Category: Finance

Most global banks unprepared for climate change risks: report

Read the full story at ESG Dive.

A recent report from climate risk data and analytics provider Climate X found that most large global banks were unprepared for the growing risks of climate change, based on a review of public disclosures and annual reports. 

The report, published last week, surveyed 50 of the world’s largest commercial banks (excluding China) and examined their climate adaptation maturity based on 17 qualitative indicators, including alignment with international adaptation goals, physical risk data collection and client engagement. Of the banks surveyed, 86% achieved less than half of these indicators.

On a geographic basis, U.S. banks had the lowest adaptation maturity when compared to other regions and countries assessed. Citigroup, JPMorgan Chase, Wells Fargo and Morgan Stanley met four, three, two, and one indicators, respectively, while three U.S. banks met no indicators at all.

Why don’t climate evacuees just leave?

Read the full story at Nonprofit Quarterly.

Portuguese Bend is part of a larger, troubling trend when it comes to insurance in a climate-changed world. Homeowners can’t get insured in parts of the country seen as more vulnerable to the impacts of climate change—large and varied segments of the US which include California with its landslides and wildfires, and hurricane and severe storm-prone Florida. Or insurance premiums increase so rapidly after a climate disaster, people can’t afford to insure their houses or even to live in their home states anymore. NPQ reported in 2023 that “insurers have underestimated climate change,” leading to a quarter of all homeowners in the US who could lose their insurance because of the climate crisis. This miscalculation is being blamed for the steep and sudden rises.

What the jumbo Fed cut means for renewables

Read the full story at Heatmap.

Renewable energy just became a much more enticing investment.

That’s thanks to the Federal Reserve, which announced today that it would reduce the benchmark federal funds rate by half a percentage point, from just over 5% to just below. It’s the beginning of an unwinding of years of high interest rates that have weighed on the global economy and especially renewable energy.

The Federal Reserve’s economic projections also indicated that the federal funds rate could fall another half point by the end of the year and a full point in 2025. The Federal Reserve began hiking interest rates from their near-zero levels in March 2022 in response to high inflation.

High interest rates, which drive up the cost of borrowing money, have an outsize effect on renewable energy projects. That’s because the cost of building and operating a renewable energy generator like a wind farm is highly concentrated in its construction, as opposed to operations, thanks to the fact that it doesn’t have to pay for fuel in the same way that a natural gas or coal-fired power plant does. This leaves developers highly exposed to the cost of borrowing money, which is directly tied to interest rates. “Our fuel is free, we say, but our fuel is really the cost of capital because we put so much capital out upfront,” Orsted Americas chief executive David Hardy said in June.

So what does that mean in practice? Let’s look at some numbers.

World Energy Investment 2024

Download the report.

This year’s edition of the World Energy Investment provides a full update on the investment picture in 2023 and an initial reading of the emerging picture for 2024.

The report provides a global benchmark for tracking capital flows in the energy sector and examines how investors are assessing risks and opportunities across all areas of fuel and electricity supply, critical minerals, efficiency, research and development and energy finance.

The report highlights several key aspects of the current investment landscape, including persistent cost and interest rates pressures, the new industrial strategies being adopted by major economies to boost clean energy manufacturing, and the policies that support incentives for clean energy spending, notably from the increasingly important viewpoints of energy security and affordability.

This year’s edition provides an expanded analysis on the sources of investment and sources of finance in the energy sector, including new insights on the role of development finance institutions in energy investments across emerging and developing economies. It will also look at how investment trends in clean energy compare with those in fossil fuels, as well as the geographic distribution of these investments.

The report also includes a new regional section covering 10 major economies and regions. It also assesses additional efforts needed to meet the COP28 goals to transition away from fossil fuels, triple renewable capacity and double the rate of improvements in energy efficiency by 2030.

Stripe pledged $1 million to carbon removal in 2020. Now it manages $1 billion

Read the full story at Trellis.

Stripe payment software enabled $1 trillion in transactions in 2023. 

The fintech company wields similarly outsized influence among roughly 300 companies that have pledged a total of $1 billion to buy credits from carbon removal startups. Stripe was among the first to take the leap, committing $1 million to four entrepreneurs in 2020. 

The woman behind that initial experiment — and Frontier, the $1 billion buyers group it has become — is Nan Ransohoff, a Stripe employee who borrowed the idea from the pharmaceutical industry, which uses a similar model to accelerate development of vaccines and medicines for emerging economies. The idea is to provide future buying signals for researchers.

Lessons from the Paris Summit for a New Global Financing Pact

Read the full story from the Atlantic Council.

French President Emmanuel Macron hosted the Summit for a New Global Financing Pact on June 22-23 in Paris “to rethink the global financial architecture” and to mobilize financial support for developing and low income countries (DLICs) facing the challenges posed by excessive debt, climate change, and poverty. Despite the grand title of the gathering, it has just produced a road map—basically a list of events and meetings in the next year and a half—and a score of progress reports on previous pledges by countries and international organizations. 

The completion or near completion of those measures is indeed helpful to DLICs, even if the measures fall short of what is needed—the sustainable development gap of those countries has been estimated to be $2.5 trillion per year. What the DLICs really need are concrete initiatives and the less said about grand strategy the better. Dressing those initiatives up as parts of a “new global financial architecture” risks conflating them with the geopolitical conflict centered around changing or preserving the current world order. That conflation will only make it more difficult to develop the international consensus required to adopt those measures. 

Small Business Administration expands clean energy loan program

Read the full story from the Associated Press.

The SBA wants to bring in lenders ranging from hyperlocal microlenders to nationally oriented financial institutions. Lenders can apply to become a microlender — offering loans up to $50,000; a Certified Development Company, which is a nonprofit focused on economic development of its community; or Community Advantage Small Business Lending Company, or CA SBLC, which is a non-bank lender focused on “mission driven” projects.

What’s next for Fannie Mae’s 12-year $120 billion quest for green housing

Read the full story at Trellis.

Fannie Mae has been working to reduce the climate impact of housing in the U.S. since 2011. That’s a big task, as energy use by homes accounts for 19 percent of U.S. greenhouse gas emissions; home construction and water use have even more impact. And the reach of Fannie Mae, officially the Federal National Mortgage Association, is vast. The privately owned company, created by Congress in 1938, provides the funding for more than 25 percent of the home loans in the United States.

Fannie Mae’s green programs are also big. Last year, the company provided $8.9 billion in financing to support more climate-efficient housing. But that represented only 2.4 percent of the company’s $371 billion volume.

To understand the company’s challenges as it tries to reduce the carbon footprint of the housing it finances, GreenBiz spoke with Laurel Davis, Fannie Mae’s senior vice president for ESG and Mission.

Forever chemicals are poisoning your insurance

Read the full story at The Lever.

As concerns about the dangers of forever chemicals rise nationwide and lawyers warn of a deluge of “astronomical” lawsuits, commercial insurers are quietly eliminating liability coverage for these chemicals’ health and ecological consequences. Such coverage exclusions can leave small businesses on the line for costly litigation and victims without recourse for their medical costs from life-threatening PFAS exposure.

Climate tech startup 44.01 raises $37 million to scale solution to turn CO2 into rock

Read the full story at ESG Today.

Carbon sequestration technology startup 44.01 announced today that it has raised $37 million in a Series A funding round, with proceeds aimed at developing and commercializing its technology, and enabling its international expansion.

Founded in Oman in 2020, 44.01 provides solutions to eliminate CO2 captured from the air or from hard-to-abate industrial processes by turning it into rock, through its technology to accelerate the natural process of CO2 mineralization. The company’s solution takes captured CO2 and dissolves it in water, creating an acidic solution that mobilizes cations within rock that reacts with the CO2 and mineralizes it, and injects the fluid deep underground, where high pressure, temperature and high CO2 concentration causes a rapid mineralization process.

New green bank to support distributed solar and storage in the Appalachian region

Read the full story in pv magazine.

The Green Bank for Rural America will support community lenders in Appalachian communities to finance climate-supporting projects including distributed solar and storage. The bank and four others received a total of $6 billion in federal awards.

How Patagonia and Seventh Generation include banks in their climate action plans

Read the full story at GreenBiz.

Most companies don’t report the “hidden” carbon emissions generated by how their corporate cash deposits are invested, but it’s larger than many realize. 

If Apple, Google and Salesforce included that data in their disclosures, their total emissions would rise by 128 percent, 207 percent and 206 percent, respectively, according to an analysis published this week by a group of NGOs. 

Their analysis found that non-financial companies in the United States cumulatively hold $7 trillion in cash and investments. The cumulative emissions enabled by those cash holdings account for more than 20 percent of all U.S. emissions, according to the Carbon Bankroll 2.0 report. By engaging with their financial partners to decarbonize those portfolios, those corporations could facilitate major emissions reductions, the report concluded. 

Emissions linked to financial investments are part of a company’s Scope 3 footprint, which includes emissions related to upstream and downstream business activities over which a company doesn’t have direct control.

Financing Building Decarbonization: Leveraging a Sector-Wide Emissions Model to Prioritize Capital Flows

Download the report.

Real estate actors across the United States are at the precipice of a major climate opportunity. The recently passed Inflation Reduction Act (IRA), and the increased focus by investors, lenders, regulators, and policymakers on building decarbonization, positions the sector to take meaningful action.

To inform this opportunity, RMI conducted a bottom-up carbon analysis of the US building stock to determine the relative operational emissions for each segment. To the knowledge of RMI, this is the most detailed US buildings emissions model created to date. This report provides a breakdown of US building carbon emissions by segment, subsegment, and building size and identifies the building types with the greatest opportunity for emissions reductions. The report also proposes actions that lenders, investors, and regulators can take to increase the flow of capital to segments responsible for the greatest proportion of emissions.

Key report findings

  • Building operations generate 23% of US annual carbon emissions.
  • Existing buildings represent the majority of US building emissions. The annual rate of addition or renovation to the existing building stock is less than 1%.
  • Single-family homes contribute 58% of US building emissions.
  • Commercial buildings contribute 37% of US building emissions. Over half of these emissions (56%) are from small and medium-sized buildings.
  • Green capital flows are nowhere near what is required to decarbonize the sector.

These findings lead us to the following conclusions:

  • Investors, lenders, and regulators seeking to decarbonize the real estate sector should target dollars toward the retrofit of existing buildings.
  • Decarbonizing single-family homes is critically important to reaching US climate goals and this sector should attract a larger share of climate-aligned investment and financing support than it currently receives.
  • Although large buildings in the commercial sector currently attract the most climate-aligned investment and capital, more climate-aligned investment should target small and medium-sized commercial buildings to produce meaningful reductions in US real estate carbon emissions.

Verizon allocates $1B green bond proceeds to renewable energy projects

Read the full story at ESG Dive.

Verizon Communications has invested all of the net proceeds of its nearly $1 billion green bond in renewable energy projects spread across five states, the company announced Monday. The allocation builds on Verizon’s goal to achieve net-zero emissions across its operations by 2035.

The telecommunications provider, which is the second-largest in the country, said it had fully allocated the $994.1 million of net proceeds from its fifth green bond to renewable energy purchase agreements. These agreements cover nearly 0.9 gigawatts of new renewable energy generating capacity, of which 53% is solar energy and 47% is wind energy, according to Verizon.

The REPAs support renewable energy projects being developed in Illinois, Maine, North Dakota, Ohio and West Virginia. Verizon estimates the greenhouse gas emissions that will be slashed due to these green bond-funded projects will amount to 846,009 metric tons of carbon dioxide equivalent, a figure the company says corresponds to the carbon footprint generated by 188,263 passenger vehicles driven and the electricity used by 142,165 homes’ in a year.

Sustainable investments are still rising, so are greenwashing concerns: Morgan Stanley

Read the full story at ESG Dive.

Global investor interest in sustainable investments has continued to rise in the past few years, with 54% of investors anticipating increasing their sustainable investments portfolio in 2024, according to a Morgan Stanley survey.

The survey, released Monday by Morgan Stanley’s Institute for Sustainable Investing, was conducted in October and includes representative samples from the United States, United Kingdom, France, Germany and Sweden, as well as an unrepresentative sample from Japan. The firm said it did not have enough information for the latter to match sample demographics to census data.

Investors have credited new climate science and the performance of sustainable investments as key factors to this rising interest. However, more than 60% of respondents also expressed concerns about greenwashing and the lack of transparency and trust in reported ESG data.