Daily Update: September 28, 2021

Start every business day with our analyses of the most pressing developments affecting markets today, alongside a curated selection of our latest and most important insights on the global economy.

The global economy needs to move faster to curb greenhouse-gas emissions and make definable progress on the pathway to net-zero carbon emissions—or risk having warming surpass 2 degrees Celsius and increase physical asset risk due to extreme climate events. The U.N.’s latest Intergovernmental Panel on Climate Change report warned that the world may warm by 1.5 degrees in the early 2030s under all emissions scenarios, marking an acceleration of 10 years sooner than previously projected. In order to keep global warming within 2 degrees—the maximum amount that scientists believe that atmospheric temperatures can rise before conditions become irreversible at best and uninhabitable at worst—the international community would need to dramatically cut annual fossil-fuel-related emissions across multiple sectors by 2025 relative to 2019 levels, no matter the scenario, according to S&P Global Sustainable1 research. In the immediate term, companies and communities have experienced devastating weather and other climate events that are only expected to worsen in the coming three decades. Utilities face the greatest threats to physical assets from climate-related events like wildfires, storms, and water stress now and in the future. “Physical assets with fixed locations owned by companies in the utilities, materials, energy, and consumer staples sectors will face the greatest climate-related risk 30 years from now,” S&P Global Sustainable1 said in separate research. “Corporate infrastructure in Asia, East Asia, the Middle East, and North America is most exposed to severe weather events and other climate change dangers.” Globally, water stress will likely emerge as the most pressing climate risk to corporate assets, particularly for utilities and materials sectors, by 2050, according to S&P Global Sustainable1. In those 30  years, many areas across Europe and the most highly populated U.S. counties are expected to confront water stress as their biggest climate risk. "Physical climate risk really is everywhere," Christopher Schwalm, a risk program director and senior scientist at the U.S.-based think tank Woodwell Climate Research Center, which works with companies on ascertaining their climate risk, told S&P Global Market Intelligence. "That hasn't quite achieved the level of resonance it ought to have in the broader corporate world.” Major carbon emitters, like the U.S., would need to take overwhelming action to reduce their carbon emissions within the next three years. The global energy mix would need to prioritize renewables, with generation from wind and solar increasing by 133% and 98%, respectively, from 2019 levels by 2025, according to S&P Global Sustainable1’s analysis of S&P Global Platts Analytics’ Future Energy Outlooks. “Companies would have to make proactive changes on the path to net zero now. They would need to create realistic plans to transition to a low-carbon world,” S&P Global Sustainable1 said in the recent research. “And crucially, those transition pathways would need to include near-term milestones. The path to 2050 won’t be attainable without credible signposts in the next few years.” Today is Tuesday, September 28, 2021, and here is today’s essential intelligence.

Uncertainty in the Global Economy

Economic Outlook Latin America Q4 2021: Settling Into The New Post-Pandemic Normal Of Slow Growth

While COVID-19 is far from over, its impact on GDP in Latin America is falling. Lockdowns are less of a drag on growth, and reopening provides less of a boost. Most of the sectors that are operating significantly below capacity, and will benefit from further progress in vaccination, are relatively small as a share of GDP.

—Read the full report from S&P Global Ratings

Airports Face A Long Delay To Global Air Traffic Recovery

Domestic travel numbers reached 85% of the 2019 level in July this year across the Americas and Asia, but international traffic only 26%, according to the International Air Transport Association (IATA), signaling an uneven and protracted recovery of global air traffic.

—Read the full report from S&P Global Ratings

The Credit Cycle

SF Credit Brief: CLO Insights 2021 MM Index: Improving Credit And Increased Issuance So Far In 2021

According to S&P Leveraged Commentary & Data (LCD), a total of 15 new issue middle-market (MM) collateralized loan obligations (CLOs) have closed in 2021 year to date, while another 17 have experienced either a refinancing or a reset.

—Read the full report from S&P Global Ratings

Swedish Covered Bond Market Insights 2021

High deposit level, low interest rates, and central bank buying mean Swedish investor-placed benchmark covered bond issuance may experience its first year of negative supply since the financial crisis. Nevertheless, Sweden remains one of the five largest covered bond markets, with outstanding issuances totaling €248 billion in first-half 2021.

—Read the full report from S&P Global Ratings

Market Dynamics

Berkshire, AIG Neck And Neck As E&S Insurance Market Strengthens In Q2

Berkshire Hathaway Inc. and American International Group Inc. controlled very similar shares of the U.S. excess and surplus market during the second quarter of 2021, a period that saw growth of the segment overall continue strongly.

—Read the full article from S&P Global Market Intelligence

Latam Marine Fuel 0.5% Prices Soar To 17-Month Highs, Surpass Pre-Pandemic Levels

Marine fuel 0.5%S in key ports in Latin America rose higher into pre-COVID territory week ending Sept. 24, reaching heights not seen since end-January or early-February 2020, bolstered by robust crude prices.

—Read the full article from S&P Global Platts

Banking Industry Under Pressure

Government Support And Improving Economic Sentiment Help Mitigate Sector Vulnerabilities For GCC Banks

UAE banks are among the most vulnerable in the GCC region, as a result of their high exposure to real estate and other hard-hit sectors, while Saudi banks are better placed thanks to stronger profitability.

—Read the full report from S&P Global Ratings

Commerzbank, Other German Banks Among Europe's Least Efficient

Germany's large banks are among the least efficient in Europe, data from S&P Global Market Intelligence shows. In a sample of the continent's 50 largest banks by assets, the four with the highest cost-to-income ratios at the end of the second quarter included three German lenders.

—Read the full article from S&P Global Market Intelligence

Success Of India's New Bad Bank Hinges On Resolution Speed, Expertise

India's new government-backed bad bank can help lenders recover capital from nonperforming assets if it can ensure a timely resolution and attract a pool of professionals who are allowed to work independently, analysts said.

—Read the full article from S&P Global Market Intelligence

Technology & Media

Infotech Capital Markets Activity Drops To Second Lowest YTD In August

Publicly traded information technology companies in the U.S., Canada and Bermuda raised about $9.58 billion through capital offerings in August, marking the second-lowest total for 2021.

—Read the full article from S&P Global Market Intelligence

Telecom Capital Markets Activity Rebounds In August

After a quiet July, Capital market activity in publicly traded telecommunications companies in the U.S., Canada and Bermuda bounced back in August, raising about $5.97 billion.

—Read the full article from S&P Global Market Intelligence

Comcast Exchange Offers Drive Media Capital Activity In August

After raising just $1.72 billion through capital offerings in July, capital markets activity in the media sector rebounded strongly with about $18.06 billion in August, the sector's highest total for 2021.

—Read the full article from S&P Global Market Intelligence

ESG in the Time of COVID-19

U.S. Pharma Giants Combat Emissions Crisis With Long-Term Net-Zero Pledges

The largest U.S. drugmakers have all committed to reducing greenhouse gas emissions in the near term as a global economic forum drew attention back to the sector's growing carbon footprint.

—Read the full article from S&P Global Market Intelligence

Foreign Demand Drives Wood Biomass Sector Growth, Despite Inconsistent U.S. Policy

The future of wood biomass fuel for electricity generation in the United States balances on a knife-edge awaiting federal and state policy to determine if it more broadly qualifies as clean energy, experts and executives said.

—Read the full article from S&P Global Market Intelligence

Feature: No Common Path On Forward Pricing Of Voluntary Carbon Credits In OTC Market Yet

A common approach for putting a price on voluntary carbon credits for forward delivery has yet to emerge in the broader over the counter market although some patterns seem to appear for some specific types, market participants told S&P Global Platts.

—Read the full article from S&P Global Platts

Appec: Qatar Could Surpass Australia In Hydrogen, Energy Transition, Says Woodside Ex-CEO

Qatar can utilize being a planned economy to gain the first-mover advantage over Australia in the emerging market for hydrogen and hydrogen-derived energy products, Peter Coleman, former CEO of Australia's largest oil and gas independent company Woodside Petroleum, said Sept. 27 at APPEC 2021.

—Read the full article from S&P Global Platts

Listen: Offshore Driller Kosmos Energy Sheds Frontier Assets, Weighs Carbon Intensity To Confront Energy Transition

Global oil demand will still be significant for years, even under the most ambitious energy transition. So which basins will continue to produce, and which others will be abandoned?

—Listen and subscribe to Capitol Crude, a podcast from S&P Global Platts

The Future of Energy & Commodities

Time For Europe And The IEA To Create A Strategic Gas Reserve

Record gas prices have sparked panic in Europe and left policymakers scrambling for answers. Solutions—like bailing out power suppliers, protecting vulnerable retail consumers with state subsidies, or pleading with Russia for more gas—just paper over the cracks.

—Read the full article from S&P Global Platts

U.K. Moves To Ease Fuel Shortages As Panic Buying Dries Up More Pumps

U.K. refiners and fuel retailers were struggling to restock fuel stations on Sept. 27 after panic buying drained most of Britain's pumps and the government outlined moves to ease the impact of a lack of drivers needed to resupply retail sites.

—Read the full article from S&P Global Platts

Analysis: Shift In Energy Policy In Spotlight For Japan's Leadership Change

Japan's impending leadership change, which would typically not change the course of its energy policy, is in the spotlight due to a potential major shift in focus after the ruling Liberal Democratic Party votes to elect a new president on Sept. 29.

—Read the full article from S&P Global Platts

APPEC: 2022 Oil Supply Seen Tight Amid Under-Investment, Cautious OPEC, Demand Recovery

Global oil demand seems poised to recover to pre-pandemic levels in 2022, but a sharp decline in upstream investments and OPEC's cautious approach in lifting the group's production volumes could lead to an undersupplied market next year.

—Read the full article from S&P Global Platts

APPEC: Colombia's Ecopetrol To Expand Heavy Crude Marketing In Asia With Carbon Offset Ambition

Asian refiners could soon find their crude oil procurement options in the regional spot market increase significantly as Colombia's state-run Ecopetrol rapidly accelerates its heavy crude marketing efforts in the Far East, while the upstream company's ambition to apply carbon offsets to its crude cargoes could lure many Asian end-users seeking to raise their share of low carbon feedstock purchases.

—Read the full article from S&P Global Platts

APPEC: Petronas Eyes Petrochemicals Amid Fragile Asian Recovery, Refining Overcapacity

Malaysia's Petronas remains cautious on the near-term petroleum refining business outlook amid the fragile transportation fuel demand recovery in Asia, with the state-run oil and gas company seeing a greater need to diversify its product slates by expanding into chemicals.

—Read the full article from S&P Global Platts

Written and compiled by Molly Mintz.