February 19-23, 2024

Your Newsletter at a Glance

Commentary by C4C

Deal-flow Summary:

NEST selects Lombard Odier to build a $6.34 billion environmental finance fund with a major nature segment. Brazil prepares a $2 billion FX hedging program with IDP to support the green investment agenda. KFW raises $2 billion on 6x oversubscribed green bonds. Verizon Invests $1 billion in clean energy generation. Strata Clean Energy Secures $559 million for Arizona Battery storage. Gresham House launches a biodiversity fund with $380 targets to participate in the new UK biodiversity offset market. African development bank invests $188 million in Moroccan green projects. Antora Energy raises $150 million for industrial decarbonization technology. Overture VC raises $60 million to help climate tech startups access government grants, Varha raises $8.7 million to quantify carbon sequestration in Indian agriculture, and more.

Policy and Regulation

• UN to vote on creating solar-geoengineering research group in major step for geoengineering
• Brussels becomes the first EU country to recognize ecocide as an international crime
• SEC removes Scope 3 guidance from emissions disclosure regulation
• EU takes next step on Carbon Removal Certification Framework

Climate and NbS Finance News

• Goa to receive the world's first sub national climate fund from the world bank
• Climate Action 100 moves to reassure investors after major exits
• London School of Economics launches Just Transition Finance Hub to promote equitable transition

New Science and Research

• Mongabay finds that Amazonian megafires could become normalized.
• University of Sheffield finds VOC emissions and albedo changes offset carbon sequestration from growing forests
• Mountain Research finds community based conservation more effective than state protected areas in the Andes

Analysis Spotlight:

Michael Liebreichs’s 5 superheroes of the Energy Transition [Bloomberg NEF]

In a follow up to his September article on limiting factors in the energy transition, Michael Liebreich in Bloomberg NEF provides an overview of the "5 superhero" factors that will continue to propel rapid adoption of renewable energy and decarbonization. His 5 factors are:

1. Exponential Growth: Wind and solar generation capacity continue to rapidly scale, and prices continue to fall, and have continually outpaced the models calculated by the IEA and others, with no sign of significant slowdown.
2. Systems Solutions: The need for a massive grid build out to integrate new clean energy resources will allow for the development and deployment of more efficient transmission systems from virtual power plant technologies to integrated EV charging and heat pumps.
3. Great Power Competition: Major and emerging industrial powers are all incentivized to get ahead in the transition, and are each making their own play to dominate different transition and hard to decarbonize sectors, which will drive both money and innovation to difficult to tackle problems.
4. Disappearing Demand: Massive increases in recycling of silicon batteries and other materials (Eric Meilin estimates 90% are currently being recycled) and future drops in the energy and materials required to refine and ship fossil fuels, will help limit the amount of materials and energy needed to achieve a net-zero transition.
5. The Nature of Primary Energy Demand: Estimates of overall energy demand are based on outdated, fossil fuel based models that overestimate the amount needed under a more advanced, clean energy based system.

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Climate Finance ≥ $100M

Commitments and deals

Commitments

KFW prepares to raise $14 billion in green bonds in 2024 [Environmental Finance]

• KFW has set a goal of raising $14 billion in green bonds in 2024, in alliance with a new green bond framework announced at the close of 2023.

NEST selects Lombard Odier Investment Managers to build £5 billion fund [Environmental Finance]

• Lombard Odier has been appointed to manage the UK pension fund Nests' climate change mitigation, adaptation, and natural capital and social issues sections. The pension fund plans to deploy 5% of its assets to this fund, with the goal of growing it to £5 billion by 2030.

Hyundai pledges $1.1 billion in Brazilian green auto investments by 2032 [YNA]

• Hyundai has announced a plan to invest $1.1 billion in electric and hydrogen vehicle production in Brazil through 2032, in partnership with the Lula administration's green development plan.

AMP Wealth Management New Zealand launches $500 million target Global Climate Fund [the spinoff]

• AMP wealth management New Zealand has announced a $500 million green investment target for the next few years, focusing on private investments in solar, wind, battery storage, EV charging and other transition infrastructure. The development represents one of the first major NZ green investment funds.

Gresham House launches biodiversity fund with $380 million target [ESG clarity]

• Gresham House has launched a specialist biodiversity strategy with Willis Towers Watson as the cornerstone investor. The Gresham House Biodiversity Co-Invest LP aims to raise $380 million to invest in "habitat banks" which turn landscape scale areas of non-arable farmland into wildlife habitat, in compliance with the UK's new biodiversity net gain legislation

Deals

KfW raises $2 billion on oversubscribed green bond [Environmental Finance]

• German development bank KfW has raised $2 billion from its first green bond since 2021, with $12 billion in orders. The bond will mature in 10 years. KfW has raised $82 billion from green bonds since 2024.

Brazil prepares FX hedging program with $2 billion in derivative investments [Reuters]

• Brazil has finalized a new foreign exchange hedging plan, channeling $2 billion in forex derivatives contracted through the inter-American development bank to facilitate longer term and lower cost currency derivatives for green development initiatives. A comprehensive agreement is expected to be signed shortly.

Petrobras plans $1.5 billion investment in oilfield decarbonization [Reuters]

• Petrobras and partners have announced plans to invest $1.5 billion to develop and implement high pressure oil and gas separation technology, with the aim of reducing carbon emissions throughout the company's operations by re-injecting separate carbon dioxide into underground reservoirs. The company aims to have a pilot project ready by 2028.

Verizon invests $1 billion in renewable energy projects from fifth green bond proceeds [ESGtoday]

• Verizon has invested $1 billion from a 2023 green bond in renewable energy generation projects across 5 states representing .9 GW of capacity. The company is on track to exceed its target of 50% renewable energy consumption by 2030, and has entered into 27 REPAS for 3.6 GW of renewable energy so far.

Strata Clean energy secures $559 Million for Arizona Battery storage project [Businesswire]

• Strata clean energy has closed a $559 million financing deal for the construction of the Scatter Wash batter storage complex in Arizona. The facility is expected to be operational in April of 2025 and have a storage capacity of 255 MW/1020MWh.

Sandbrook Capital commits $460 million to rPlus Energies [Business Wire]

• Sandbrook has announced a $460 million dollar investment in renewable energy developer rPlus. The investment is the first in the United states from Sandbrook's $2.1 billion climate infrastructure fund. The funding will help to further develop rPlus's solar and storage portfolio

ADB invest $188 million in Moroccan Green Development [Africa.com]

• The African Development Bank and the OCP Group have concluded 3 loan agreements with Morocco which will finance modular desalination plants and green energy sources to power those plants.

Overture VC raises $60 million to help climate tech startups tap government funds [Impactalpha]

• Overture VC has raised $60 million for a dedicated climate tech startup fund. The fund is focused primarily in investing in companies that qualify and can benefit from access to government funding opportunities, and aims to leverage the founders’ experience in the Obama administration to help companies engage with governments.

Nature-based Solutions ≥ $1M

Commitments and deals

Commitments

Microsoft Signs 6 year offtake agreement with Catona Climate [ESGtoday]

• Microsoft and Catona climate have announced a 6 year, 350,000 metric ton agroforestry carbon offtake agreement, with the credits generated through agroforestry projects in Kenya. The projects aim to support 15,000 smallholder farmers in improving practices and sequestering carbon.

Deals
Chennai invests 54.2 million in coastal resilience projects, shoreline restoration [BNN Breaking]

• The government of Tamil Nadu has announced Rs4.5 billion ($54.2 million) in investments in coastal restoration and resilience projects, focusing on improving marine habitat, and guarding against climate effects.

Future Food Fund raises  $43 million for impact vehicle [New Private Markets]

• The Future Food Fund II has raised €40 million ($43 million) for an article 9 impact fund. This includes €20 million in commitments from the European Investment Fund, with participation from other LPs such as Risk Capital Resources and the Dutch Future Fund. The Vehicle will prioritize seed and Series A rounds for Western European agtech companies in regenerative agriculture, zero impact foods, and circular systems.

Global Environment Fund to invest $26 million in Central Asian ecosystem restoration [Kun]

• The Global Environmental Fund will invest $26 million across 5 projects in Central Asia focused on restoring land and water resources across the region. Four out of 5 projects will be in partnership with Uzbekistan.

Climate Impact X secures $22.3 million for carbon credit marketplace [Fintech.Global]

• Mizuho has contributed S$20 million to a S$30 million raise for Climate Impact X's carbon credit trading platform. The company has to date facilitated transactions exceeding 2 million tons.

Arizona to invest $10 million in ecosystem restoration [Miragenews]

• Arizona will invest $10.3 million form the bipartisan infrastructure law in landscape level restoration projects to promote carbon sequestration and climate resilience. The projects will be developed in partnership with local communities.

Varaha raises $8.7 million to aid sustainable smallholder agriculture [AGfundernews]

• Varha, an Indian climate tech company that develops technology to measure and quantify carbon sequestration and emissions reduction, has raised $8.7 million in series A funding. The primary investors were RTP global, Omnivore, Orios, and Norinchukin Bank.

FAO investing $6.9 million in Pakistani sustainable rice [Dawn]

• The UN FAO has announced $6.9 million in funding from the Global Environment Facility for sustainable rice production projects in Pakistan. The projects will restore 15,000 hectares of land and improve farming practices on 50,00 hectares, with the goal of reducing 460,000 tonnes of greenhouse gas emissions.

Jane Goodall institute receives $5 million from Bezos Earth Fund [PRnewswire]

• The Jane Goodall institute has received $5 million in grants from the Bezos Earth Fund to support forest conservation in the Congo basin. The grant will expand conserved areas by over 1.5 million hectares, and will work in partnership with local indigenous groups and other communities to monitor and prevent deforestation and biodiversity and carbon loss throughout the region.

Hard to Abate Industries ≥ $1M

Commitments and deals

Deals

Atmos Zero raises $21 million for steam decarbonization technology [ESGtoday]

• Atmos zero has raised $21 million to commercialize its industrial steam decarbonization technology solutions. Atmos Zero's boiler 2.0 system uses air heat to generate high temperature steam with zero carbon emissions from the process.

Industrial decarbonization company Antora Energy raises $150 million in series B round [Businesswire]

• Antora energy has raised $150 million from a series B funding round led by Decarbonization Partners. The financing will be earmarked to scaling thermal battery production for industrial decarbonization.

Australia releases A$51 million pool of funds for climate tech [FS Sustainability]

• The Australian government dispersed A$51 million ($33 million) in grants for short term research collaborations focusing on projects related to net-zero hydrogen production to hard-to-recycle plastic recycling.

Clarity Technology raises $6.75 million to scale DAC [ESGtoday]

• Clarity Technology has raised $6.75 million in a seed round for scaling Direct Air Capture carbon removal. The company's solid sorbent technology uses honeycomb carbonate salts to bind CO2, which are then used in the production of concrete products.

EU offering €2.2 million to develop sustainable fishing vessel[EU]

• The EU has announced plans to invest €2.2 million ($2.39 million) in demonstration marine fishing vessels that use alternative propulsion technologies to reduce emissions. The call is open until June 2024, and selected projects will be chosen by the end of the third quarter of 2024.

Research and Knowledge Sharing

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Policy and RegulationUN to vote on creating solar engineering research group [politico] (Courtesy of Nature 4 Climate)

• Switzerland has submitted a draft EU resolution on creating a group of experts to examine solar geo-engineering in response to climate change. The proposal is supported by Guinea, Monaco and Senegal, and is expected to be voted on this week. It represents an important step in the consideration of previously radical approaches to fighting climate change, which would require extensive international cooperation.

Belgium recognizes ecocide as an international crime [Brussels Times] (Courtesy of Nature 4 Climate)

• Belgium has become the first EU country to recognize large scale and irreversible crimes against nature, or "ecocide', as a felony, with sentences as high as 20 years in prison and a fine of €1.6 million. The regulation is both on a national and international level, which gives the country jurisdiction to prosecute cases outside of the country. The EU mandated member states align their penal code with new EU directives on ecocide, but Belgium is the first country to do so.

EU moving forward with Carbon Removal Certification framework [Environmental Finance]

• The European Council and Parliament have agreed on a provisional carbon removal certification framework, which will be reviewed by the European Commission in the coming months. The framework will develop carbon removal certificate criteria for the following areas: *permanent carbon removal, *temporary carbon storage in long lasting projects, *temporary carbon storage from nature based solutions and *soil emission reduction from carbon farming. Avoided deforestation projects and renewable energy projects will not be eligible for certification

UK to quit energy charter treaty [Politico] (Courtesy of Nature 4 Climate)

• The UK has announced plans to leave the Energy Charter Treaty, a 1994 treaty that critics say allows fossil fuel companies to sue governments and stymie climate progress.

Climate Bonds Initiative releases report on harmonizing Brazilian and Chinese approaches to agricultural sector [Climate Bonds Initiative]

• The Climate Bonds Initiative’s new report "Comparison Study of Chinese and Brazilian Agriculture Criteria; Harmonizing Green Standards in the Agricultural Sector" proposes policies for aligning the two countries' green ag subsidy funding and criteria to accelerate a sustainable agriculture transition in both countries.

China proposes new corporate sustainability disclosure rules [Bloomberg]

• China has finalized new ESG disclosure rules for more than 400 large firms. The companies will be required to publish sustainability reports by 2026, and will help standardize sustainability reporting for large Chinese companies, with rules resembling those under the EU Corporate Sustainability Reporting Directive.

SEC removes scope 3 guidance from emissions disclosure regulation [Reuters] (Courtesy of Nature 4 Climate)

• The SEC has removed its scope 3 emission disclosure requirements from its proposed rules on emission disclosure requirements, seen as a potential blow to the Biden administration's green goals, though some critics argue that it would eliminate potential double counting.

Indonesian Green Investment Rulebook includes coal projects, draws criticism [Nasdaq]

• Indonesia's revised taxonomy for green investment includes coal power plants in a controversial choice. The new taxonomy gives captive coal power plant systems an amber rating for supporting a low carbon transition, if they are built before 2031 and are shut before 2050, and reduce emissions by 35% off their 2021 average within 10 years. The plan has drawn criticism from green groups for this inclusion, as well as its rules on nickel processing.

€406 billion climate investment gap major challenge for next EU administration [Euractiv]

• New research suggests that over €813 billion is required annually to meet the EU's 2030 climate goals and that only €407 billion was committed in 2022, leaving a  €406 billion gap, 2.6% of EU GDP. This represents a major issue for the next EU administration, whether led by Ursula von der Leyen or someone else. In order to reach its new 2040 climate policy recommendations, the EU is likely to need to spend €1.5 trillion annually from 2030-2050.

EU commission considering major green investment package [Euractiv]

• In response to this issue, the European Commission's director general of the climate action department, Kurt Vandenberghe, has floated a new investment plan to meet the EU's new goals in the next mandate, modeled for the 2015 Juncker plan that helped close the investment gap left by the financial crisis. With the EU expected to return to stricter fiscal rules in 2024 after suspending them during covid, any new plan would be likely to be highly targeted and compete with other spending priorities.

Finance Research and Updates

CSIS analysis examines issues with voluntary carbon markets [CSIS]

• A new CSIS analysis looks into recent issues with voluntary carbon markets as they emerge from a rocky 2023. The analysis finds that increased reputational risk from using hard to verify credits drove companies away from offsets in 2023, with major developments including ongoing investigations into voluntary credits by The Guardian and an August paper in Science arguing forestry programs significantly overestimated deforestation avoidance. The analysis suggests that emerging guidance on the VCM from the CFTC, as well as the continuing alignment of independent carbon standards, will be vital for restoring market confidence, especially if regulators take a stronger hand in markets to guarantee integrity.

Climate Action 100 seeks to calm regulatory concerns after exit of large firms [Reuters] (Courtesy of Nature 4 Climate)

• Climate action 100 has moved to reassure members that its efforts do not breach anti-trust and security law following the departure of State Street, JP Morgan and Pimco due to concerns and anti-ESG legislation.

Goa to receive world's first sub national climate fund [Timesofindia]

• A world bank delegation is in Goa negotiating talks with the state government to set up the world's first subnational climate resilience green fund. The World Bank will pool resources with NABARD, SIDBI and the Power finance Corporation among others to build a blended finance scheme supporting green initiatives in the state.

LSE launches Just Transition Finance Hub [Edie]

• The London School of Economics and Political Science has launched a new Just Transition Finance Hub that will study and support the inclusion of social considerations in the transition to net-zero. The Hub will push for major changes to the global financial system, including embedding just transition principles into all green bonds, among other initiatives.

ETS carbon price reaches lowest in 2 years [Bloomberg]

• The European carbon price fell below €55 a ton for the first time in 2 years from a combination of falling gas prices and demand drop off due to mild winter weather. The decline runs contrary to earlier expectations that the escalating clean energy goals of Europe would lead to higher prices, and reflects a broader economic slowdown across the bloc.

Worries emerge over south African energy transition rollout [Businesstech]

• Civil society organizations are worried about a lack of transparency in the deployment of South Africa's $11 billion Just Energy Transition initiative. While the partnership has already invested in 145 projects, information is limited on project progress, transparency, and the use of funds, with civil society groups pushing for improved public transparency for future distributions.

Rhodium group finds permitting issues and grid delays slowing energy transition, among other factors [Reuters]

A joint report by Princeton University, the Rhodium Group, and Energy Innovation has analyzed U.S progress in achieving 40% greenhouse gas reduction off of 2005 numbers by 2030, as outlined in the inflation reduction act. The study found that while investment is rising, large scale installation has been slowed by permitting and grid interconnection delay. Zero emissions electricity rose 32% in 2023 to 32.3 gigawatts, but fell behind the modeled addition of 46-79 gigawatts. To stay on track, the U.s must add 60-127 GW of capacity in 2024, and 70-126 a year after 2024.
Emerging Science

Conservation International study suggests rewilding to promote healthy grasslands [Conservation International] (Courtesy of Nature 4 Climate)

• A new study from conservation international builds on research suggesting that tree planting projects can negatively affect grassland ecosystems, and highlights the importance of restoring grassland ecosystems to fight climate change. The study suggests restoring large herbivore populations, either through rewilding or sustainable pasture, to promote healthier grasslands, sequester carbon, and protect ecosystem health.

Amazon megafires are new normal, according to Brazilian scientists [Mongabay] (Courtesy of Nature 4 Climate)

• Fires burning more than 100 square kilometers of rainforest are expected to become more common in the Brazilian Amazon, especially on the agricultural periphery, due to a drying forest, widespread degradation and climate change, according to a recent investigation conducted by Mongabay with the help of numerous local scientists. Preventing accidental and intentional burning is seen as the most important action that can be taken in preventing the trend from continuing and giving the forest time to recover, as well as conducting controlled burns in concert with indigenous practices and local communities.

University of Sheffield Study finds VOCs emitted from forests can offset carbon sequestration [Theconversation] (Courtesy of Nature 4 Climate)

• A new study finds that growing forests can emit volatile organic carbons that offset the forests carbon sequestration and contribute to global warming. While forests still sequester carbon as they grow, the study finds that VOC emissions from increased forest cover can cancel up to 30% of the climate benefit, when combined with changes in the albedo of the area, causing it to absorb as opposed to reflect light.

Study finds community-based conservation in the Andes protects more forests than state protected areas [Mongabay] (Courtesy of Nature 4 Climate)

• A study published in Mountain Research and Development has found that community-led conservation in the high altitude Andean Paramo is more than 5 times as effective as government protected conservation areas in preventing environmental degradation. The research adds to growing scholarship that finds local communities, especially indigenous groups, are highly effective at protecting natural ecosystems when incorporated into government decision making.

South Korean Scientists develop high protein "meaty" rice [phys.org]

• Scientists from South Korea have created a protein rich rice enriched with beef muscle and fat cells, which provides 8% more protein and 7 percent more fat than regular rice. The hybrid rice could potentially serve as a major alternative protein in grain growing regions.

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