Welcome to Drumbeats, the must -listen -to podcast
which explains why Indigenous partnerships are
the key to securing successful outcomes in natural
resource and infrastructure investment in Canada.
I'm Mark McNacca and my co -host Rob Brant and
I are joined today by Aude Radjinson. In this
two -part series, we explore UK and European
sustainable finance with Aude, head of fixed
income origination at London Stock Exchange Group.
And Aude is also based in New York. The LSEG
oversees more than 1 ,200 debt issuers, representing
more than $6 trillion in securities from over
90 countries, and OAT provides essential intelligence
on how international capital markets serve communities
seeking sustainable development financing. This
will be a two -part series. In our first podcast,
you'll discover why the UK and Europe hosts 90
% of global sustainable bond fund assets, understand
how LSEG's £400 billion sustainable bond market
has evolved over 10 years, and we also ask the
practical questions you want answered about creditworthiness,
deal sizes, currency flexibility, and rating
requirements. In part two, Next week's podcast,
we'll dive deeper into the innovation spectrum
and have some step -by -step guidance for accessing
these markets. But first, let's understand what
makes UK and Europe's sustainable bond market
an essential consideration for the Indigenous
peoples of Canada. Welcome. We have Odra Johnson
from the London Stock Exchange Group with us
today. She's the Director, Head of Fixed Income
Origination at LSEG, based in New York. and a
French national, and a Sciences Po graduate.
Welcome. Thank you so much. Thank you, Mark.
Nice to see you. Rob, nice to see you as well.
Delighted to be on. Hi, Od. Nice to see you again,
and thanks for joining us. I've done a lot of
work with the London Stock Exchange over the
years. A lot of capital has been raised by Canadian
companies in the equity and debt markets. So
it's great to have you with us. Do you want to
start by talking a little bit about your own
professional background and how you ended up
at the London Stock Exchange? Yeah, absolutely.
So as Mark rightly said, I am head of the fixed
income origination for the London Stock Exchange.
So essentially, my team, we are in charge of
over 1 ,200 issuers at least. their debt securities
on our markets globally, whether it be from Australia
to Canada to Europe to Africa. And as part of
my role, I speak, I have ongoing conversations
with heads of funding, treasurers, ministries
of finance, when they seek to access the international
market and will list their securities on our
markets. as an owner exchange, as a way to access
international investors. I have been at the London
Stock Exchange for about five years now. Prior
to that, my background is actually in debt capital
markets. I used to work as a DCM banker at Standard
Bank. I was covering a lot of emerging markets,
debt origination. Great. Well, we're very pleased
to have you with us today. And why don't we just
start talking about the international financing
opportunity. The LSE obviously operates in global
capital markets. Great reputation. How do you
see the benefits of Indigenous capital markets
for the Indigenous people of Canada and around
the world? Yes, thanks, Mark. It's a very, very
good question. So maybe if I can sort of take
a step back. The loan and stock exchange essentially
is an infrastructure that sits at the heart of
global markets. And our role as an exchange rate
is to facilitate the flow of capital between
those who have it, meaning investors looking
for return and yield, and those who need it,
such as companies, governments, agencies, multilateral
development banks, financial institutions. We
as an exchange, as I mentioned in my introduction,
we serve over 102 ,000 issuers at least of security
on our exchanges. So that's over $6 trillion
worth of debt from issuers from over 90 countries
across 50 currencies. So it's a very sort of
international communities that we have. So when
you think about the scale of that global market
versus domestic markets, the advantage that we
see from our assured base coming to the LSC really
is in terms of funding options. The international
capital markets offer access to broader, to more
diversified pool of investors that will include
wealth funds, global asset managers, development
finance institutions, we call DFIs. And that
enables issuers to raise a larger amount of debt
than was sometimes awarded in the domestic market.
Sometimes also achieving a lower cost of funding
by virtue of having more investors coming into
transactions and creating some price tension.
So not only do issuers have access to your wider
investments, but they also have access to different
types of investors, including... sustainability
investors or investors that have a specific mandate
to only invest in perceived sustainable finance
securities, for example. Another advantage that
we see from global markets is that issuers do
have the option to diversify their currency away
from their local currency. and access longer
-term financing that may not always be available
in the domestic market and that can help finance
some of the projects. If you think about, you
know, many infrastructure energy development
projects, they often require fundings over a
long period of time, like sometimes 10, 20, 30
years, right, to match their investment horizon.
That diversity, in fact, when you look at...
And closer to home, when you look at the Canadian
institutions that regularly access the international
markets through our exchange, whether it be the
province of Saskatchewan, the province of Alberta,
or all the major Canadian banks that list our
program on our exchange, they have been erasing
various types of fixed income instruments through
multiple currencies, and not just the Canadian
dollar. So we have about $200 billion. worth
of debt raised by Canadian insurers across nine
different currencies on the markets. You mentioned
the sustainability segment of the bond market
and it's from North America at least nice to
hear that that's not a dirty word and that there
still is an active investor community in that
segment. Can you tell us a bit more about the
sustainable? bond market in particular on the
LSE? Yeah, absolutely. So it's pretty timely
actually, because earlier this year, we celebrated
the 10 -year anniversary of the sustainable bond
market of the London Stock Exchange. So we built
this market back in 2015 in consultation with
this market. And at the time, we became the first
major exchange to have a dedicated green segment.
So initially, it was just a green segment. And
that's really because about 11 years ago, the
market introduced the ICMA green bond principles
that then followed by the social bond principles
and sustainability bond guideline. So from then,
from that green bond segment, we then expanded
to social, sustainable, and then later on, sustainability
linked bond, LB. as well as transition segment,
all under sort of the umbrella of the sustainable
bond market that aligns to the ICMA principles.
And over the past decade, the sustainable bond
market has become really like a high -profile
platform, connecting investors with an impact
mandate and issuer. And really, the mission for
us, the mission of this market for us, is to
facilitate the flow of capital I was talking
about earlier between investors and those in
need of capital with a sustainable purpose. So
with our sustainable bond market, you know, we
work closely with markets participant championing
issuances from sovereigns, supranational agencies,
financial institutions and corporates alike.
Our sustainable bond market of the London Stock
Exchange has almost $400 billion worth of sustainable
debt across 16 different currencies. And we have
a very sort of diverse base of issuers, including
issuers from Canada. So it's a very growing and
vibrant community that we have. As part of this
sustainability bond market as well, what we've
done is we launched a few years ago, we set up
this initiative where we launched the Sustainable
Bond Market Advisory Group. And this is how we
keep the conversation going with multiple market
participants, issuers, investors, advisors, to
make sure that our sustainable bond market evolves
with what the market needs. And this is how our
transition segment and our Selby segment that
I was talking about earlier came to life. Well,
you've certainly led the development of that
and the 10 -year celebration was something. And,
you know, from a market that started at zero,
yourself and your colleagues, supported by...
The City of London has done a great job of really
making this the home of sustainable finance.
What are the key differences between social bonds
and other sustainable financial instruments like
green or sustainability -linked bonds, especially
for Indigenous issuance? What's in it for investors
to invest in these types of bonds? Yes, absolutely.
There are some clear distinctions between all
of these types of instruments. Typically, when
we talk about green bonds, A green bond is when
the proceeds of the bonds are used to finance
projects that have clear environmental benefits,
such as climate change protection, biodiversity
and ecosystem protection of forests and so on.
An example of that is the country of Hungary
regularly issues green bonds that are used to
fund the rehabilitation and restoration of forests
and conservation efforts. These are the type
of green bonds that we've seen. They are by far
the largest portion of the broader sustainable
bonds issued every year. They're about 60 % of
the total sustainable bonds that gets issued
on a global level. When you think about social
bonds, social bonds tend to have a focus on the
people and on society. So the proceeds are used
to finance projects that have clear social benefits.
So an example of that is social housing, access
to education, access to health care, social care,
access to basic infrastructure, where really
the goal is to help the population that lives
below the poverty line and low -income population,
the uneducated, the unemployed, the vulnerable.
So it's about improving the standards of living.
The category of social bonds really expanded
during COVID, actually, where basic infrastructure
healthcare became a core part of our needs. And
the African Development Bank issued a $3 billion,
what they called... the fight COVID -19 social
bonds back in 2020, where essentially the proceeds
of this bond were used towards enhancing access
to essential services, supporting healthcare,
employment, water and sanitation to really mitigate
the impact of the pandemic. We've seen other
social bonds, the likes of the UK publisher Pearson.
who issued a 350 million sterling social bonds,
where the proceeds of that bonds were directed
to education product that target the sort of
underserved learner and communities, such as
people living below the poverty line with disability
or the unemployed population. Sustainable bonds
are quite simple in a sense that they're just
a mix of both green and social project. And then
you have sort of like a couple of sort of innovative
structures that came to life over the last few
years. You have what we call the SLB, the Sustainability
Link Bond. And those are forward -looking performance
-based instruments where the issuer is committing
to future improvement in sustainability outcomes
within a predefined timeline. So a good example
of that is the government of Uruguay who issued
its first SLB with a step -down coupon mechanism
that gets activated if the government reaches
certain environmental targets over time in line
with the Paris Agreement. And then you have another
category of transition bonds. It's actually...
a step that we took forward back in 2021 with
the introductions of that transition bond segment
on our market which is designed for issuer financing
sort of clearly defined climate transition activities
for example to help carbon intensive industries
finance their shift towards more sustainable
operations so an example of that is the uk company
Gate and Gas raised transition bonds in sterling
to support the decarbonization of their gas distribution
infrastructure. So it's often targeted for what
we call the sort of brown industry that is looking
to transition towards more sustainable operations.
So given all of this structure, Mark, to your
point, I think The great thing is that there
are so many options available for the Indigenous
community. And just to give a few examples, I
mean, you know, they could look to issue a green
bond for land conservations or a blue bond for
lakes or protections of lakes and rivers, or
even a social bonds for community development
towards reducing poverty, knowing that all of
these structures have been tested in the market.
And when you think about the universe of investors
that look at these instruments, it's the universe
of investors that have a dedicated mandate in
impact investing. And those investors will be
looking for new investment opportunities to diversify
their portfolio away from vanilla bonds. They
will want to seek returns for their portfolio
and also be in alignment with regulatory framework.
So really, a sustainable instrument represents
an opportunity for them to invest, especially
as the context of sustainability debt is currently
lagging behind demand, which makes those sustainable
bonds often very attractive and oversubscribed.
If you think about the universe of sustainable
bonds. They represent about a volume of a trillion
dollar insurance back in last year in 2024, which
actually was a new annual record last year. But
it's really only about 10 % of the global bond
insurance that we see for the year. So it's a
very small part of the market. Our role as an
exchange is to continue to foster that sustainable
development and investment. And one way that
we do that through our exchanges is through ensuring
that there is a high degree of transparency in
the market so that it gives investors the confidence
to invest. And that's a responsibility that we
take seriously, especially in the context of
wanting to avoid... the green, what we call greenwashing.
So we have defined a series of terms and conditions
for bonds for them to be deemed eligible for
our sustainable bond market. And those align
with investment criterias of the investment community.
So for use of proceeds bond, for example, these
criterias will typically include the requirement
for issuers to set up a sustainable framework.
seeking a second -party opinion on this framework,
as well as the publication on an annual reporting
on the allocation of the proceeds raised, such
as what we call an impact report. Wow. That's
really interesting. Yeah. And some big numbers
there, a trillion, was it dollars, globally?
Yes. Sustainable markets. What innovations or
trends in sustainable finance could support and
empower Indigenous communities that you've seen
in your experience? So the very interesting part
of sustainability is the innovation that keeps
coming out of the asset class. And innovation
in this space is driven by issuer needs, community
needs, investor appetite, and regulatory frameworks.
Those incentivize the market to constantly come
up with instruments that are more diverse, readable,
and impactful. And this is really the reason
why over the last few years we have seen interesting
structures coming out more broadly on the market.
The market has seen blue bonds for the conservation
of ocean in support of the fishing industry.
The Seychelles, for example, issued a blue bond
with the support of the World Bank. We've seen
the Nordic Investment Bank issue a blue bond
for the protection of the Baltic Sea. So you
can see how blue bonds are an innovative tool,
could be an innovative tool for financing lake
constellations in Canada, given that Canada is
home to over two million lakes. And three oceans.
And three oceans. Ian Market has also seen some
rhino bonds, what we call rhino bonds, right?
So the World Bank back in March 2022 issued a
rhino bond in dollars to fund protection of black
rhinos, which is a critically endangered species
in South Africa. We've also seen debt for nature
swaps, where essentially there's a commitment
from countries to cancel a portion of their country's
external debt. in exchange for their commitment
to fund an environmental conservation project.
And it's a structure that is largely issued by
emerging markets because they're the ones facing
high debt and facing climate vulnerability. So
you've seen a lot of the structures issued by
Latin American countries, actually, the likes
of Ecuador, Barbados, Bahamas, Belize. You may
have seen also structures like forestry and biodiversity
bonds. And actually, one of the various relevant
structures that we've seen earlier this year
was launched by the U .S. organization Everland,
where they issued what we call an outcome bond,
a $50 million outcome bond. The proceeds were
to protect the Amazon forest and its indigenous
and traditional population under the equitable
earth standards. And we're very proud at the
LSE to have always been at the forefront of innovation
and we're constantly pushing for innovation and
new structures. And because of the international
nature of our issue -based, but also of our group
footprint as part of... the London Stock Exchange
Group, where we have presence in about 65 countries.
Our ethos is to serve and work closely with local
economies throughout the world. So we have been
the place of many what we call first and innovative
structures. We worked with pioneer transactions
in sustainability. Also, earlier this year, we
worked with the climate investment funds. for
the establishment of their Capital Markets Mechanism
Program, which is an innovative financing backed
by the World Bank and a pool of MDBs to fund
climate projects in the sector of renewable energy,
energy efficiency, sustainable transport, and
green industry. We also were the first to see
the first M. SLB with a step -down coupon mechanism
that I mentioned earlier that were issued by
a sovereign. And that sovereign was the governor
of Uruguay. And we've also seen the likes of
the metropolitans of Tokyo in a different part
of the world that listed their sterling resilience
bond on our main market. And this transaction
marks... the first in the world to carry the
resilience certification under the Climate Bond
Initiative's Climate Bond Resilience Taxonomy.
And the proceeds of that are used to fund flood
defenses, coastal protection, and other sort
of disaster risk infrastructure for the city.
So we have been able to support local communities
and issuers and really emphasize the global reach
of their innovation so that the transaction gets
to be seen by the international community, but
also by other similar communities that live in
other parts of the world. And really by listing
their securities on our markets, not only does
the issuer position itself as a pioneer, but
they also get to set a trend. in a way, that
sends a signal to other communities or issuers
in other parts of the world about what's possible.
And our role as our exchange is to emphasize
that message. I think we've seen that. We had
a gentleman on our podcast a week or two ago
who was in Latin America and talking about the
leadership that... Canadian Indigenous nations
have been providing for other Indigenous nations.
So I think that's a very timely comment. Thank
you to Owen Rogerson for sharing your insights
with us. And thank you for viewing and listening.
Mark your calendars for the upcoming 2026 Summit
taking place on the 8th of April. Be sure to
share, subscribe, and leave a review on your
favorite podcast channel. Thanks for listening
to Drumbeats. Until next time.