February 12 - 16, 2024

Your Newsletter at a Glance

Commentary by C4C

Dealflow Summary:

• UAE’s Alterra fund sets a $250 billion target for transition investments by 2030. Japan sells $5.3 billion in sovereign climate transition bonds. Singapore plans a $3.7 billion energy transition fund. GEF and FAO approve $2.9 billion in sustainable agriculture projects. Romania raises $2.15 billion in green bonds. GEF approves $203 million for climate adaptation funding. Woven Earth closes $152 million climate tech fund of funds. Voyager ventures closes inaugural $100 million fund. SDG impact and Sustainacraft launch NBS carbon credit fund with $88 million goal. US fish and wildlife service invests $70 million in water basin restoration and adaptation projects in Oregon. Velocys raises $40 million for sustainable aviation fuel. USDA partners with native American governments on $20 million in restoration projects, and more.

Policy & Regulatory Highlights

• Eu commission approves draft Net Zero Industrial Subsidies legislation
• UK Biodiversity net gain legislation comes into effect

Climate & NbS Finance Updates

• Hard to abate emissions technologies need massive scaling to meet Paris targets, according to World Fund analysis
• Commonwealth sovereign wealth funds meet to discuss Paris target compliance, mobilizing private finance
• Just Carbon launches NbS investment mechanism and accelerator programs
• JP Morgan and State Street leave Climate Action 100+ amid ESG backlash

New and Emerging Science

• 44% of listed migratory species facing declines, 22% endangered, according to new UN analysis
• Amazon tipping points may be closer than expected, more widespread according to new analysis in Nature

Analysis Spotlight:

Nature For Climate (N4C) releases its survey of financial institution sentiment regarding nature based solutions with important findings on the state of the space. [Nature for Climate] [Environmental Finance]

Nature for Climate, a frequent collaborator of Capital for Climate and leading coalition organizing action on nature based solutions policy, scientific research and investment, has announced the result of their recent survey of 121 financial institutions’ attitudes towards nature based solutions investments. Some of the key trends that emerged:

• 80% of respondents feel that their firms have a moral duty to help protect climate and nature
• 36% of respondents feel that NbS investments offer good returns, and 40% feel they offer first mover advantages
• Half of respondents categorize NbS as its own asset, a third believe it will become an official class in 2024
• 3/4ths of respondents felt nature tech was important for their investments
• Half of respondents have set a biodiversity or nature related policy for their investments
• N4C Director Lucy Almond notes that “In 2022, investments in nature-based solutions totaled approximately $200 billion, but finance flows to activities directly harming nature – such as deforestation – were more than 30 times larger…These important results show that while there is an immense interest in scaling finance to support nature, better data and more comparable metrics, more options for blending with public or philanthropic capital and an improved market infrastructure are needed to help the market grow.

C4C News and Events

Learn more about what we're doing

We are making some changes to the newsletter! Check out our research and knowledge sharing section for new policy and science developments previewed from Nature for Climate’s Wednesday newsletter. We’ve also added a new section tracking deal flow in hard to abate sectors to keep investors informed on movement in this vital space.

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Climate Finance ≥ $100M

Commitments and deals

Commitments

Commitments

Alterra increases investment ambitions to $250 billion by 2030[Prnewswire]

• The UAE's Alterra investment fund has announced it will aim to mobilize $250 billion in climate investments by 2030. The UAE has already invested $30 billion in seed funding for the fund, which launched at COP28. The fund is currently split between two arms, with Alterra acceleration managing $25 billion, which will primarily be invested in scaling net zero and climate resilience investments. The second arm, Alterra Transformation, has $5 billion currently earmarked for investment in incentivizing investment in the global south.

NY Pension fund restricts investment in fossil fuels and sets $40 billion investment target by 2035 [OSC.ny]

• The NY state common retirement fund has doubled its commitment for climate solutions investments from $20 billion to $40 billion by 2035. The fund has also restricted its investments in eight oil and gas companies, including Exxon Mobil. The decisions are part of an overall strategy aiming to limit the funds exposure to climate risk.

Germany to earmark $4.31 billion for green energy subsidies [Reuters]

• Germany will devote € 4 billion ($4.31 billion) in subsidies for supporting decarbonization in energy-intensive firms. The first tender will take place in spring 2024.

Singapore plans $3.7 billion clean energy transition fund [Bloomberg]

• Singapore has announced a "Future Energy Fund" with a target of S$5 billion ($3.7 billion) devoted to clean energy technology and infrastructure as part of a net zero emissions 20250 goal. Singapore's current electricity mix is 95% natural gas, and the investment aims to help build a grid that can import low carbon electricity.

Clean Industry Fund Launches fund with $200 Million target [NPM]

• Clean Industry Ventures, a Los Angeles and Austin based impact fund, has launched an impact fund focusing on backing energy transition, industrial transformation, and climate technology companies. The fund has a target of $200 million.

Deals

Japan Sells $5.3 billion in First Sovereign Climate Transition Bonds [ESGtoday] [Climate Bonds Initiative]

• Japan issued its first tranche of ¥800 billion ($5.3 billion) in sovereign climate transition bonds, out of a planned $11 billion total issuance for 2024. The issuance has earmarked 55% of its use of proceeds to R&D for industrial decarbonization and other hard to abate processes, with 44.5% earmarked to support decarbonization across industries such as vehicles, transport and batteries through subsidies.

Romania raises 2 billion euros from 1st green bond [Reuters]

• Romania released its first green bond with a raise of €2 billion ($2.15 billion) Due in 2036. The raised funds will primarily be devoted to green transport links, energy efficiency, and reforestation.

Woven Earth closes $152M climate tech fund of funds [PRnewswire]

• Woven Earth has hit its hard cap of $152 million for its first climate tech fund. The fund focuses on US early stage climate tech, and is partnered with the Boston University, Northwestern University, Pennsylvania State university endowments for the inaugural fund. The fund aims to provide exposure to 300 underlying portfolio companies in climate tech.

Voyager Ventures closes inaugural fund at $100 million [New Private Markets]

• Voyager Ventures has completed its Select I fund with a raise of $100 million. The Fund will be deployed primarily in Series A investments, targeting software, hardware and biotech companies. The fund has already invested in CarbonChain, Intensivate and Remora, and we'll make more investments throughout 2024.

Google Nest Renew Subsidiary invests $100 million in Ohm Connect virtual power plants [Forbes]

• Google will spin out its Nest Renew and Sidewalk Infrastructure Partners into a new company combined with OhmConnect. The Company will be called Renew Home, and will receive a $100 million initial investment.

DOE to invest $100M in advance carbon removal [Carbon Herald]

• The U.S Department of Energy is continuing to expand its investment in carbon dioxide removal technologies, with a $100 million commitment to invest in the early stages of advanced carbon removal technologies. The 3 current program priority areas are small biomass carbon removal and storage, rock based mineralization pilots, and testbed facilities for studying new carbon removal solutions.

Nature-based Solutions ≥ $1M

Commitments and deals

Commitments

Global Biodiversity Fund Enters into Operation with $1.1 billion in funding[Environmental Finance]

• The Global Environmental Fund's Global Biodiversity fund has officially come online. $1.1 billion in assets have been invested in the fund, with more than $900 million already dispersed, as detailed in last week's Newsletter.

SDG impact and sustaincraft launch Nature Commitment NBS credits fund with goal of $88 million [Carbon Herald]

• SDG impact Japan and Sustainicraft have launched a partnership initiative under the Nature Commitment fund, managed by SDG Impact Japan subsidiary SIJ Climate LIC. The project aims to raise $88 million to reduce 9 million metric tons of CO2, exclusively through NbS projects.

Deals

Global Environment Facility approves $2.9 billion in FAO led projects [Reliefweb]

• The Global Environmental Facility and the FAO have jointly approved a $2.9 billion investment across 48 FAO-led sustainable agriculture projects, representing $294 million in project financing and $2.6 billion in co financing, with goals of restoring 474,000 hectares of land, supporting 4.2 million people across 5 global regions, and improving practices across 24 million hectares of land and marine space. The projects are estimated to eventually mitigate 133 million metric tons of greenhouse gas emission and remove 202 metric tons of hazardous agrochemicals, and is the largest work program investment by the FAO to date.

GEF approves $203 million for climate change adaptation [GEF]

• The Global Environmental Facility has provided $203 million in climate adaptation investments through the Least Developed Country fund and Small Island Developing States Fund, complimenting a recent $918 billion approval through the recently inaugurated Global Biodiversity Framework Fund, as we detailed last week. The Funding will be split across 21 projects focused on building resilience to climate shocks across food systems, water resources, and other essential infrastructure, with a focus on building better climate information and early warning systems.

US Fish and Wildlife service approves $70M in locally coordinated adaptation and restoration projects in the Klamath Basin [US Fish and Wildlife Service]

• The U.S Fish and Wildlife service will invest $64 million in Bipartisan Infrastructure Law funding and $6 million from other infrastructure investment in restoring the Klamath Basin watershed to improve climate resilience and ecological integrity. The project will be coordinated with several local tribes including the Klamath, Yurok and Karuk tribes, as well as the local water users association.

USDA invests $20M in indigenous Carbon Market access [USDA]

• The US forest service will invest $20 million of Inflation Reduction Act funding in competitive grants to federally recognized Tribes and Alaska Native corporations across the country. The funding will support the expansion of tribal forest management practices on tribal lands along self determination principles and in compliance with the justice 40 initiative.

Hard to Abate Sectors ≥ $1M

Follow the latest deals and commitments in steel, construction, aviation fuel, and other hard to abate sectors.

Deals

Sustainable aviation fuel company Velocys Raises $40 million [ESGtoday]

• Velocys, a sustainable aviation startup, has announced a raise of $40 million after delisting from the London Stock Exchange. The company supports the production of negative carbon intensity drop in fuels ranging from waste bio-materials to woody biomass, CO2 and green hydrogen.

GEA announces $20 million investment in alternative protein [Vegconomist]

• GEA will invest $20 million €18 million in an alternative protein focused technology center in wisconsin. The facility will specialize in microbial, cell based and plant based food tech and will begin construction in spring of 2024.

Rimere raises 10 million to convert methane into sustainable materials [ESGtoday]

• Rimera has announced $10 million in strategic investment from Clean Energy Fuels, a natural gas provider, with the proceeds going to improving Rimere's methane and natural gas conversion technology. The company's technology aims to be a long term decarbonization solution for natural gas.

Research and Knowledge Sharing

Grow your climate finance expertise

For more on the latest science and policy in Nature based Solutions, subscribe to our partners at Nature for Climate (N4C)

Finance Research and Updates

Global Carbon Markets Value hit $949 billion in 2023 [Economictimes]

• The total value of traded carbon credits has reached $948.75 billion in 2023, a 2% increase on previous years, according to LSEG. This accounted for 12.5 billion metric tons of traded carbon permits across regulated and voluntary markets, and was buoyed by high European ETS prices in the middle of 2023.

Hard to abate emissions not receiving required investments [Wired]

• VC World Fund estimates that capital investment in hard to abate emissions reduction will have to accelerate by 590% to over 1 trillion a year in order to effectively reach net zero emissions in line with Paris agreement guidelines. Developing underlying and scalable technology is seen as the most vital task, as they estimate 46% of all emissions will be reduced by technology not yet developed or deployable.

JP Morgan and State Street quit climate action 100+ [FT] [Nasdaq]

• JP Morgan and State Street have left the Climate Action 100 + asset managers coordinating group. The reasons for the withdrawal are unclear, but come amid increasing action by Republican controlled states and conservative groups against ESG and climate conscious investment. Blackrock had previously dropped its membership due to concerns over the group's phase 2 strategy. Both State Street and JPmorgan have noted that they have scaled up their teams responsible for climate and ESG investment, despite leaving the CA 100+ grouping.

21 sovereign wealth funds meet to discuss Paris agreement compliance [The Commonwealth]

• The leaders of 21 sovereign wealth funds within the commonwealth of nations met in London to discuss coordination on meeting paris agreement goals. The delegates collectively manage over a trillion dollars in assets, and focused on the role of sovereign wealth funds in mobilizing additional capital.

CMI releases international carbon market update for 2024 [Carbon Market Institute]

• The Carbon Market Institute has released its update on global voluntary and regulatory carbon markets for 2024. In particular, it provides a brief and instructive overview of the recent issues with article 6 market mechanisms, with an agreement being reached for neither article 6.2 or 6.4 credits, due to issues in harmonizing regulatory approaches and problems developing centralized UN methodologies and establishing baselines, among other causes. Nevertheless, it notes that the Article 6.4 supervisory body is expected to continue pre-registering 6.4 projects ahead of an agreement.

PFZW divests 98% of oil and gas holdings [ESGtoday]

• The Netherlands PFZW pension fund has announced divestment from 300 fossil fuel companies that it deemed to have unconvincing decarbonization plans, including Shell, BP, and TotalEnergies. PFZW has set a goal of moving to a totally climate neutral portfolio by 2050, with 15% of assets in climate solutions by 2030.

Just Carbon plans nature-based carbon removal funding mechanism & accelerator [Environmental Finance] [AZO Cleantech]

• JustCarbon, a carbon credits trading platform, has announced plans to build a mechanism for investment in nature based carbon solutions, which will likely take the form of a bond or ETF. Carbon standard groups including Gold Standard and Verra are being consulted to choose eligible projects.

Maersk receives first verified maritime SBTI guidance [Hellenic shipping news]

• Maersk has become the first shipping company to have a SBTI approved decarbonization plan. Maersk has set a goal of net-zero carbon emissions by 2040, with specific absolute decarbonization targets across all scopes.

Heatpumps outsold gas furnaces in 2023 by 21%[Canary Media]

• More than 3.6 million heat pumps were sold in 2023, exceeding gas furnace sales for the 2nd year in a row, 21% more than the almost 3 million gas furnaces sold. Sales for both systems fell that year though heat pump sales were still at their 3rd highest level ever.

MSCI releases projection for Global Biochar Market, projecting 20-fold growth over next 10 years, but with short term price compression [MSCI] (courtesy of N4C)

• MSCI has analyzed the current global biochar market and found a sharp uspswing in interest throughout the 2020s for far, with biochar credits jumping from 34,000 tons in 2022 to 65,000 in 2023, with two thirds coming from the U.S so fat, but Brazil beginning to take a larger share. Biochar projects also received very high prices per ton, averaging between $100-200 a ton due to higher permanence. The study estimates a potential 20 fold growth over the next 10 years.

Policy and Regulatory Changes

EU releases provisional Net-Zero Industry Act, aiming to support green manufacturing industries throughout the bloc[utilitydive]

• The European Commission has announced it has reached an agreement on a final proposal for its Net Zero Industry Act, which aims to subsidize green energy manufacturing supply chains and sets a goal of the EU manufacturing at least 40% of the blocs net-zero technologies by 2030. The package is inspired by the US's major industrial policy acts of 2021-22, and aims to help offset some of the protectionist measures passed in the Inflation Reduction Act and Bi-partisan Infrastructure Law.

UK Biodiversity net gain legislation come into force [environmental finance] [Phys]

• The UK has passed and begun to implement legislation that will require property developers to show a 10% net gain on biodiversity and habitability, which can be either shown or achieved by purchasing biodiversity net grain credits. The developer can achieve this by either enhancing existing habitat on site or protecting and restoring it elsewhere. The legislation is the largest so far to mandate a biodiversity credit market, alongside a recent, less stringent regulation in Australia. While a major development, the legislation has been criticized for not having accurate enough measurements for net gain, and for launching a market that may not have adequate expertise and support yet.

UAE, Azerbaijan and Brazil announce "climate troika" to coordinate COP 28, 29 and 30 Implementation[AFP]

• COP 28, 29 and 30 hosts UAE, Azerbaijan and Brazil have announced they will closely collaborate on implementing the resolutions agreed at COP28 across the next 3 conferences. This marks the closest level of collaboration between 3 COP hosts, and is viewed as crucial in mobilizing the $2.4 trillion a year that is required to be spent in developing nations to combat climate change.

Indonesia and Malaysia Challenge the EU deforestation regulation [bnnbreaking]

• Indonesia and Malaysia have put up a major challenge to the EU deforestation regulation, alleging the EUDR is a front for preferential treatment of European commodities. Indonesia has requested a delay in the implementation of the EUDR in order to negotiate between the 2 major palm oil producers and the bloc.

EU lawmakers vote to move forward on green claims directive regulation [Euractiv] (courtesy of N4C)

• EU lawmakers have taken the next procedural steps for a new green claims directive, which is expected to ban carbon neutral claims based exclusively on carbon offsets, and impose heavy fines for greenwashing. A final agreement is expected to be reached after upcoming EU parliament elections in June.

IEA debates expanding green pivot [Reuters]

• The international energy agency has continued its Biden Era pivot towards prioritizing green energy investment, and a meeting in Paris this past week underscored the shifting priorities of the organization. Participants debated if the organization should continue emphasizing green energy investment, as well as gamed out potential effects of a return to Trump administration policy in the U.S on energy.

Nature Conservancy launches insurance scheme for Hawaiian coral reefs [Politico] (courtesy of N4C)

• The nature conservancy has launched a new insurance scheme for Hawaii's coral reefs, with an agreed upon payout to help repair them in the event of extreme weather events and heatwave damage. The system represents an emerging model that is being trialed in other island and coastal ecosystems.

Emerging Science

New Study in nature finds Amazon tipping points could accelerate quicker than expected, with some shifts in rainfall already occurring [nature] [guardian] (courtesy of N4C)

• A sobering new study in nature finds that as much as 47% of the Amazon could be severely affected by climate and deforestation related system changes, including more frequent droughts and conversion to Savannah, by 2050. The study emphasizes the importance of conserving and restoring the forest before problems become more severe.

UN migratory species report finds 22% of all covered species threatened with extinction, 97% of fish.

• The UN migratory species report has stark warnings about the populations of the species listed under the Convention on the Conservation of Migratory Species of Wild Animals. Over 44% of listed species were shown as declining, with 22% threatened by extinction, including 97% of listed fish species.

Study finds reforestation efforts can harm grasslands if planned improperly[miragenews]

• A study from the University of Liverpool finds that reforestation projects in Africa can often harm native grassland ecosystems when not properly planned and implemented. The study found that reforestation projects that did not take the original ecosystem type into account could have major environmental and social consequences, and not meaningfully contribute to reducing carbon emissions.

Study by Wageningen University scientists examines usage changes on deforested African land[phys] (courtesy of N4C)

• A study in scientific reports, organized by Wageningen university and GFZ in Potsdam, uses satellite data to examine the frequency of different land use types and agricultural practices across deforested land in Africa. The study produced a comprehensive map of different land use classes on deforested land based on satellite data.

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