Evidence continues to mount that the world needs trillions of dollars worth of green and sustainable investment in coming years, if we are to keep global warming below the 1.5 degree Celsius threshold.
The UN Intergovernmental Panel on Climate Change’s recent report warned of the consequences if 1.5 degrees is breached, including extreme drought, wildfires, floods and food shortages for hundreds of millions of people.
Limiting global warming to 1.5 degrees, the report said, requires “rapid and far-reaching” transitions in how we approach land, energy, industry, buildings, transportation and cities. The IPCC stated that global carbon emissions in 2030 need to be about 50% less than 2010 levels and reach “net zero” by 2050. It also says coal-generated power must be very sharply cut while use of renewable energy more than doubles by 2030, and calls for scaling up of carbon capture technologies.
All this has infused a new sense of urgency into the climate change debate, and is widely expected to catalyze growth in sustainable financing of projects that can decarbonize the economy.
A separate report issued in June by the International Institute for Applied Systems Analysis says an additional $480 billion of investment into low carbon energy and energy efficiency is needed annually through 2030.
The growing realization regarding the risks of climate change is driving new investment activity, corporate commitments, and new sustainable investment funds being offered to institutional investors, as we see in the wide range of sustainable finance news from the month of October, detailed below.
Major oil & gas companies to cut methane emissions by 20%
In September, the Oil & Gas Initiative (OGCI), comprising 13 oil and gas companies that represent a combined one-third of the world’s oil and gas production, pledged to cut methane emissions 20% by 2025 to battle climate change and to support the Paris Agreement. Member companies include BP, Royal Dutch Shell, Chevron, Exxon Mobil, Occidental Petroleum and Total.
OGCI’s $1 billion investment fund, OGCI Climate Investments, was launched in 2016 and focuses on ways the industry can reduce its carbon footprint in its current operations, including recycling and storing CO2 and reducing methane emissions.
The group also created a $100 million China-focused climate investment fund with China National Petroleum Corporation (CNPC). The major investors in the fund are CNPC Asset Management and Climate Investments. The fund will invest in new technologies, including satellite imagery, to help measure and detect methane leaks from pipelines, wells and other infrastructure, according to a statement.
New Sustainable Investment & Fundraising Activity
– San Francisco-based energy efficiency firm Carbon Lighthouse raised $65 million in project funding from Generate Capital. It will use the money to extend its services to 200 to 300 more commercial buildings, up from its current 500. Carbon Lighthouse’s business model is to charge building owners a flat monthly fee to cut their energy costs by 20% to 30% through retrofits such as LED lighting and HVAC system upgrades like sensors and software to manage those systems. The new project funding is in addition to $34.5 million total in growth equity funding it has raised this year, including $7.5 million from CEAS Investments in October.
– Boston-based clean energy investment firm Sunwealth received a $3 million loan from Reinvestment Fund and $3 million in tax-equity investment from private investors. The new funding will support the installation of 2.5 megawatts worth of commercial and residential rooftop solar systems in areas that have been underserved by renewable energy financing to date. Reinvestment Fund, which integrates data, policy and strategic investments to improve the quality of life in low-income neighborhoods, also announced the close of $76 million in general obligation bonds. Investors included insurers, pension funds, donor-advised funds and mutual funds.
– Amazon invested $10 million in New York-based Closed Loop Fund to help increase the availability of curbside recycling for 3 million homes in communities across the country. The investment is expected to divert 1 million tons of recyclable material from landfills and eliminate the equivalent of 2 million metric tons of carbon dioxide by 2028 — the equivalent to shutting down a coal-fired power plant for six months, according to Amazon. Closed Loop Fund is backed by large corporations and provides low interest loans to municipalities and companies for local recycling projects.
– The European Commission and Breakthrough Energy Ventures launched a $115 million joint investment fund called Breakthrough Energy Europe. It will focus on helping innovative European companies develop new clean energy technologies and bring them to market, according to a statement. The $1 billion Breakthrough Energy Ventures was launched in late 2016 by Bill Gates, and is backed by major investors including Vinod Khosla (Khosla Ventures), John Doerr (Kleiner Perkins), Jack Ma (Alibaba), Jeff Bezos (Amazon) and Masayoshi Son (Softbank).
– Vancouver-based cleantech venture capital firm Chrysalix announced the first close of its new Chrysalix RoboValley Fund, which has a target size of $120 million and is the firm’s second fund focused on industrial innovation and IoT. The fund plans to invest in early-stage companies worldwide that are developing technologies in intelligent systems and resource productivity solutions for industries such as energy, mining, mobility, chemicals and materials. Investors in RoboValley include large industrial corporates, which Chrysalix plans to connect with the startups it invests in to develop new partnerships in areas such as data analytics, cloud services and robotics.
– Minneapolis-based North Sky Capital, with $1.2 billion under management, has raised $63 million of its planned $100 million for its new Clean Growth Fund V, according to an SEC filing. The fund plans to acquire limited partnership interests in other professionally managed clean technology, ESG and infrastructure funds.
– ArcTern Ventures, a Canadian clean tech venture capital firm, announced the first close of its second cleantech fund, with pension fund Ontario Municipal Employees Retirement System and Equinor Energy Ventures, formerly Statoil, as anchor investors. ArcTern raised $46 million of its target $76 million and expects to hold a final closing in the near future, with a maximum target of $114 million.
– Azure Power, one of India’s largest independent solar power developers, raised $100 million from Caisse de dépôt et placement du Québec (CDPQ), Canada’s second-largest public pension. CDPQ has invested a total of $240 million into Azure and owns 40% of the firm.
– CDPQ and Generation Investment Management, the firm co-founded by Al Gore, launched a long-term sustainable investing partnership and plans to invest $3 billion into private equity investments with a duration of 8 to 15 years, a longer period than typical private equity investments but one that the two companies say better suits the objectives of sustainable value creation to build successful long-term businesses. The firms say they will integrate ESG principles and target investments that are a net positive for the environment, will benefit society and, in many cases, use technology as a key factor for driving change.
– Redwood City, Calif.-based DC Systems, a provider of utility-grade smart energy applications for optimizing grid operations, raised $4 million in venture funding, led by WindSail Capital Group, a Boston-based private equity firm focused on energy innovation and sustainability. DC Systems works with utilities, large power producers and energy users, and has more than 100 utility customers and 400 projects worldwide, providing real-time intelligent control, secure communications and monitoring of centralized and aggregated decentralized grid assets.
– Volvo invested in EV charging startup FreeWire Technologies through its Volvo Cars Tech Fund. San Francisco-based FreeWire’s charging stations use low-voltage power to allow operators to use existing power outlets and more easily adopt its systems and, according to Volvo, is a “pioneer in flexible fast charging technology for electric cars.” FreeWire has raised over $15.2 million in venture funding, including $5 million from BP Ventures in a Series A round in January. At the time, BP announced plans to roll out FreeWire’s EV charging units at selected BP gas stations in the UK and Europe.