While we wait for COP26 to wrap up on 12th Nov (don’t worry, we will have an edition summarizing key observations), today, we take a look at how climate projects are funded... somebody has to pay for it right?
What to expect today:
If you like the initiative, we request you to forward the newsletter to just ONE of your friends and ask them to sign uphere. Thank you for your ongoing support!
$1,000,000,000,000 Infrastructure bill
Late night on Nov 5, the US Congress passed the biggest infrastructure bill in a decade that provides $1 trillion in nationwide spending on infrastructure. The $1 trillion package would invest in refurbishing aging roads, bridges and ports; easing transportation bottlenecks; replacing harmful lead pipes; expanding internet access; upgrading the nation’s power grid; and boosting infrastructure resilience amid growing concerns over climate change.
How does it address Climate change?
The current infrastructure bill includes many initiatives for clean energy and climate change protections among other things. While we were not able to find exact total dollar amount that will be used specifically for reducing carbon emissions, we found several areas where the bill directly allocates money which can be seen as beneficial for the climate:
$47 billion for “climate resilience”, intended to help communities prepare for the new age of extreme weather
$21 billion in removing pollution from soil and groundwater, job creation in energy communities and a focus on economic and environmental justice
$7.5 billion for electric vehicle charging stations
$5 billion for low-emission or zero-emission school buses
$2.5 billion for ferries
Other investments which are not directly addressing climate change but improved infrastructure would ultimately be better for the environment. These include:
$66 billion in improving Amtrak (Rail transport is far more carbon efficient)
$65 billion investment to upgrade the nation's electricity grid (newer more efficient transmission lines and smart grids are better for the environment)
$39 billion for improving public transportation and making it more disabled friendly (why is public transport better? Check out our previous edition on comparing emissions by mode of transport here)
Who will pay for it?
In the long run - we will pay for it (remember taxes?) In seriousness though, the bill reauthorizes existing federal infrastructure programs for five years and pours an additional $550 billion into projects. including more than $200 billion in repurposed funds originally intended for coronavirus relief but left unused; about $50 billion will come from delaying a Trump-era rule on Medicare rebates; and $50 billion from certain states returning unused unemployment insurance supplemental funds.
The Congressional Budget Office estimates the infrastructure bill could add $256 billion to the nation's budget deficit over the next 10 years, meaning nearly half of the package's proposed new spending could end up tacked on to the nation's $29 trillion debt load.
Financial firms come together
At COP21, The Glasgow Financial Alliance for Net Zero or GFANZ announced that the coalition has grown to over 450 firms. Over $130 trillion of private capital from 450 financial groups is now committed to set net-zero pledges, GFANZ said in a press release on Nov. 3.
How did GFANZ start?
In April 2021, Global financial firms came together to form The Glasgow Financial Alliance for Net Zero or GFANZ, chaired by Mark Carney, UN Special Envoy on Climate Action and Finance, bringing together over 160 firms (together responsible for assets in excess of $70 trillion) from the leading net zero initiatives across the financial system to accelerate the transition to net zero emissions by 2050 at the latest. Currently, over 450 firms from 45 countries, managing $130 trillion in assets, are part of GFANZ - co-chaired by Mark Carney (former Governor of Bank of England) and Michael Bloomberg (hopefully no introduction required here).
Progress so far
Over 90 of the founding institutions of GFANZ have already delivered on setting short-term targets, including 29 asset owners that have committed to reducing portfolio emissions by 25-30% by 2025, as well as 43 asset managers that have published targets for 2030 or sooner. These targets typically include phasing out investments in coal / oil and other sectors which are harmful for the economy.
Not everyone is convinced
Under the terms of GFANZ, signatories must commit to use science-based guidelines to reach net-zero carbon emissions by 2050, and to provide 2030 interim goals. But the proliferation of net-zero commitments is raising concerns around how well the banks, insurers and asset managers are actually following through. An analysis of the holdings of 130 climate-themed funds this summer by London-based think tank InfluenceMap found more than half the funds weren’t as green as they purported to be. Some funds that were classified as “fossil fuel restricted” owned shares of oil refiners and distributors, for example.
VC funding in climate tech
Climate tech start-ups have raised a record $32 billion globally so far in 2021. The amount of venture capital money flowing into climate tech this year has already exceeded the whole of 2020, the report by venture capital analysis firm Dealroom and promotional agency London & Partners said. The investment amount has also quadrupled from 2016 where the total amount invested by VCs in start-ups was just $6.6 billion.
Where is the money flowing?
Between 2016 and 202, climate tech start-ups in the U.S. have raised the most funding at $48 billion, while their equivalents in China, Sweden and the U.K. were next in line with $19 billion, $6 billion and $4 billion respectively. India ranked 9th bringing in about $1 billion rounding up just ahead of Singapore in 10th place attracting about $0.7 billion.
Europe is the fastest growing region in attracting investments in climate tech, increasing investments seven fold from $1.1 billion in 2016 to more than $8 billion in 2021 so far. Bay area and London are the biggest hubs where climate tech startups are located.