Dec 18 2023 - Jan 12, 2024
Your Newsletter at a Glance
Commentary by C4C
CPI estimates a $1226 Trillion cost of climate inaction (~10x global GDP). India’s REC prepares for a $500 M green bond. Pattern Energy closes an $11 billion financing deal for the SunZia Transmission Project. New Forests raises $300M for Australia New Zealand Forest Management. Equinix allocates $4.9 billion in green bonds. Canada invests $200M in engineered carbon capture. Massachusetts invests $50 million in forest based carbon sequestration. I Squared invests $400 million in Origo energy, and more.
Policy & Regulatory Highlights
- Brazil prepares to launch a regulated carbon market
- CFTC proposes new guidelines for US Voluntary Carbon Market transactions
- India launches a federal forest project certification scheme
Climate & NbS Finance Research
- World Bank, Leapfrog and Temasek estimate emerging markets offer a $330 billion yearly green investment opportunity
- Green Bonds topped $950 Billion in 2023
- More than 50 asset Managers now offer natural capital strategies
- Emerging biodiversity standards cause tension among investment groups
- Voluntary Carbon markets show resiliency after rocky 2023
Climate Research & News
- 25% of the global population are now affected by drought.
- The US becomes the world’s largest producer of fossil fuels in 2023
- Amazon Deforestation fell 50% in 2023, while Cerrado deforestation increased 45%
Important News and Research
Grow your climate finance expertise
Climate
- The Climate Policy Initiative estimated a staggering $1266 trillion cost to the global economy if needed investment and action on climate change is not taken, a figure totaling more than 10X of global GDP. This estimate was based on totalling quantifiable impacts of climate change, pollution and ecosystem degradation, as well as taking into account less quantifiable factors such as social costs. CPI estimates that a whole of society approach that takes climate action into account in governmental and business decisions, and meets the need of $9.7 trillion invested in climate solutions each year, is needed.
Brazil to Launch Regulated Carbon Market [Financial Times]
- Brazil's congress is poised to pass a bill establishing a regulated cap and trade carbon market, following up on a major promise of President Lula. While groundbreaking, and incorporating NbS, the bill has faced criticism for exemption of livestock and primary agriculture from carbon regulation, a major issue given that livestock, agricultural-driven deforestation account for more than half of Brazil’s emissions. The proposed rules will impose reporting requirements on companies emitting more than 10,000 tonnes of CO2 annually, and compliance and trading will apply to emissions over 25,000 tonnes.
U.S Oil Production Hits 13.2 million barrels per Day [Washington Post]
- The U.S became the world's largest oil producer by a wide margin in 2023, contributing to falling gasoline prices throughout the country, and drawing a sharp contrast with President Biden's stated goals of reducing greenhouse gas emissions.
- A new report by Bfinance estimates that over 50 asset managers are offering natural capital strategies to investors, combining agricultural, timberland and natural climate solutions investments. The report noted that more than 60% of these strategies included carbon credits, 18% of which have carbon as a core focus.
EU Warns that Countries Are Falling Behind on 2030 Climate Goals [Reuters]
- The EU's assessment of constituent countries' national climate plans has found that they will only cut EU emissions by 51% from 1990 by 2030, short of the bloc's 55% goal. The commission highlighted still existing fossil fuel subsidies as a major stumbling block in meeting their goals.
- Despite the disappointment among certifiers, developers and tropical forest countries that no agreement was reached at Cop28 on article 6.2, bilateral deals continue, often operating in existing voluntary markets. Some registries, including the Qatar based Global Carbon Council, are attempting to sell article 6.2 credits using existing methodologies.
- A new report titled "Accelerating clean technology access to emerging consumers" has highlighted the $330 billion per year investment opportunity represented by clean consumer product distribution in emerging markets. The report urges investors to focus on solutions specifically tailored to these markets, such as 2 and 3 wheeler electric vehicles, and modular solar systems.
Investors Split Over Future Directions of Biodiversity Standards [Responsible Investor]
- Investors, including Federated Hermes, Columbia Threadneedle, and NinetyOne, have expressed concerns that emerging biodiversity standards under the TNFD umbrella are not granular enough and don't take all aspects of the issue into account. Critical investors are hopeful that soon to be released ISSB standards will offer improvements, while others feel that the TNFD itself is likely to address concerns eventually.
Funds in Texas Navigate anti-ESG Laws to Ensure Climate Investment [FT]
- Texas's recent regulations prohibiting public funds from investing in institutions exhibiting 'hostility to fossil fuels' has complicated green investment in the state, but pension funds are still making such investments, including a $300 Million investment in the Macquarie’s energy transition fund by the Texas Permanent School Fund. These commitments have to navigate multiple roadblocks put up by Texas’ comptroller's office, which have forced pension funds and others to disinvest from leading asset managers like Blackrock.
- Green bonds have reached almost $1 trillion in 2023, totalling approximately $950 billion, up 3% from 2022, but still below the $1.08 trillion raised in 2021. Sovereign green bonds were a particularly large growth segment, increasing 48% to $156 billion.
Biodiversity Credits Gain Traction and Meet Increased Criticism [Bloomberg Green]
- Both national and international markets for biodiversity credits continue to grow since the 2022 Kunming-Montreal Global Biodiversity Framework highlighted their potential use. France and the UK launched an international advisory panel in June, and England has included biodiversity net gain credits as part of its rules for avoiding nature loss in home construction. However, the currently unregulated market for biodiversity credits has drawn high levels of scrutiny due to the lack of oversight on claims and difficulty quantifying efficacy of projects.
Bloomberg Offers Sustainable Fixed Income Indices [CSR Wire]
- Bloomberg has launched a series of new indices tilted towards green fixed income investments. The company hopes that it will allow investors to better understand and invest in the green bond and “green tilted” bond market.
Drought Touches A Quarter of Humanity in 2024 [New York Times]
- The current El Nino cycle and ongoing climate change have exacerbated drought patterns from Brazil to Africa, with 258 million people expected to experience acute hunger throughout the world. In Brazil in particular, the drought is affecting efforts to protect the amazon, and in Central Africa it has exacerbated existing conflicts.
California Cuts $2.9 Billion in Climate Funding to Help Close Budget Deficit [LA Times]
- The State of California is slowing its investments in climate due to a $37.9 billion budget deficit, reducing its climate budget by 11% from the original $54 billion approved in 2022. The main trims will be in transportation, forest maintenance, and watershed management.
Niki Haley Courts Conservative Climate Hawks [Semafor]
- Republican think tanks and conservative politicians concerned about climate change have begun to coalesce around Nikki Haley as the best option in the Republican primary field to support climate action.
WEF Releases Global Risk Report Ahead of Davos [World Economic Forum]
- The WEF released its new Global Risk Report, and warns in particular about increasing declines in economic development worldwide and climate induced natural disasters throughout 2024.
Oman Unveils Sustainable Finance Framework in Green Push [Reuters]
- Oman has unveiled a sustainable finance framework with the hopes of attracting ESG investors to support the country's development goals. The sultanate will release green bonds and other financial instruments with the hopes of meeting its 2040 goal of reducing oil's share to 8.4% of its GDP.
Money Continues to Flow Into Carbon Credit's Despite Setbacks [Semafor]
- A rocky 2023 that saw major criticism of the Industry's top standards has battered the Voluntary Carbon Market, but analysts believe that 2024 may mark a recovery for the industry. Macquarie and others estimate that demand in fact fell only 3% in 2023, and is unlikely to fall further. Regulatory changes could affect the market, with U.S financial regulations and EU bans on carbon neutral claims expected in 2024.
Price Slump in 2024 Clouds Outlook for Voluntary Carbon Markets [S&P Global]
- Carbon Credit Prices on [the traded market] dipped over the course of 2023 for all major forms of carbon capture, boding poorly for the market going into 2024. Nature based avoidance prices were particularly hard hit, falling from almost $12/mtCO2e in January to less than $4 at the start of the year. [note, Bilateral purchases for retirement remain in higher price bracket]
CFTC's New Proposal Guides Voluntary Carbon Credit Trading [CarbonCredits.com]
- The CFTC has released Carbon Credit guidelines similar to those already followed by organizations such as the ICVCM. While the CFTC does not have statuatory authority to regulate the VCM, it does have a mandate to reduce fraud among exchanges.
Climate Tech VC funding dropped 30% in 2023 [Sightline Climate]
- Sightline Climate's 2023 analysis found that climate Tech Investment fell 30% in 2023, totaling $32bn. The reductions were linked to a challenging macro-environment for venture capital in general. Different sectors declined at different rates, and series A startup funding was particularly heavily hit.
World Biggest Banks Made $3 Billion on Green Debt in 2023 [Bloomberg Green]
- Major Banks earned more than $3 Billion in fees on sustainable debt deals in 2023, more than the $2.7 billion earned on fossil fuel related deals. Banks extended $583 billion in green bonds in 2023, also outstripping $558 billion in oil, gas and coal, potentially the start of a growing pattern of low carbon lending outstripping fossil fuels.
COP 28 Financial Commitments Fall Short off Needed Financing [Focus 2030]
- While major announcements and commitments were made at COP28, financing commitments still remain far below what is needed to address the climate crisis. The loss and damage fund in particular has been underfunded, with industrialized countries pledging a little more than $700 million dollars. The Green climate fund was replenished with $12.8 billion in commitments, a record, but still far below estimated needs.
First Chinese Bank Joins Net Zero Banking Alliance [UN Environment Programme]
- UNEP has announced that the Bank of East Asia has become the first Chinese bank to join the Net-Zero Banking alliance, bringing the total number of participants to 140 banks in 45 countries.
Top 1% of EU Companies Cause 50% of Eu ETS Emissions [Carbon Credits.com]
- Carbon Market Watch reported that the EU's top 30 emitters receive large amounts of free pollution permits, and account for over 50% of the scheme's emissions in 2022.
Nature-based Solutions
Amazon Deforestation Fell 50% in 2023 Hitting 5 Year Low [Reuters]
- Amazon deforestation fell 50% in 2023, to less than 6000 square kilometers cleared. While a major drought has complicated progress, it marks a major success for the Lula administration.
Yet, Deforestation in the Cerrado Surges to the Highest Level Since 2019 [ABC]
- Brazil's tropical savannah, the Cerrado, has experienced 3,000 square miles of deforestation/delegation in 2023, up 45% from 2023. Much of this deforestation is technically legal under the Brazilian forest code.
Guyana Waits to Sell Additional Carbon Credits [Loop News]
- Guyana is holding off on selling 33.5 M TREES REDD+ carbon credits due to unfavorable market conditions. The country hopes to eventually make $750 million by selling its existing carbon credits and is waiting for the market to improve.
Biodiversity Credit Market Slammed as Illusory Capital [Environmental Finance]
- The Campaign for Nature has released a new report arguing that the emerging biodiversity credit market is a distraction and could potentially derail needed investment. The report argued that in-value chain investments and improved tax and subsidy models would be more effective in protecting and restoring nature.
One Acre Fund Aims to Build Sustainable and Resilient Farming Throughout Africa
- The One Acre fund relaunched in December of 2023, with the goal of helping provide resiliency support to the 97% of smallholder farmers without insurance.
- Major donor countries to the Amazon Fund have expressed concern with Brazil's intention to pave the BR-319 highway to support economic development in the amazon. While the Brazilian transport ministry has advertised the project as "the world's most sustainable highway" environmentalists contend it will open the door to massive deforestation.
EU Biodiversity Strategy Could Potentially Move Risk to More Vulnerable Countries [Carbon Pulse]
- A study in Conservation Biology finds that the EU Biodiversity Strategy could have the unintended effect of moving hardwood production to less regulated markets, which could exacerbate deforestation and biodiversity loss.
- The UK Center for Ecology estimates that human beings have caused the extinction of more than 1400 bird species.
Coalition of Indigenous Groups Calls for Moratorium on Terrestrial Carbon Trade [Mongabay]
- The Pathways Alliance for Change and Transformation, a coalition of indigenous community groups and allied nonprofit organizations, argues for a moratorium on forest carbon trading due to concerns over ongoing rights violations.
India Launches State Run Forest Sustainable Forestry Certification Scheme [Indian Express]
- Aiming to get ahead of emerging forest code regulation in the EU, U.S and UK, India has launched a federally run certification scheme that will be mandatory across the country, offering certification in sustainable forestry management.
UNDP Launches Nature Project Finance Finder [Environmental Finance]
- The UNDP has launched the Finance Resource Database for Biodiversity aiming to help match nature projects with private and public funding. The database is nested under the Biodiversity Finance Initiative, and provides a list of potential investors and funders for different types of biodiversity focused projects.
Verra Declares Intention to Strengthen Forest Management Methodologies [Verra]
- Verra has announced that it intends to update its Improved Forest Management and Verified Carbon Standard Program, following extensive criticism throughout 2023. Verra has announced the changes to improve the quality of their standards and intends to implement them during 2024.
UAE led AIM for Climate Managing $17B in Assets Post COP28 [Agribusiness global]
- The UAE led Agriculture Innovation Mission for Climate more than doubled its assets under management to $17 billion after COP18. This investment primarily comes from government partners, and aims to focus on climate smart agriculture and food systems innovation in low and middle income countries.
Climate Finance ≥ $100M
Commitments and deals
Commitments
EU Commission approves EUR2.9 billion in French State aid for Green Industries [European Commission]
- The European Commission has announced that France can go forward with providing 2.9 Billion Euros in tax and investment support for green industries to help the production of solar panels, wind turbines, and other critical components.
EPA providing School Districts $1 Billion in Grants to Adopt Electric School Buses [Washington Post]
- The EPA is providing $1 billion dollars to school districts across the country with the goal of building out electric school bus charging and maintenance infrastructure.
Brookfield Renewable Plans $C299M Bond [Renewables Now]
- Brookfield Renewable Partners has announced a Canadian dollar $299 Million Bond raise in 2024, with the proceeds going to renewable investments and debt repayments. The notes will be due in 2054.
- Tata Power has signed an exploratory agreement with the government of Tamil Nadu with the aim of investing $8.5 billion in clean energy projects. The deal aims to build 10 GW of renewable energy projects and expand solar panel manufacturing. Tata aims to generate 70% of its power from renewable sources by 2030 and to be entirely renewable powered by 2045.
PSE&G Aims to Spend $21 Billion on Achieving Clean Energy Targets [Carbon Credits.com]
- PSE&G has increased its net zero capital investment plans to $21 billion, with a focus on solar, energy efficiency and grid projects. PSE&G is aiming to achieve net zero greenhouse gas reduction by 2030, by reducing GHG emissions by 44.8% from 2022 levels, and
EPA prepares for Launch of $14 Billion National Clean Investment Fund (NCIF) [GreenBiz]
- The US NCIF has an unprecedented $14 billion available for clean energy investment throughout the United States, and is planning to select nonprofits to manage disbursement in early 2024, the winner announcements expected in March, and disbursements will begin in July. The nonprofits will be chosen based on their capacity to mobilize private capital alongside the provided funds, and their sensitivity to the needs of underinvested projects and communities.
Erdemir Expected to Invest $3.2 billion to cut Emissions by 25% [Reuters]
- The Turkish steel conglomerate Erdemir has made a $3.2 billion commitment to cut emissions 25% by 2030. The company aims to expand its crude steel capacity to 13.5 million metric tons through the use of electric arc furnaces and reduce coal consumption through the use of biomass and natural gas.
UK Government Expected to Invest $2.5 Billion in Drax Carbon Capture Plant [Carbon Herald]
- The UK has proposed investing $2.5 billion to build carbon capture storage plants at Drax’s sites (which are mainly fueled with wood pellets), a major part of the UK’s carbon reduction strategy. This has drawn criticism from some environmental groups who say the removal will be carbon neutral at best.
India's REC prepares for $500M green bond fundraiser denominated in Yen [Reuters]
- India's state owned REC is hoping to finance green infrastructure using $500 million in yen denominated five and 10 year bonds. The company is still figuring out the final details of the order, but is attracted to the low interest rate in the current yen market.This deal may be a sign of growing Japanese interest in green bonds.
- The UK government has announced its intention to invest $2.53 billion in engineered biology, including alternative proteins, hoping to help develop an engineered protein industry within the country and fill gaps in private funding.
HASI Announces Investment in AES Renewables Portfolio [Business Wire]
- HASI announces a structured investment in an AES managed portfolio of 605 MW solar assets, spanning 11 states and over 200 individual projects. The dollar amount of investment is currently undisclosed.
- The Philippines has proposed a $9.74bn budget for climate related expenditures in 2024, including mitigation and adaptation, a 17% increase on 2023. Critics alleged that the government is favoring gray infrastructure such as dams and reclamation that may damage mangrove ecosystems and not be resilient to future climate shocks.
Adani Plans $1billion Green Energy Investment [Bloomberg]
- The Adani family plans to invest $1 billion in the green investments arm of the conglomerate, in order to help meet a goal of 45 gigawatts of green energy capacity by 2030. The company also aims to refinance $1.2 billion in bonds to assist with these goals.
Singapore OCBC Plans to Launch $500M Decarbonization Fund [Nikkei]
- The Singaporean Oversea-Chinese Banking Corp has pledged to create a fund of $500 million to finance decarbonization related business in Southeast Asia. The fund aims to begin raising money in early 2024 and will solicit financial institutions and companies in Japan and throughout southeast Asia.
Deals
BlackRock in $12.5B Deal to Purchase Global Infrastructure Partners [Guardian]
- BlackRock has announced the finalization of a deal to purchase Global Infrastructure Partners for $3bn in cash and 12m shares. The purchase is intended to allow BlackRock to take advantage of state funding for renewable energy and other infrastructure initiatives, including the 2022 Inflation Reduction Act.
- The long awaited development of the SunZia transmission project is getting underway as funders close a $11 billion financing deal, and are beginning construction. The 550-mile and 525 kV transmission line will be able to devote 3000 MW of electricity between New Mexico and Arizona. The line will primarily deliver power from the 3,515 MW SunZia wind facility. The construction of the transmission line is notably greater than the $7 billion cost of the SunZia project.
Equinix Fully Allocates $4.9 B in Green Bond Proceeds [Equinix]
- Equnix has finished the allocation of $4.9 billion in green bonds as it aims to become climate neutral by 2030, having allocated the final of 6 bonds issued since June 2020 in June of 2023. The bonds have gone to support 172 green building projects, 33 energy efficiency projects, and 2 power purchase agreements.
I Squared Invests $400 Million in Brazil-based Clean Energy Platform Origo Energia [ESG Today]
- I Squared has announced its first investment in Brazil with plans to invest $400 million in Origo Energia expected to close in Q1-24, to fund the development of more than 2 GW of distributed solar energy generation projects.
Bahrain Steel given $450M Loan for Carbon Reduction [Steelorbis]
- Bahrain Steel has received a $450 million sustainability linked loan aimed at decarbonizing its industrial operations through the installation of renewable energy infrastructure at the company's steel plants.
Canada Invests $200M in Carbon Capture Startup [ESG Today]
- The Canadian Growth Fund announced a $200 million investment in the Calgary based carbon startup Entropy, with an attached fixed price carbon credit purchase agreement. The recently founded company aims to develop modular carbon capture and storage facilities.
Nature-based Solutions ≥ $1M
Commitments and deals
Deals
New Forests Raises $300M for Investment in Australian Forestry and Carbon Assets [FS Sustainability]
- New Forests has closed an $300M fund targeting one million tonnes of carbon abatement over the next decade. The raise was primarily from institutional investors from Oceania and Europe, as well as the Australian Government's Clean Energy Finance Corporation, which committed $50 million. The fund will primarily support the development of new greenfield plantations.
Jaguar Corridor Investment Fund Aims to Raise $130M by Mid 2024 [Carbon Pulse]
- The Jaguar Corridor fund has announced that it aims to raise between $100-130 million by mid-2024 in order to protect carbon intensive forests in the vital wildlife corridor.
Standard Biocarbon Raises $5 million to Launch U.S Biochar Production Facility [ESG Today]
- Nexus Development Capital has announced a $5 million investment in Standard Biocarbon's sawdust biochar based carbon removal systems. The company aims to begin producing 16,000 cubic tons of Biochar a year starting in 2024, and sequester 3000 tons of carbon yearly.
Massachusets announces $50 Million in investments in Forest Climate Solutions [Morning AG Clips]
- The Massachusetts Office of Energy and Environmental Affairs plans to invest $50 million in assisting Massachusetts communities in managing forest land to help meet the state's carbon reduction and nature protection goals.
Vietnam sells $51.5 million in carbon credits [VN Express]
- Vietnam sells $51.5 million carbon credits at $5 a ton to the World Bank, representing a sale of over 10 million tons of carbon credit.
EIB provides 100 Million Euro’s for Morocco's Forest Strategy [North Africa Post]
- The European Investment Bank Will Provide Morocco $110 Million to invest in forest management, biodiversity management, and eco-tourism development as part of its 2020-2030 Forest strategy. The funding will also help Morocco meet its target of reducing greenhouse gas emissions 45.5% by 2030.
Biden Administration Announces $51 Million in Watershed Restoration Projects [DOI]
- The Biden Administration has announced $51 million in funding from the Bipartisan Infrastructure Law will be used for 18 projects in eight states focused on watershed restoration and protection.
- The Washington State Department of Natural Resources has partnered with The Conservation fund to purchase more than 20,000 acres of forestland in the state for $121 million. The forests will be conserved as habitat and working forests as part of the state's climate strategy.
- New Forests will manage a $75 million investment in the Australia New Zealand Landscapes and Forestry Fund, which will support the establishment of new carbon capture plantations and improved forestry rotations in existing plantations.
Norway Invests $4.46 million in Kelp Forest Preservation [The Fish Site]
- The Norwegian government plans to invest $4.46 million in harvesting sea urchins to protect the country's declining Kelp Forests. The investment also aims to create an industry focused on sea urchin projects to maintain long term funding for protection and restoration efforts.
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