Climate Investment Newsletter 1/30 - 2/5

Highlight of the Week

McKinsey provides a blueprint for scaling voluntary carbon markets to meet the climate challenge [McKinsey]

• McKinsey, in this bullish report, forecasts 15X growth in voluntary carbon markets with the global trade potentially growing to $50 billion by 2030. The trading of carbon credits can help companies—and the world—meet ambitious goals for reducing greenhouse-gas emissions. The sustainability team at McKinsey outlines their view on what it will take to strengthen the market.

Bill in US aims to create National Green Bank with $100B available to business sectors key to climate transition [Green Tech Media]

• On February 3rd, congressional Democrats reintroduced the Clean Energy and Sustainability Accelerator Act. The bill would direct $100 billion to the Clean Energy and Sustainability Accelerator, a nonprofit tasked with making loans and investments into sectors of the economy that need to grow rapidly to meet the Biden-Harris administration’s aggressive decarbonization goals.

Individual Deals and Market Watch

Public Markets - Asia - Morningstar reports record fourth-quarter sustainable fund flows for Asia [Pensions & Investments]

• Morningstar Asia reported a record $5 billion in inflows to sustainable funds in Asia for the fourth quarter 2020, boosting ESG asset totals to $25.4 billion by year-end, up 131% over the past 12 months.

Moody’s forecasts sustainable bond issuance to hit $650 billion in 2021, a 32% increase from 2020 [Climate Action]

• Moody’s forecasts $121 billion of sustainability bonds, $375 billion of green bonds and $150 billion of social bonds in 2021.
• Global issuance of sustainable bonds will hit a record of $650 billion in 2021. Formed of sustainability, green and social bonds, a 32% increase will be seen from the $491 billion issued in 2020. These sustainable bonds could account for 8-10% of global bond issuance in 2021, after accounting for 5.5% of total issuance in 2020.

Coatue and T. Rowe Price funds anchor $590M investment in Sila Nanotechnologies [SILA Nanotechnologies]

• Sila Nanotechnologies (“Sila Nano”), a next-generation battery materials company, announced that it raised $590 million Series F at a $3.3 billion post-money valuation.
• Sila’s first product is a silicon-based anode that demonstrates 20 percent improvement over state of the art traditional lithium-ion today, with the potential to reach 50 percent improvement over time.

BlackRock Invests $1.2 Billion in First Asset-Backed Notes for Solar Energy [Institutional Investor]

• BlackRock is putting $1.22 billion from its global money market funds, including its environmentally-aware lineup, into a first-of-its-kind asset-backed deal to fund solar energy projects. Credit Suisse developed the green asset-backed commercial paper specifically for solar energy deals in the U.S.

Intersect power raises $600 million to expand utility-scale solar in the U.S. [Impact Alpha]

• The company raised a mix of debt and equity to support its 3.2-gigawatt pipeline of new solar generating capacity. Bill Green’s new Climate Adaptive Infrastructure and Trilantic North America invested $127 million in equity in the company, while Generate Capital and CarVal Investors provided $482 million in debt.

NextEnergy Renewables Aims to Raise $412 Million in London IPO [Bloomberg Green]

• NextEnergy Renewables Ltd. plans to raise 300 million pounds ($412 million) in an initial public offering in London, capitalizing on growing demand for sustainable investments. (Over 20 green funds worth more than $10bn are currently listed on the LSE)

Hong Kong Special Administrative Region issues $2.5Bn in Green Bonds of Mixed Tenors [Hong Kong Monetary Authority]

• The Government of the Hong Kong Special Administrative Region of the People’s Republic of China (the “HKSAR Government”) announced the successful offering of US$2.5 billion of green bonds (the “Green Bonds”) under the Government Green Bond Programme.

First Abu Dhabi Bank is first in Middle East with 'green bond' in Swiss francs [Gulf News]

• First Abu Dhabi Bank (FAB) has priced the first 'green bond' deal from a MENA issuer in Swiss francs. The 260 million six-year bond was priced at 0.068 per cent, which is inside FAB’s outstanding Swiss francs curve and on a dollar basis swaps to a level inside its current greenback curve too.
• This is the bank's fifth green bond issuance after having issued in dollars and Hong Kong dollars before and now in Swiss francs. This issuance also reiterates FAB’s commitment to sustainable finance, "having now issued more green bonds than any other financial issuer from the MENA," the bank said in a statement.

Great interest in Scania’s first Green Bond [Web Wire]

• Scania has now issued its first green bond. About 30 Nordic banks, insurance companies and pension fund managers participated. The bidding resulted in Scania raising loans totalling SEK 1.25 billion with a 4-year maturity for investments that the company is making to convert to production of electric vehicles.

SilviaTerra Launches Natural Capital Exchange, Empowering Companies to Buy High Quality Carbon Offsets from Every American Landowner [business wire]

• SilviaTerra, a venture-backed climate tech company, today announced the launch of the Natural Capital Exchange (NCAPX), a data-driven forest carbon marketplace. NCAPX is designed to help companies achieve their carbon offset goals through transparency and scale while providing the opportunity for landowners of all sizes to participate. Yesterday, SilviaTerra’s NCAPX was announced as 1 of 26 solutions in Microsoft’s new carbon removal portfolio.

Sustainable Fund Assets Hit Record $1.7 Trln In 2020 [News 18 World]

• Demand to invest in funds which focus on environmental, social and governance (ESG) issues jumped in 2020, driving assets under management up 29% in the fourth quarter to nearly $1.7 trillion, according to industry tracker Morningstar.

South Africa’s development bank launches $242 million green bond [IOL]

• The Development Bank of Southern Africa (DBSA) on February 3rd launched its first green bond, worth €200 million (R3.59 billion), in its bid to increase its role in climate finance.
• The bond was issued through a private placement with the French development finance institution, the Agence Française de Développement.

Green Energy Firms to Help Power Spanish IPO Revival in 2021 [Bloomberg Green]

• Spain’s national stock market, home to a solitary listing in 2020, is gearing up to host a flurry of green energy providers in the coming months.

Corporate and Institutional Commitments

Aviva to Divest From Companies That Don’t Act on Climate [Bloomberg Green]

• Aviva Investors, AUM ~$438bn, one of Britain’s top asset managers, will divest from oil, gas, mining, and utilities companies that do not meet its expectations on tackling climate change.

BP, Qantas partner to advance net zero emissions [Biomass]

• Qantas and BP on Jan. 28 announced a strategic partnership to further advance their shared net zero ambitions. Through the collaboration, the companies will work together on opportunities to reduce carbon emissions in the aviation sector and contribute to the development of a sustainable aviation fuel industry in Australia.
• The two companies have agreed to explore ways in which BP’s global capabilities, skills and knowledge can support Qantas’ industry-leading sustainability and environmental strategy.

Aberdeen Standard launches multi-asset climate solutions fund alongside The Big Issue Group [Investment Week]

• Aberdeen Standard Investments (ASI) has launched a multi-asset climate solutions fund alongside The Big Issue Group, allowing investors to "actively participate in the climate shift" while diversifying across equities, bonds and real estate.
• The Multi-Asset Climate Solutions (MACS) fund will invest in companies whose products and services actively help to mitigate climate change. These will typically reside across the renewable energy, electric vehicle and smart working sectors, alongside energy efficient buildings and other green technologies

Smart Pension sets sights on net zero portfolio before 2050 [Business Green]

• Workplace pension provider becomes latest to join the Make My Money Matter campaign which is pushing pensions industry to set 2050 net zero goals
• Smart Pension committed on February 1st to halving emissions across its investment portfolio within the next decade before reaching net zero ahead of 2050

Aggreko on path to net zero emissions by 2050 [Australia Mining]

• Aggreko plans to invest up to $600 million a year to support the mining sector’s energy transition, responding to the industry’s requests for energy alternatives to fossil diesel.
• Mining companies are intending to reduce their capital costs while lowering their emissions according to their emission targets.

Retail giant Tesco's inaugural sustainability-linked bond will support its rapid decarbonisation targets [BNP Paribas]

• The €750mn benchmark 8.5-year sustainability-linked bond (SLB), for which BNP Paribas acted as joint sustainability structuring advisor and joint bookrunner, is also the first SLB issued by a UK rated issuer, the first SLB from a retailer and Tesco's inaugural SLB in the public market.

Asia real estate giant CDL targets net-zero operations by 2030 [edie]

• City Developments Limited (CDL) has become the first large business in Southeast Asia to sign the World Green Building Council's (WorldGBC) net-zero carbon buildings commitment.

Ford’s Surprise Profit Paves Way for Electric-Car Investment [Bloomberg]

• Ford Motor Co.’s gas-powered SUVs and trucks helped haul in an unexpected fourth-quarter profit, providing a down payment on the $29 billion the automaker plans to spend developing electric and autonomous next-generation vehicles.

Singapore based DBS boosts 2024 sustainable finance target by 150% [The Asset]

• DBS Bank has raised its 2024 sustainable finance target to S$50 billion (US$37.5 billion) from S$20 billion, accelerating its sustainability agenda in helping customers incorporate sustainable business practices into their overall business strategy.

Frameworks and Case Studies

The National Academy of Sciences Provides Report for Path to Net-Zero Carbon Emissions by 2050: Recommends Near-Term Policies to Ensure Fair and Equitable Economic Transition and Revitalization of Manufacturing Industry [The National Academies of Sciences Engineering Medicine]

• NAS says a net-zero carbon U.S. by 2050 is feasible and would not only help address climate change but also build a more competitive economy and address social injustice. The authors emphasized that immediate action and proactive innovation are required. They recommend a portfolio of near-term policies to ensure equitable access to benefits generated as a result of this transition, mitigate harms to vulnerable populations and engage public participation in decision-making, and revitalize the U.S. manufacturing sector.

Germany grid operators say the country needs to double its renewable energy output by 2035 [Reuters]

• Germany may need to double its renewable energy capacity by 2035 as Europe’s biggest economy goes electric in heating, transport and other sectors, grid operators said on Friday.

U.K. needs to install electric car chargers five times faster to enable the country to achieve all electric vehicle sales by 2030 [Bloomberg Green]

• Britain will need to install electric-vehicle charging points five times faster during this decade to prepare for a ban on the sale of new gasoline and diesel cars from 2030.

Report: Under-reporting of greenhouse gas emissions in U.S. cities [Nature Communications]

• Cities dominate greenhouse gas emissions. Many have generated self-reported emission inventories, but their value to emissions mitigation depends on their accuracy, which remains untested. Here, we compare self-reported inventories from 48 US cities to independent estimates from the Vulcan carbon dioxide emissions data product, which is consistent with atmospheric measurements.

UK energy consumers embracing the sustainability revolution, EY survey suggests [Business Green]

• Growing numbers of UK energy consumers are taking sustainability into account when choosing products or services, with over 60 per cent more likely to choose sustainable options.

Transform economics to halt destruction of the natural world, UK study urges [Reuters]

• Nations will have to rethink economic growth as a measure of success if they want to make good on pledges to halt the destruction of the natural world, according to a British government-backed report published on Tuesday [A C4C Recommended Report]. The report points out that market systems depend on and are built on our shared natural capital infrastructure.

IFRS Foundation announces next steps for sustainability standards [Regulation Asia]

• The Trustees of the IFRS Foundation reviewed responses to the body’s consultation paper for a global sustainability standard published in December last year, and mapped out the next steps toward taking a leading role in creating a universal framework for corporate reporting on sustainability issues.

Green bonds support carbon emissions reduction finds Joint Research Center of the European Commission [Market Screener]

• Green bond financing is proving effective in promoting more sustainable, less carbon-intensive activities in the EU, according to Joint Research Center (JRC) research.
• Analysis of the carbon emissions of green bond issuers' assets finds an average reduction of around 4% compared to similar non-green bond issuers. When looking specifically at new green investment projects (by excluding refinancing), the reduction is over 8%.