February 26 to March 1
Your Newsletter at a Glance
Commentary by C4C
Dealflow Summary:
J.P Morgan leads a $5 billion funding round for Northvolt. Brazil, IDB and World Bank expand $3.4 billion green investment FX hedge plan. Canada raises $3 billion from world’s first nuclear inclusive green bond. The Biden Administration announces $3 billion in clean port grant funding. Raizen issues $1.5 billion in green bonds. Verdane raises $1.2 billion for a decarbonization investment fund. Meag raises $207 million for sustainable forest equity fund. Santos secures $150 million for a South Australia carbon capture project. Singapore invests $39 million in decarbonization research. Hellas direct raises $33 million to support climate insurance products, and more.
Policy and Regulation Highlights
- MIT technology review discusses IRA components most at risk in a 2nd Trump admin
- Brazil partnering with GFANZ to build climate and nature finance hub
Finance Highlights
- Nature Tech collective releases nature-fintech sector map
- Oil Major spending on climate mitigation fell 40% in 2023
- SBTI releases 2 new beyond value chain guidance papers
- S&P launches 2 new biodiversity benchmarks
- Publicly traded biodiversity funds passed $1 billion AUM in 2023 but underperformed benchmarks
Science Highlights
- LSE finds REDD+ projects in Sierra Leone effectively reduced deforestation, had net neutral local economic effects
- New book provides overview of global forest carbon landscape, reforestation potential
Analysis Spotlight
Capital Reset dives into Brazil and IDB’s expanded FX hedge plan [Capital Reset]
During the G20 summit, Brazil further defined and expanded its previously announced green investment FX hedge plan with further details and commitments from the world bank and IDB. The IDB and the World Bank will now lend $2 billion and $1 billion respectively to Brazil to support the government's de-risking of international investments in green projects, alongside funding from other partners. The funding will be earmarked into four credit lines:
- A 25 year blended finance line with a 5 year grace period which will supplement international market funds for green projects, and give preference to financial institutions capable of leveraging large volumes of international private investment.
- An emergency liquidity line to solve cash shortages from currency fluctuations.
- A line fostering development of long term currency hedging products.
- A line increasing the pipeline of green projects.
Ceron estimates that the credit scheme could enable $1 - 2 billion in annual disbursements of green finance in Brazil over the course of the initiative. An executive order formalizing the initiative is expected soon, and the Brazilian treasury will oversee program execution.
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Climate Finance ≥ $100M
Commitments and deals
Commitments
New Philippine central bank framework aims to unlock $168 billion in green investments [Bilyonaryo]
- The Philippine central bank has launched the country's first Sustainable Finance Taxonomy Guidelines (SFTG), with the goal of guiding $168 billion in green investment into the country over the next few decades. The SFTG classifies environmentally beneficial activity in the Philippines, and will expand to include biodiversity and circular economy measures in the future.
Saudi Arabia to invest $1.6 billion in green projects by 2030 [Arabnews]
- The Saudi deputy minister of the environment has announced that environmental projects in the Kingdom will receive $1.6 billion in investments through 2030.The future projects will be focused on restoring habitat, reducing degradation, and reducing carbon emissions.
- Boutique fund manager Redwheel and Turquoise, a decarbonization focused VC firm, have announced a partnership on a UK climate tech venture fund. The partners are targeting a £100m ($127 million) initial raise, and will invest in 10-15 climate tech companies in the UK.
- CM Venture capital, a Shanghai based VC firm, plans to launch an evergreen private markets Carbon Mitigation fund which will seek $100 million by Q2 2024. The vehicle will be focused on corporate investors, and invest in startups across hydrogen energy, new materials, sustainability and advanced manufacturing.
BB Asset and JGP launch environmental and social impact fund [Fundssociety]
- Banco do Brasil’s fund management arm BB Asset has formed the BB Espelho Renda Fixa JGP Equilibrio IS Credito Privado fund with JGP. The vehicle will focus on bonds aimed at climate and environmental projects. The portfolio will be made of corporate and financial debt securities with low credit risk, and bonds issued abroad.
Deals
Northvolt receives $5 billion in funding facilitated by J.P Morgan and others [JPMorgan]
- J.P Morgan has led a $5 billion debt deal for Northvolt, a battery maker and supplier for major European auto firms. The Loan will support battery production plants in Sweden, Germany, the U.S and Canada.
Canada sells first Nuclear Green Bond for $3 billion [Bloomberglaw]
- Canada raised $3 billion of its first nuclear inclusive green bond, the first sovereign state to issue such a bond. The bonds have a 3.5% coupon and yield half a basis point less than debt due in 2033.
Verdane raises €1.1 billion for decarbonization program [New Private <arkets]
- Norwegian private equity company Verdane has closed its Edda III fund for €1.1 billion ($1.2 billion) which invests in digitalization and decarbonization across all funds. The fund was oversubscribed and brought the company's total raised over the past 6 months to €2.2 billion.
Engie Completes $1 billion in Tax Equity -financing to support 1.3 GW of renewable assets [Engie]
- Engie has completed a $1 billion tax equity raise to support a portfolio of 6 projects across ERCOT, MISO and SPP, including 950 MW of solar and 353 MW of wind capacity.
Biden Admin announces $366 million for rural renewable energy [NBC]
- The U.S Federal Government has announced $366 million in funding for 17 projects across the country to expand access to renewable energy for Native American reservations and other rural areas. The plan will fund solar, battery storage and hydropower projects and is funded by the bi-partisan infrastructure law.
Fervo energy raises $244 Million to support geothermal development [Finsmes]
- Texas geothermal development company Fervo Energy has raised $244M in funding to scale its geothermal energy project, including a 400 MW project in Utah, which is expected to be operational in 2026.
- Santos has secured AUD$228 million ($150 Million) to complete its fund for the Moomba carbon capture and storage project. The project will have capacity to store up to 1.7 million tonnes of CO2 a year, and is targeting lifecycle breakeven storage costs of $24 a ton.
Brazil Launches $200 million fund to support clean energy scaling [BNN breaking]
- Brazil has announced a $200 million mineral fund to support production of critical clean energy manufacturing minerals. Announced recently, this initiative is set to channel investments into 15 to 20 burgeoning companies dedicated to the exploration and development of essential minerals for clean energy advancement. This strategic effort aims to invigorate the mining industry, ramp up the production of clean energy minerals, and catalyze economic growth by attracting more investments into the sector.
Blackrock invests $200 million in German solar [Environmental Finance]
- Blackrock has invested $200 million in Envira, a German solar installer, maintenance and asset management firm, through its Global Renewable Power IV Fund. Funding will support solar plant expansion across 2000 commercial and industrial projects, totaling 2.3GW of power.
Impact engine closes $85 million social and environmental impact fund [Environmental Finance]
- Impact Engine closes its second private equity fund at $85 million, with backing from Martis Capital, the Vistria group, Lumos Capital Group, Blume Equity, Ara Partners, and Next Billion Capital Partners. The Fund of Funds will support impact investment fund managers that generate environmental and social impact.
Hellas direct raises €30 million ($33 million) in round led by ETF [Environmental Finance]
- Climate risk technology insurance provider Hellas direct has raised €30 million in a Series B funding round to diversify its insurance offerings for climate mitigation focused projects. The major investors include Portage Ventures, the IFC, European Bank for Reconstruction and Development and the European Investment Bank.
Hohm energy raises $8 million to support South African grid through solar power [ImpactAlpha]
- Hohm energy, a South African Startup, has raised $8 million to support its platform for connecting electricity customers to solar project suppliers and credit options. The round was led by E3 Capital and 4DX Ventures.
Nature-based Solutions ≥ $1M
Commitments and deals
Commitments
TNC and Anglian Water target GBP£30 million ($38 million) nature-based solution fund [Carbon Pulse]
- The nature conservancy and Anglian water have announced a Norfolk Water Fund with the goal of raising $38 million to support nature based solutions for protecting the region's water resources. The fund managers hope to deliver pilots over the next 18 months with a cost of £1.2 million.
Deals
Raizen issues $1.5 billion in green bonds [Bloomberg]
- Brazilian Ethanol producer Raizen has raised a $1 billion 10 year green bond, as well as a $500 million, 30 year security at 265 basis points above treasuries, with plans to frequently release additional green bonds moving forward. The proceeds from the sale will be used to build new residual sugarcane ethanol plants, as well as improve current crop yields.
MEAG raises $200 million for sustainable forestry fund [ESG Today]
- MEAG has raised $207 million to complete its first MEAG Sustainable Forest Equity Fund. The fund will begin investments in the first half of 2024 in EU taxonomy aligned, ecologically sustainable forest management.
National Parks to receive $195 Million in Inflation Reduction Act Funding [NPS]
- The U.S Interior Department has announced $195 million to support natural parks climate resilience and carbon sequestration. The funding will include initiatives to improve forest climate resilience, mitigate climate impact on tribal nations, restore sagebrush ecosystems and manage grasslands for fire and ecosystem health.
Paul Allen Foundation launches $5 million Climate Initiative focused on NBS [BNN breaking]
- The Paul G Allen foundation has launched a $5 million initiative focused on nature-based projects, including forest protection, kelp restoration, and urban forestry.
Hard to Abate Sectors ≥ $1M
Commitments and deals
Deals
Biden Admin announces $3 billion in grants for clean ports [EPA]
- The U.S EPA has launched $3 billion in clean ports grants through the Inflation Reduction Act, which will be viable to reduce carbon emissions and air pollution in and around ports. The grants will directly fund zero-emission port equipment and include a variety of port vehicles, and physical plants. The grants will also fund air quality planning for U.S ports.
- Singapore has committed to invest $38.67 million to decarbonize its electricity grid, including clean hydrogen production and power plant capture and cross border storage in partnership with regional partners.
Research and Knowledge Sharing
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Policy and Regulations
What parts of the IRA are at most risk from a Trump administration [MIT Technology Review]
- With the 2024 election looming and a Donald Trump return a possibility, the MIT technology review has examined the parts of the IRA most likely to be repealed if Trump comes back into office, especially if republicans gain the senate and keep the house. They identify tax credits for EV's and clean power as the most likely to be repealed, but that a wholesale repeal is unlikely given the constituencies that have developed for the package in red states.
UNDP establishes green development facility with Lebanon [UNDP]
- The UNDP, Cedar Oxygen SAS and Lebanese Ministry of the Environment have established a new Lebanon Green Investment Facility aimed at accelerating mitigation and adaptation efforts across Lebanon. The Fund is part of the UNDP Climate Promise 2.0 project and will provide funding and technical assistance for green projects throughout Lebanon.
- The Chinese Forestry Bureau has begun pilot projects across the country on new forest tenure approaches to help combat climate change and promote ecosystem integrity.These include forestry carbon ticket systems to provide farmers benefits for effective management, and simplified forest rights registration in pilot rural areas.
Germany releases draft Carbon Management Strategy with emphasis on CCS [Argus Media]
- Germany's climate ministry proposed a draft for new legal changes to the country's carbon management strategy. The new regulation will allow CCS for gas-fired plants, but will not financially support them. CCS for coal-fired plants will not be allowed. The law will also provide a framework for CO2 Pipeline infrastructure and ratify the London Protocol on the export of CO2.
Brazil to partner with GFANZ on climate finance hub [Reuters] [Gfanz]
- Brazil's BNDES and the Glasgow Financial Alliance for Net Zero will partner on a climate finance hub to help support the country's green transition. The partnership will develop an Ecological Transformation Plan to lay out the countries financing of its GHG and biodiversity goals, and build the first GRANZ country chapter in Latin America
Finance Research and Updates
LSE analysis of REDD+ Projects in Sierra Leone points to potential improvements of system [LSE]
- A LSE analysis of the Sierra Leone Gola Rainforest Buffer Zone REDD+ project found that the project effectively reduced deforestation 30% across the 126 communities receiving project interventions, but had no net economic benefit for the communities, though still resulting in changes in local labor markets.
Nature Tech Collective releases nature fintech sector roadmap [Naturetech]
- The Nature Tech Collective has released its first nature fintech sector map of more than 300 nature fintech companies around the world, providing sector and geographical based mapping of active companies.
SBTI releases beyond value chain guidance[SBTI]
- SBTI has released 2 new recommendation papers for companies on engaging in Beyond Value Chain Mitigation to reduce their impact on the climate. The first, Above and Beyond Value Chain Mitigation sets out standards of best practice for companies aiming for beyond value chain mitigation of emissions. The second, Raising the Bar focuses on how large corporate players can accelerate BVCM adoption.
Biodiversity funds top $1 billion AUM for first time [Environmental Finance]
- Asset funds with biodiversity in their title reached $1.4 billion in 2023, up from $984 million in 2022. The funds were mostly domiciled in Europe, with the largest fund being managed by French asset manager AXA investment managers. 14 of 19 funds were below $100 million in assets.
Biodiversity Funds Underperformed Benchmark in 2023 [Environmental Finance]
- 13 out of 15 publicly traded biodiversity funds saw positive returns in 2023, an improvement on 2022, when a majority delivered a negative return of 10% or worse. However, every actively managed fund that used a benchmark underperformed their benchmark
Sustainable funds outperformed peers, reached $3.4 trillion in AUM in 2023 [Morgan Stanley]
- Morgan Stanley finds that sustainable funds outperformed traditional counterparts across all major asset classes and regions in 2023, generating median returns of 12.6%, nearly 50% ahead of traditional funds average returns. Assets under management also grew 15% off 2022 levels, reaching $3.4 trillion, and accounting for 7.2% of global AUM.
Oil major spending on climate dropped 40% in 202 [Energy Intel]
- Oil and gas companies spent $63 billion on low carbon projects and technology, a 40% drop from the previous year. The decline came as demand for fossil fuels rose due to the war in Ukraine and other factors, but also may reflect decreased emphasis on net-zero plans by oil majors.
S&P launches 2 biodiversity benchmarks [Environmental Finance]
- S&P has launched 2 biodiversity benchmarks tracking a subset of S&P 500 and S&P Global indices. The index constituents have been chosen to help the indices track a collective reduction of ecosystem impact intensity, a limiting of the proportion of the ecosystem impact and, alignment with UN SDGS and a reduction in carbon footprint, in order to align targets with the Global Biodiversity Framework.
- An Environmental Working Group report finds that $1.9 billion of the $3 billion earmarked to support climate smart agriculture through the inflation reduction act in 2023 have been spent on practices that are unlikely to have any climate impact. The report, which was disputed by the USDA, suggests the funding has gone to non climate related items like irrigation and livestock fencing.
Oxford updates carbon offset guidance, suggesting current system not working [IPE]
- Oxford has updated its Oxford Offsetting Principles to better reflect the current environment arguing that the majority of current offsetting approaches are not helping to advance net-zero emissions. Among other updates, it calls for mitigation efforts beyond net-zero targets and for any credits to be based on removed emissions as opposed to avoided ones.
Shell "cleantech" company accused of greenwashing [The Guardian]
- Onward, a Shell-owned company marketed as a cleantech venture, has been accused of focusing mostly on oil and gas projects, with the majority of their publicly listed projects and jobs being focused on fossil fuel exploration or technology improvements.
European Green bond issuance rose %9.7 while ESG bonds fell 13.2% overall in 2023 [P&Ionline]
- European ESG bonds dipped overall in 2023, with total proceeds falling to $650.7 billion in 2023. However, Green bonds grew by 9.7%, though they contracted slightly in the last 3 quarters. This contrasted with a fall of 29%, 20%, and 30% respectively for social, sustainable and sustainability-linked bond issuances.
Emerging Science
New Nature Paper examines effectiveness of Debt-for-nature swaps [Nature]
- A new paper from Humanities and Social Sciences Communications examines implementing marine protected areas in Belize, Seychelles, Barbados and Ecuador. The study found that DFNS could be very helpful in alleviating the debt burden -of countries, and were most effective when integrated into existing nature protection strategies.
New book on Global Forest Carbon discusses trade off between timber and reforestation [Earth]
- Runsheng Yin's new book Global Forest Carbon: Policy, Economics and Finance covers the current state of global forest carbon stocks, and suggests that more rigorous assessments are needed to support carbon sequestration claims. The book also discusses the potential limiting factors on forest carbon sequestration and the loss of carbon from wood harvesting.
New Study examines technique for determining priority restoration areas [Phys]
- A study in the Journal of Cleaner Production conducted by researchers at the Chinese Academy of Sciences examines methods for improving the country's approach to integrated ecological security patterns (ESP).
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