What we're reading about, 4/12/24
Climate, energy, and sustainability coverage we've been following around the web
(1) The US Environmental Protection Agency (EPA) awarded $20 billion in funding to nonprofit financial institutions under two grant programs, the $14 billion National Clean Investment Fund (NCIF) and $6 billion Clean Communities Investment Accelerator (CCIA). The awardees - mostly community development financial institutions (CDFIs) - will offer affordable loans for “clean technology projects.” The funds are modeled after the “green bank” concept - public and non-profit entities that finance rooftop solar panels, building retrofits, heat pumps, and EV charging stations (Canary Media).
(EPA)
Awards have yet to be announced for the $7 billion Solar for All program, which like the NCIF and CCIA, will offer grant funding to nonprofit lenders. Reed Hundt, a former chair of the Federal Communications Commission (FCC), and the co-founder of the Coalition for Green Capital, was quoted in the press saying that the nonprofits in their network have a ~$30 billion pipeline of vetted projects that they want to fund (as against the ~$5 billion award they received from the EPA).
As of 2020, US CDFIs held ~$152 billion in assets, and had total equity of ~$21 billion (a 7.1x ratio). This is probably the basis for the EPA’s stated goal of achieving a “private capital mobilization ratio” of 7:1. Like traditional banks, CDFIs lever up a small sliver of equity financing with deposits and other borrowing. The EPA administrator, Michael Regan, was quoted in the NYT saying that the grant programs would “unleash tens of thousands of clean technology projects like putting solar on small businesses, electrifying affordable housing, providing EV loans for young families, and countless others.”
That all hinges on whether the CDFI sector has enough access to private capital - and organizational capacity - to basically double the sector’s total equity capital with the stroke of a pen. All in all, the Biden administration appears to be moving quickly to distribute the funding before election season. The section of the IRA that establishes the EPA funds states that they “will remain available until September 30, 2024.”
(2) March marked the 10th “warmest ever” month in a row (Axios). March 2024 was an estimated 0.73 C above the average March temperature for 1991 to 2020, and 1.68 C above pre-industrial levels (1850 to 1900).
(3) “What if global emissions went down instead of up?” asks the Financial Times’ Pilita Clark in a new opinion piece. Paraphrasing Nat Keohane, a former advisor to the Obama White House, she suggests that a (non-pandemic-driven) year of declining emissions “would show that the fight against global warming was winnable, not a futile, pointless quest.”
(4) A new InfluenceMap report calls out 57 “carbon majors” that produced 80 percent of the world’s emissions (including Scope 3) between 2016 and 2022. Notably, the three biggest players on the list were all state-owned companies - Saudi Aramco, Gazprom, and Coal India. Perhaps more interesting than the headline finding is the data set that Influence Map put together, with production data from coal and oil & gas companies going back in some cases to the mid-19th century.
(5) The SEC is pausing the rollout of its new climate-related disclosure rules as the Eighth Circuit Court of Appeals reviews several petitions seeking a stay of the final rules. “In issuing a stay, the Commission is not departing from its view that the Final Rules are consistent with applicable law,” the SEC’s pause order said. “Thus, the Commission will continue vigorously defending the Final Rules’ validity in court.”
(6) The UK government is launching a new “Transition Plan Taskforce” to rethink corporate climate disclosures, and to harmonize transition plan reporting so that it’s more comparable across companies, per the Financial Times. But the TPT is entering an already crowded field of reporting principles and target-setting approaches. Oxford sustainable finance professor Ben Caldecott told the FT that the guidance is “more about creating a framework over the short, medium or long term [for users] to deliver their existing commitments… than saying there is one particular set of targets you need for this to count as a credible transition plan.”
(7) Bloomberg reported on a closed-door meeting back in February where a UBS banker told the assembled central bankers and regulators that the financial industry is “living and lending on planet Earth, not planet NGFS [the Network for Greening the Financial System].” In other words, banks and other financial institutions are getting increasingly restless about being asked to align their lending and underwriting with a 1.5C scenario, when the world is on track for 2.8C of warming. Relatedly, Bloomberg also reports that the US Fed is clashing with the European Central Bank (ECB) over a proposed rule that would require lenders to disclose transition strategies.
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