Climate Investment Newsletter 10/31 - 11/6

Individual Deals and Market Watch

Norway’s Statkraft to buy solar power developer Solarcentury

Statkraft is paying $151.34 million to acquire U.K.-based Solarcentury. Solarcentury has developed 1.3-gigawatts of installed solar power since 1998 and claims to have a pipeline of projects totaling 6-gigawatts.

An investment trust set up to buy into renewable energy and other infrastructure assets will today announce plans to raise £200 million via a flotation in London.

Sustainable investments are booming across Europe. In the DACH region – spanning Germany, Austria and Switzerland – alone, the market has more than doubled in the past year. According to a new study, this is likely to grow further, as the EU looks to subsidise investments which will help it meet its climate targets for 2030.

This means financing activities that will help decarbonise the economy and supporting customers to transition to a low-carbon economy, AIB said at the outset of the third Irish Climate Finance Week conference, which it is sponsoring.

Etihad Airways says it has launched the first transition sukuk and sustainability-linked financing in the global aviation industry.
Abu Dhabi’s carrier said the $600 million transaction will support Etihad’s drive for sustainable aviation by linking the sukuk terms to its carbon reduction targets.

The AUD60 billion ($42 billion) Retail Employees Superannuation Trust (REST) pension fund has settled a court case brought against it by a member over its handling of climate change risk, which could spark further legal climate challenges at pension fund managers.

Environmental, Social and Governance (ESG) Funds have demonstrated competitive financial performance in recent years, and were found by a recent Morningstar survey to be more resilient than their conventional counterparts to the financial impacts of the COVID-19 pandemic. As U.S. investors increasingly take ESG factors, and particularly climate change, into account, they should monitor and, where warranted, incorporate emerging EU guidelines.

While 2020 has been a year for most to forget, it's been one to remember for environmental, social and governance (ESG) investing. The ESG space was highlighted by sustainable fund assets reaching the $1.2 trillion mark in the third quarter.

Jeremy Grantham, the money manager who’s devoting his fortune to fight climate change, called on the next U.S. administration to start a major public works program akin to the Marshall Plan to revive economic growth amid the pandemic and threats caused by global warming.

The green finance market in China will expand, driven by supportive policies and government initiatives, as it is an important tool for policymakers to achieve the country's pledge of net zero carbon emissions by 2060, Fitch Ratings says in a new report.

Macro Commitments

At the Climate Investment Summit today, the Danish pension industry announced that USD 8 billion has been invested in the green transition since Danish pension funds committed at the UN Climate Action Summit last year to increase green investments by USD 50 billion by 2030. Finance Denmark also announced a new commitment of a 75% CO2 reduction in investment funds in 2030 offered to Danish private investors.

Back in February, Jeffrey Bezos posted a picture of the Earth on Instagram. In the caption, the world’s richest man announced his new project to save the world: the Bezos Earth Fund, an initiative to support scientists, activists, nonprofits, and anyone else who seems to have a good idea to fight climate change. “Climate change is the biggest threat to our planet,” the Amazon chief executive said. He committed $10 billion to the effort, and said he would begin issuing grants in the summer.

The government has today announced clean tech innovation funding totaling £134m for over 1,000 projects across the UK, just 24 hours after confirming the award of £49m to a raft of green automotive initiatives.

At the Climate Investment Summit today, the Danish pension industry announced that USD 8 billion has been invested in the green transition since Danish pension funds committed at the UN Climate Action Summit last year to increase green investments by USD 50 billion by 2030. Finance Denmark also announced a new commitment of a 75% CO2 reduction in investment funds in 2030 offered to Danish private investors.

The European Union’s rush to finance its recovery from the pandemic means its first-ever green bonds may come before the standards meant to regulate them.

Spain’s Iberdrola SA said it would spend €75 billion,equivalent to $88 billion, over the next five years to double its renewable power capacity and capitalize on the shift to green energy, highlighting how some of Europe’s lesser-known utility companies have become major players in the global energy industry.

Frameworks and Case Studies

RAFI Multi-Factor Climate Transition offers diversified exposures to the value, low volatility, quality, and momentum factors, while integrating objectives related to greenhouse gas emissions reductions and a transition to a low-carbon economy. The index strategy is designed for investors who wish to promote responsible environmental management with their investment choices as well as to preserve the potential for long-horizon outperformance.

The ten principles act as a guiding framework for governments, companies, and society to strike the balance between energy security and the transition to a lower carbon future.

Active engagement and stewardship are increasingly important ways for money managers to approach the issue of sustainability, institutional investors say.

The International Development Finance Club, a group of 26 national and regional development banks, said its members supplied $197 billion in green finance in 2019, representing a quarter of their total lending.

What’s new in climate investment?