Climate Investment Newsletter 2/27 - 3/5

Editorial

Is the green SPAC wave [temporarily?] replacing private equity follow ons [Tech Crunch]

• Before 2020, if you needed to raise a first-plant or commercialization round for a pre-revenue technology company that wasn’t biotech you had to spend up to nine months making the rounds with later-stage private equity investors, most of whom loathe technology risk. If you were lucky, you might close a $100M+ follow-on round after six months of pitching to crossed arms while making the case that your pre-revenue company was worth more than the money poured into it to that date. With a global SPAC bloom eighteen months into flower, for the first time since the internet bubble of 1999 promoters are setting up public acquisition vehicles at a blazing rate and providing liquidity, cash and eye popping valuations to companies years away from commercial product. (In the US, SPACs typically have 2-years to complete an acquisition or merger or they have to return their cash to investors).
• In Bloomberg Wealth’s summary of SPACs yesterday we learned 59 SPACs raised $13.6 billion in 2019. In 2020, those figures leaped to 248 and $83.3 billion. So far in 2021, the totals are 226 SPACs and almost $73 billion raised, with SPACs making up more than 70% of the IPO market.
• Of the 78 acquisitions/mergers completed or announced since 2018, just over one-third have been climate-related, as tallied by Climate Tech VC. And these SPACs had outperformed the broader technology market.
• Relatively easy money has given the SEC pause about lack of rigor in disclosures. Signs of a bubble include Cassius Cuvée’s rap song SPAC Dream, and SPAC Guru’s followers increasing from one to 75,000 in the last six months.  
• Even if the window closes tomorrow, there will be hundreds of cash rich SPACs looking to acquire something before their 2-year clock to complete a merger runs out, which should provide a brief respite to investors and entrepreneurs living in a commercialization investment drought.

Climate Dispatch

In the Atlantic Ocean, Subtle Shifts Hint at Dramatic Dangers [NYT]

• Our warming atmosphere seems to be causing the northern current of the Gulf Stream to weaken, some scientists fear. The scientists’ concern stems from their understanding of thousands of years of the prehistoric climate record. In the past, a weakening or shutdown of the northern Gulf Stream likely triggered rapid changes in temperatures and rain patterns around the North Atlantic and beyond.

Individual Deals and Market Watch

LinkedIn, Zynga founders to take Joby Aviation public in $6.6B SPAC deal [Santa Cruz Tech Beat]

• The 12-year-old Santa Cruz company, which has partnered with Toyota Motor Corp. and Uber Technologies, plans a $6.6 billion reverse merger with special purpose acquisition company (SPAC) Reinvent Technology Partners Corp., which is led by LinkedIn co-founder Reid Hoffman and Zynga founder Mark Pincus.
• Joby plans to use the $1.6 billion in capital it expects to get from the deal to begin a commercial passenger service in 2024, using its electric vertical takeoff and landing (eVTOL) aircraft. It plans to begin construction on a 450,000-square-foot manufacturing facility at the Marina Municipal Airport later this year, designed in conjunction with Toyota.

Emissions Quest Lifts a Solar Mogul’s Wealth to $4 Billion [Bloomberg Wealth]

• Rising demand for a niche material used in solar panels has sent shares of top producer GCL-Poly Energy Holdings Ltd. soaring and swelled the fortune of its billionaire founder, delivering another winner in the global push to net zero.
• Prices have boomed for polysilicon, an ultra-refined form of the mineral found in beach sand and used to convert photons of light into electricity. Factories will need to run at full capacity this year as key markets including China, Europe and the U.S. accelerate solar deployment to help meet climate targets.

Ardagh Metal sells largest-ever green junk bond [Reuters]

• Ardagh Metal Packaging sold $2.8 billion worth of green bonds on Friday, the biggest green issuance in the high-yield market to date, as a part of its plan to merge with a blank-check firm (SPAC) backed by billionaire Alec Gores.

EV Company Xos Merging with NextGen Acquisition at $2B Valuation [Deal Flow’s SPAC Newsletter]

• Commercial EV maker Xos and NextGen Acquisition announced February 22nd that they have entered into a definitive business combination agreement. The deal values the combined company at a $2 billion pro forma equity value, at a price of $10 per NextGen share. The transaction will provide $575 million of gross proceeds to the company, assuming no redemptions, including a $220 million oversubscribed and fully committed common stock PIPE at $10 per share anchored by Janus Henderson Investors, as well as a consortium of truck dealers led by Thompson Truck Centers.

Equinix launches €1.1B ($1.31B) green bond for sustainability projects [Smart Energy Decisions]

• Equinix, a leader in the datacenter building and leasing business (digital infrastructure) announced Feb. 25 that it priced its second green bond offering for €1.1 billion to go toward advancing its sustainability initiatives and reducing its environmental impact.

Enovix Set to Go Public Through a SPAC in Deal Valued at $1.1 Billion [WSJ]

• Battery maker Enovix Corp. is poised to go public using a SPAC in a deal valued at $1.1 billion, benefiting from investor enthusiasm for technology to improve battery performance as the world races toward electric vehicles.

Mastercard issues $600 million Sustainability Bond [Sustainable Brands]

• Mastercard announced that it has priced a $600 million Sustainability Bond at a fixed rate of 1.90%. This milestone further supports the company’s work to build an inclusive and sustainable digital economy through commercially sustainable social impact. Mastercard’s global commitments include reaching net zero emissions by 2050 and bringing 1 billion people and 50 million small businesses into the digital economy by 2025.

Hochbahn issues green bond for climate-neutrality in Hamburg [Hamburg News]

• Hamburg’s public transit company, Hamburger Hochbahn AG has become Germany’s first transport company to issue a green bond, seeking EUR 500M and rated AAA by Fitch. Such an investment will help it fund sustainable transport projects for climate-neutrality in Hamburg. This comes against the backdrop of Hamburg’s goal of slashing CO2 emissions by 55 per cent through 2030, in line with the EU target.

Green bonds persevere as volatility takes toll [Nasdaq]

• De Volksbank and SpareBank 1 Ostlandet hit the market each with €500m seven-year green bonds on February 24th and were met by modest volumes of demand by recent standards, as rates volatility took its toll on investor sentiment, though green demand helped both secure high quality books.
  The two green bonds were launched into a market occupied with moves in rates and equities, even while credit remained resilient.

Highland Electric Raises $235M, Lands Biggest Electric School Bus Contract in the US [Green Tech Media]

• Highland Electric Transportation says it can remove those barriers for school districts and transit authorities by taking on the financing and management of an EV school bus fleet in exchange for a fixed annual leasing fee. In the past week, the Hamilton, Mass.-based startup has won two votes of confidence in its business model.

Bacchus Capital puts together US$140 million equity capital raising for its uranium venture, Yellow Cake plc [cision]

• Bacchus Capital Advisers Limited ("Bacchus Capital"), the independent investment and merchant bank specialising in cross border public market M&A, and natural resources sector ventures, is pleased to have arranged financing for the US$100 million purchase of physical uranium, by Yellow Cake Plc, pursuant to its option with Kazatomprom. Since 2018, Yellow Cake has accumulated 9.3 million pounds of U3O8 at an effective price of US$21.34 per pound; at the current spot price of US$28.35 per pound, this represents a gain of approximately 33%, or US$65 million.

Georgia Power issues first sustainability bond from a U.S. utility [gurufocus]

• This is important because power utilities need to find a way to finance their low carbon transition; particularly decommissioning of coal plants, most of which run negative cash flow, and also have material clean up liabilities.
• Georgia Power announced its first sustainability bond -- the  first sustainability bond for a US utility. Bond proceeds will be allocated to fund the company's environmental, renewable, and social initiatives. The 3.25% rate represents the lowest 30-year coupon for a publicly-traded bond ever issued by any affiliate of Southern Company, Georgia Power's parent company.

Britain to launch the world's first sovereign green savings bond [Yahoo Finance]

• The UK is on course to become the first country in the world to offer sovereign green savings bonds to retail investors interested in saving the environment.
• According to the Treasury the move allows people to help drive Britain's greener future and goals to reach net zero carbon emissions by 2050.

Macro Commitments

Jigar Shah to lead $40 billion DOE cleantech loan effort [Smart Energy Decisions]

• If you have not already read this on your linkedin feed, The U.S. Department of Energy (DOE) announced last Wednesday the appointment of clean energy industry pioneer Jigar Shah as Director of the Loan Program Office, which will oversee more than $40 billion in loan authority across manufacturing, innovative finance, and tribal energy projects. [Go Jigar!  The perfect person for the job of rejuvenating this critical lending capacity.]

Italy raises €8.5bn in Europe’s biggest-ever green bond debut [FT]

• The banks running the issuance chalked up around €80bn in orders for €8.5bn of debt. It was the biggest debut sovereign green bond from a European issuer to date, according to Intesa Sanpaolo, which worked on the deal.

FedEx commits to carbon-neutral operations by 2040 [Climate Action]

• Moving faster than 2050, to help reach this goal, FedEx is initially investing $2 billion into vehicle electrification, sustainable energy and carbon sequestration.
• “We have a responsibility to take bold action in addressing climate challenges,” said Frederick W. Smith, Chairman and CEO, FedEx Corp.

Hydrogen Set for $960 Million Push in Polish Green Recovery Plan [Bloomberg Green]

• Poland plans to invest 797 million Euros ($960 million) to develop the production and distribution of hydrogen, using the European Union’s economic rescue fund to speed up its shift to clean energy.

World Bank plans $100 million guarantee scheme for solar rooftop projects [Mint]

• The World Bank plans to introduce a $100-million credit guarantee scheme to boost India’s rooftop solar programme, which has not gained enough traction.
• The scheme will allow micro, small, and medium enterprises (MSMEs) to avail concessional debt financing for setting up rooftop solar units, said two people aware of the development requesting anonymity.

Aviva sets target for net zero carbon footprint by 2040 [The Guardian]

• The firm, one of the UK’s top asset managers with £300bn of investments under management, said it had written to the 30 biggest CO2 emitters in its portfolio, comprising companies in the oil and gas, utilities and mining sectors, asking them to sign up to the science-based targets aligned to the Paris climate agreement and to set net zero emission goals with fixed deadlines within 12 to 36 months.
• Additionally, Aviva plans for all its UK pension customers to put more than 20% of new savings into sustainable impact funds or Net Zero-aligned funds by the end of 2022 as part of its Net Zero pledge. [Responsible Investor]

Volvo Cars to go all electric by 2030 [BBC News]

• Sweden’s Volvo is only going to sell electric vehicles by 2030.  It will phase out all car models with internal combustion engines by then, including hybrids. The carmaker is also planning to invest heavily in online sales and simplifying its products lineup.

ESG roundup: Devon pension fund makes 2050 net-zero pledge [IPE]

• Devon Pension Fund has joined the ranks of asset owners making net-zero pledges, setting a deadline of 2050 for this to be achieved.

Pathways, Frameworks, Case Studies, Research

UNFCCC: Climate commitments ‘not on track’ to meet Paris Agreement Goals [Climate Action]

• The UNFCCC says that in order to keep the global rise in average temperature to 1.5C requires global emissions be reduced 45% from 2010 levels by 2030.  Reviewing the self-determined commitments of 75 nations leading up to COP26 next November) leads to the conclusion we are on track to reduce emissions only 1% by 2030.  

SEC launches ESG Climate Enforcement Task Force to tackle ‘ESG-related misconduct’ [Responsible Investor]

• Seeking to avoid greenwashing and protect investors, the US Securities and Exchange Commission (SEC) has announced the formation of a Climate and ESG Task Force to identify what it calls “ESG-related misconduct”.
• The task force will sit within the SEC’s Division of Enforcement and will be led by its Acting Deputy Director of Enforcement, Kelly Gibson, as well as drawing on staff from across the Commission.

House Democrats release plan to reach net-zero emissions by 2050 [The Detroit News]

• Democrats in the U.S. House detailed legislation March 2nd that endeavors to reshape American climate policy with the aim of reaching net-zero greenhouse gas emissions by 2050.
• The bill would require the U.S. to reduce emissions to at least 50% of 2005 levels by 2030, direct federal agencies to develop plans to achieve a "100 percent clean economy" by 2050, and create new programs and requirements for the transportation, energy, building, and construction industries.

The Lab selects six new ideas that create climate investment opportunities for a sustainable economic recovery in emerging economies [Climate Policy Initiative]

• The Global Innovation Lab for Climate Finance (the Lab) has selected six new climate finance instruments for its 2021 acceleration program. In the 7th year of an annual competition. For 2021, the Lab chose one idea for each of its thematic streams: food systems, energy access and cities, two for its Brazil program and one for its Southern Africa program.