Climate Investment Newsletter 3/6 - 3/12

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Individual Deals and Market Watch

HSBC plans to phase out coal financing by 2040 [Yahoo]

• HSBC has said it plans to ramp up its climate change policies and stop financing coal projects by 2040, as long as shareholders back the move. It follows pressure from a coalition of investment firms and pension funds who called for stronger action from the bank on climate change. Non-profit Shareaction, which led the group effort, said HSBC had put $15bn (£11bn) into coal developers since 2018.

Goldman Sachs completed $156B in sustainable financing in 2020 [Smart Energy Decisions]

• Goldman Sachs announced March 4 that it achieved a fifth of its 2030 sustainable financing goal that it set in 2020, with $156 billion of financing in sustainability, $93 billion of that dedicated to climate transition (click the link to see a breakdown of the $156bn). The bank announced last year that it would target $750 billion in financing, investing and advisory activities focused on climate transition and inclusive growth by 2030. Soon thereafter, the bank created the Sustainable Finance Group to coordinate its sustainability efforts and in February 2021 issued its first sustainability bond.

Allianz repositions 74 funds as sustainable, launches climate engagement strategy focused on high emitters [Responsible Investor]

• AllianzGI (AUM $535bn) has repositioned 74 funds, running some $84bn, as sustainable products, and has launched a new climate engagement strategy. Under the strategy, fund managers will engage with the 10 biggest emitters in their funds, and will consider divesting from companies that do not positively engage with climate targets.

Chinese EV trio eyes HK listings this year to raise combined $5 billion [Reuters]

• Big public EV listing coming up for Hong Kong.  U.S.-listed Chinese electric vehicle (EV) makers Li Auto Inc, Nio Inc and Xpeng Inc plan to list in Hong Kong as soon as this year, tapping a growing investor base closer to home, said people with direct knowledge of the matter.

Temasek takes stake in impact investor LeapFrog as part of $500m deal [Responsible Investor]

• Certainly the largest investment to date to an impact fund, Singapore-based Temasek has made a $500m commitment to Australia’s LeapFrog Investments, which also sees it take a minority stake in the fund’s manager. LeapFrog specialises in impact investments in Asia and Africa and runs four private equity funds. It claims the companies in those funds have grown at an average rate of 30% per year, and it has so far sold company stakes to Prudential, Allianz, Swiss Re and Standard Chartered.

Nexamp secures $440 million in debt financing for solar and energy storage portfolio [Cision]

• Nexamp, Inc., a leading renewable energy generator and community solar provider, has closed a $440 million senior secured credit facility for a 380-megawatt portfolio of solar and energy storage assets, the largest debt financing for community centric projects. The portfolio spans five states and consists of nearly 100 solar projects, including energy storage capacity totaling 120MWh. MUFG Union Bank, N.A. served as lead arranger for the syndicated financing, which included a number of major lenders.

Aflac issues $400 million sustainability bond [Smart Energy Decisions]

• Aflac Incorporated announced March 8 that it has issued its first sustainability bond at $400 million to finance existing or future investments in environmental or social projects. The bond was issued at a rate of 1.125% due in 2026. The insurance provider will use an amount at least equivalent to the net proceeds from the offering for projects that meet eligibility criteria under its Sustainability Framework within eight categories: renewable energy, energy efficiency, green buildings, clean transportation, sustainable water management, pollution prevention and control, socio-economic advancement and empowerment; and communities.

ESM Acquisition Corporation a $300 million energy transition SPAC [Street Insider]

• Another $300M to buy the low carbon transition, ESM Acquisition Corporation (the “Company”) announced it priced its initial public offering of 30,000,000 units at $10.00 per unit and listed on NYSE March 10 and trade under ESM.U.
• The Company intends to focus on a target businesses including, but not limited to, the shift away from fossil fuels, the light-weighting and electrification of vehicles and the reduction of carbon emissions from key industrial processes.

Macro Commitments

Saudi Arabia’s bold plan to rule the $700 billion hydrogen market [Bloomberg Green]

• We are going to find out if green hydrogen is the new crude oil.  The world’s biggest crude exporter doesn’t want to cede the burgeoning hydrogen business to China, Europe or Australia and lose a potential source of income. So Saudi Arabia is building a $5 billion plant powered entirely by sun and wind that will be among the world’s biggest green hydrogen makers when it opens in the planned megacity of Neom in 2025.

RBC sets sustainable finance target of $500 billion by 2025 [Smart Energy Decisions]

• Royal Bank of Canada (RBC) announced its intent to increase its sustainable financing by $500 billion by 2025 and achieve net zero emissions in its lending by 2050.
• The Canadian financial institution achieved its initial goal of $100 billion in sustainable financing in 2020. With its new sustainability commitments, RBC is also joining the Partnership for Carbon Accounting Financials (PCAF) and RMI’s Center for Climate-Aligned Finance.

Wells Fargo to deploy additional $500 billion in sustainable finance by 2030 [Environment + Energy Leader]

• Wells Fargo announced another step in its efforts to support the transition to a low-carbon economy by setting a goal of net zero greenhouse gas emissions — including its financed emissions — by 2050. To help meet this ambitious goal, Wells Fargo will measure and disclose financed emissions for select carbon-intensive portfolios; set interim emission reduction targets; deploy more capital to finance climate innovation; and continue to work with its clients on their own emissions reduction efforts.

NY State Pension Fund strikes climate deals with five companies [Chief Investment Officer]

• About corporate engagement, the $248 billion New York State Common Retirement Fund has reached agreements with five major US companies to reduce their greenhouse gas emissions (GHG), adopt new energy efficiency measures, and increase their use of renewable energy.
• The five companies are chemical company Albemarle Corp., steel maker Cleveland-Cliffs Inc., water treatment company Pentair, and commercial property owner Realty Income Corp, pizza chain Domino’s.

Shipping industry backs United Nations $5 billion “Moon-Shot” programme to decarbonise shipping [Hellenic Shipping News]

• Industry partners welcome “moon-shot” proposal from governments to set up a $5 billion USD fund to catalyse the vital research and development needed to help shipping meet UN decarbonisation goals.
• Governments controlling a major share of world shipping to submit detailed proposals to the United Nations International Maritime Organization.

LG to invest $4.5bn to meet growing US electric vehicle demand [FT]

• Korea’s LG Energy Solution, the world’s largest producer of electric vehicle batteries, will invest more than $4.5bn in the US by 2025 to meet growing consumer demand for non-carbon emitting cars.

Biden administration backs nation’s biggest wind farm off Martha’s Vineyard [Washington Post]

• The Biden administration last Monday moved toward approving the nation’s first (and original) large-scale offshore wind farm about 12 miles off the coast of Martha’s Vineyard, MA., a project that officials say will launch a massive clean-power expansion in the fight against climate change generating 800MW of electricity.  

FedEx unveils $2 billion plan to become carbon neutral by 2040 [Euractiv]

• FedEx has announced it will invest $2 billion (€1.66bn) to make its global operations carbon neutral by 2040, a task that will involve cutting the emissions of the company’s 70 aircraft and more than 30,000 vehicles operating in Europe.

Australia to support battery production with $1.2 billion funding initiative [pv Magazine]

• Australian Prime Minister Scott Morrison unveiled the federal government’s technology investment roadmap last week as part of its AUD 1.5 billion ($1.2 billion) modern manufacturing strategy, which aims to position the country as a world leader in the renewable energy transition.

Australia’s New South Wales govt's $750m net zero emissions push [Yahoo Finance]

• The NSW is investing $750 million over the next decade to encourage industries to lower emissions as the state pursues a net zero target by 2050.
• Energy Minister Matt Kean says the Net Zero Industry and Innovation Program is about co-investing with industry to reduce carbon emissions and develop low-emissions technologies.

Brunel Pension Partnership commits to net zero by 2050 [Business Green]

• UK local authority pension pooling vehicle Brunel Pension Partnership has announced plans to achieve net zero emissions by mid-century using the Net Zero Investment Framework (NZIF) launched by the Institutional Investors Group on Climate Change.
• Brunel, which manages £30bn ($41.7bn) worth of investments for 10 local government pension scheme funds, confirmed this week it had tested the new framework against its portfolios and would use it to work towards a 50 per cent reduction in its emissions by 2030 and to reach net zero by 2050.

Frameworks and Case Studies

Global framework for investors to achieve net zero emissions alignment launched – $8 trillion investors put it into practice

• The Institutional Investors Group on Climate Change (IIGCC) on March 10th launched the ‘Net Zero Investment Framework’, enabling investors to maximise the contribution they make to decarbonisation of the global economy and tackling climate change.
• The Framework enables investors to decarbonise investment portfolios and increase investment in climate solutions, in a way that is consistent with and contributes to a 1.5°C net zero emissions future. Investors do this by developing a ‘net zero investment strategy’ built around five core components of the Framework.

Food systems responsible for ‘one third’ of human-caused emissions [Carbon Brief]

• “Food systems” were responsible for 34% of all human-caused greenhouse gas emissions in 2015, according to new research. The study, published in Nature Food, presents EDGAR-FOOD – the first database to break down emissions from each stage of the food chain for every year from 1990 to 2015. The database also unpacks emissions by sector, greenhouse gas and country.

UN adopts landmark framework to integrate natural capital in economic reporting [Climate Action]

• In a move that may reshape decision and policy-making towards sustainable development, the United Nations has adopted a new framework that includes the contributions of nature when measuring economic prosperity and human well-being. The new framework — the System of Environmental-Economic Accounting—Ecosystem Accounting (SEEA EA) — was adopted by the UN Statistical Commission and marks a major step forward that goes beyond the commonly used statistic of gross domestic product (GDP) that has dominated economic reporting since the end of World War II. This measure would ensure that natural capital—forests, wetlands and other ecosystems—are recognized in economic reporting.

Sea level rise up to four times global average for coastal communities [Science Daily]

• New research, published in Nature Climate Change, shows that coastal populations are experiencing relative sea-level rise up to four times faster than the global average. The study is the first to analyze global sea-level rise combined with measurements of sinking land. The impacts are far larger than the global numbers reported by the Intergovernmental Panel on Climate Change (IPCC). The high rates of relative sea-level rise are most urgent in South, South East and East Asia.

Malaysia to implement principles-based taxonomy disclosures for banks [Responsible Investor]

• Malaysian banks have been asked to report their exposures to green and polluting economic activities from this year onwards, using a soon-to-be released taxonomy. After a public consultation and a pilot exercise undertaken by 12 banks last year, Malaysia’s central bank, Bank Negara Malaysia (BNM) is preparing to publish the final, principles-based taxonomy by the end of March.

Analysts point to $500B investment gap in climate resilience for electric utilities [Utility Dive]

• Noting a variety of research indicates the global climate investment gap exceeds $2.5Tr per year, ICF reported that investor-owned utilities face a $500 billion capital investment gap to build out resilience efforts and address risks from climate change.
• Around 60% of the gap is driven by the need for investment in system hardening due to rising temperatures, while protecting infrastructure during extreme storms represents around 13%.

Climate Action 100+’s new benchmark: a powerful new tool for directors and investors? [Responsible Investor]

• The $52trn Climate Action 100+ (CA100+) initiative will next week publish its highly anticipated benchmark analysis on its 160 target companies.
• CA100+ seeks to use the powers of investor-led stewardship to transform companies in the direction of decarbonisation. The benchmarking process, a maturing of the initiative as it enters its fourth year, has been described as a “comprehensive analysis on which companies are leading the transition to net-zero emissions”.

Moody's: Green, social and sustainability bonds to close in on $300bn in 2021 [Business Green]

• Global green, social and sustainability bond issuances from financial firms and development banks are expected to approach a record $300bn in 2021, which would mark a near 30 per cent increase on last year's total, according to the latest forecast from Moody's Investors Service.