market participants to meet net zero commitments, ICE’s markets are expanding into voluntary climate markets and other carbon credits.”
Benjamin Jackson, president and chair of ICE mortgage technology, said on the second quarter results call that despite global energy concerns, governments, corporates and market participants remain committed to environmental policy to reduce carbon emissions. Therefore, he expects placing a price on pollution, carbon-free electricity and carbon sequestration and storage will continue to increase in importance.
ICE’s products across the carbon cycle include renewable fuel contracts, carbon allowances, nature-based solutions and renewable energy certificates.
“The breadth of our complex, coupled with the growing importance of carbon price transparency, has contributed to the 19% average annual volume growth in our environmental complex over the past five years,” he added.
On 10 October 2022 ICE plans to introduce options on UK Carbon Emission Allowances (UKA Options), subject to regulatory approval after launching UK carbon allowance futures in May 2021.
Gordon Bennett, managing director of utility markets at ICE, said in a statement: “The launch of UK Carbon Options follows the successful launch of the UK carbon market last year and should provide a meaningful new tool for our customers to manage carbon emissions price risk.”
On 17 August 2022 ICE launched 10 new Nature-Based Solutions Carbon Credit futures contracts which allow market participants to buy, sell and hedge carbon credits from 2016 out to 2030
Michael Curran, head of environmental products at Vitol, said in a statement: “The development of a deep and liquid financial market for carbon credits will help us reach net-zero. Carbon credits have a key role to play, both in mitigating climate change and addressing other sustainability issues.”
Data and indexes
ICE’s data products have over 550 data attributes that cover E, S and G according to King. The index business is also developing climate-aligned indices which clients are using as benchmarks to develop their own products.
In June 2022 ICE launched a suite of corporate bond climate indices designed to help achieve net zero carbon emissions by 2050. They use 23 of ICE’s corporate bond benchmarks to create a suite of 138 climate indices, many of which are labeled as Paris Aligned benchmarks and Climate Transition benchmarks.
Varun Pawar, head of ICE data indices, said in a statement: “The goal of carbon reduction has become a key focus for investors, as they begin to look at not just promises of change, but at actions companies are taking to achieve their emission goals.
ICE’s ESG data covers 10,000 companies globally and there is a lot of interest in ESG in Asia according to King. She said: “Some Asian banks have licenses for our climate-based indexes and are building ETFs around those products, so it really is a global phenomenon.”
NYSE
ICE owns the New York Stock Exchange which has 2,400 listed companies with their own sustainability goals.
King said: “A differentiator for ICE is that as an exchange we have the largest environmental markets and the NYSE has the largest companies listed with us who are furthest along in their sustainability initiative, so I think that is a great resource.”
NYSE and Intrinsic Exchange Group are also pioneering Natural Asset Companies, a new asset class based on nature and the benefits that nature provides which King described as a very interesting product which will be supported within the larger group.
The NYSE Sustainability Advisory Council was launched in March this year and consists of 21 sustainability leaders at the exchange’s largest listed companies across sectors. The group will share information so they can learn from each other and also look at whether they can provide best practice and guidance to the wider NYSE-listed company community.
In her new role, King is also working to expand the NYSE Board Advisory Council with co-chairs Sharon Bowen and Duriya Farooqui. The council is composed of 20 chief executives at listed companies and was launched in 2019 to bring more diversity to boards.
The chief executives on the council recommend board candidates for its database of almost 300 diverse candidates.
“There has been an uptick in requests from companies for board candidates from our database and we are working to make more companies aware of this resource as they look for potential candidates with diverse demographics to refresh their boards,” said King. “Approximately 30 to 40 candidates from the Board Advisory Council have been placed on boards.”
