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S&P assigns its first 'green evaluation' to NY undersea cable

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Standard & Poor's has launched a new service called Green Evaluations, and has assigned its first "green evaluation" to the Cross Sound Cable project in New York. The 24-mile-long undersea cable connects New England, which has a significant amount of renewable resources, with Long Island, N.Y., which historically has faced both gas and electric transmission constraints, said S&P Global Ratings, in issuing the evaluation.

The Cross Sound Cable "is likely to be a critical infrastructure asset during the coming decades," said S&P Global in the evaluation, noting that New York state has made renewable energy a primary policy goal under its new clean energy standard. Last summer, the New York Public Service Commission approved a standard requiring 50 percent of the state's electricity to come from renewable energy sources such as wind and solar by 2030.

The bi-directional Cross Sound Cable, which transmits about 330 megawatts of power, is under contract with the Long Island Power Authority through 2032, S&P Global noted in its evaluation.

In August 2015, Argo Infrastructure Partners placed $120 million of private-placement debt to fund a portion of the acquisition of the Cross Sound Cable project.

"This transaction received the strongest Green Evaluation score - E1 on our scale of E1 (highest) to E4 (lowest)," said S&P Global.

New service is separate from credit ratings

The new Green Evaluation, which is separate from traditional credit ratings, is "a comprehensive approach to measuring sustainability at the asset level," S&P Ratings said in announcing the new service.

"We wanted to respond to the robust market demand for rankings that consistently measure climate risk and environmental impact, and research that delivers actionable insights," said Michael Wilkins, managing director and head of environmental and climate risk research at S&P Global Ratings.

The evaluation service "is able to assess financial instruments including stocks, bonds, loans, and securitizations," said S&P. "It will also be able to identify the green contribution of any transaction by highlighting the portion of funds dedicated to green investments and its environmental impact."

"The Green Evaluation is not a credit rating, and it does not consider credit quality or factor into our credit ratings," the credit rating agency said in a report on how the new service works. "The evaluation provides a relative ranking of financings globally. We first consider the governance and transparency of a financing from a green perspective. We then combine this assessment with an estimate of the asset's expected lifetime environmental impact in its region, relative to maintaining the status quo."

Green investment is 'on a firm upward trajectory'

"Green issuance and investment is on a firm upward trajectory, propelled by the 2015 Paris Climate Agreement, and the impetus it created to finance $1 trillion a year in investments for renewable energy and other initiatives to limit global warming," says S&P Global Ratings on a web page about the new Green Evaluations.

"At the same time, long-term investors are also recognizing the threat from greenhouse gases and have begun to diversify portfolios away from carbon-based investment. The final push is coming from corporations as they start to contend with the consequences of increasingly extreme and violent weather and flooding. Many are starting to see that managing environmental exposure may be more than risk management; it may be good for business."

S&P also issued a report that says investment "of some $90 trillion" is needed in the next 15 years to achieve global sustainable development and climate objectives.