TBLI Weekly - July 25th, 2023


TBLI Weekly - July 25th, 2023

Your weekly guide to Sustainable Investment


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How Web3 can accelerate climate finance and help save our warming planet: Opinion

by ELIZABETH TAN - Forkast News

$1 trillion in capital is needed to fight climate change, but investment money is sitting on the sidelines, going unused. How can we close this funding gap?

As heatwaves and flooding dominate headlines, new estimates suggest that US$1 trillion in annual investment is needed to help developing countries fight climate change. Climate finance is supposed to help bridge this gap, but a reliance on governments and institutions has resulted in false promises and missed obligations. Other sources of capital are desperately needed if we’re going to stand any chance of meeting these funding requirements.

Enter retail investors.

We know that retail investors want access to sustainable investments. In Standard Chartered’s “Sustainable Banking Report 2022: Mobilising retail investor capital through sustainable investing,” the bank found that US$8.2 trillion of “investable retail wealth” is sitting on the sidelines waiting for the opportunity to be deployed for sustainable causes like the fight against climate change.

There are a few reasons why this number is so large, but the one I find most poignant is the lack of investment opportunities. Retail investors simply don’t have access to the type of investments — such as renewable energy, reforestation and preservation — where real impact can be made. Instead, they are presented with “sustainable” exchange-traded funds (ETFs) that give them exposure to companies striving toward net zero — a very indirect and carbon-focused way of taking action against climate change.

This is where Web3 can and needs to help. If implemented in tandem with clear regulations, Web3 solutions can provide the kind of direct bridge between retail investor capital and climate finance that will enable the potential deployment of trillions of dollars. Tokenized assets and decentralized autonomous organizations can act as investment vehicles, while access to the billion-dollar green bond sector can be democratized. And it can all be built on top of funding infrastructure like launchpads.

Tokenized climate assets

When I use the term “climate asset,” I mean any on- or off-chain asset that is related to climate action. Things like renewable energy credits, carbon credits, equity in climate projects and green bonds. The problem is that virtually all off-chain climate assets are inaccessible to retail investors. Getting these assets on-chain — whether bridging from off-chain or issuing natively on-chain — is the first step toward democratizing access, leveraging fractionalization, and creating new asset classes.

Once on-chain, these assets can be integrated into new and innovative solutions, particularly in decentralized finance. Climate index funds, carbon credit futures and climate-asset-backed stablecoins are just a few of the possibilities. Imagine being able to hold a stablecoin that earns interest based on revenue from on-chain carbon credit sales.

Special-purpose DAOs

One of the most positive things to come out of the summer of decentralized autonomous organizations (DAOs) was the idea that a group of individuals scattered around the world could coalesce energy and funding around a particular cause. The underlying governance mechanism enabled the funds to be managed responsibly and transparently, while advances in legislation meant that a DAO could have the same legal rights as a traditional off-chain entity. An added benefit of these DAOs is that they are a low-friction way to get new users onboarded to Web3.

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India increases ESG strategies available to mutual funds

By: Michael Nelson - ESG Clarity

The measures are designed to facilitate an increase in green investment

India’s financial regulator, the Securities and Exchange Board of India (Sebi), has created a set of sub-categories for mutual funds interested in investing in ESG initiatives to address an increasing need for sustainable finance.

Following recommendations from the regulator’s ESG advisory committee, it has decided to allow six types of ESG equity strategies for mutual funds: exclusion; integration; best-in-class and positive screening; impact investing; sustainable objectives; or transition-related investments.

At present, mutual funds are only permitted to launch one of these strategies. Under the new rules, however, managers will be allowed to launch multiple strategies.

A minimum of 80% of the total assets under management (AUM) within any of these strategies has to be invested in line with its ESG requirements, while the remaining 20% can be outside that, as long as it’s not something that directly contradicts its ESG investments.

Sebi has also said 65% of AUM has to be invested in companies that are reporting on comprehensive Business Responsibility and Sustainability Reporting, providing assurance on such disclosures. This comes into effect from 1 October 2024, with those not in compliance expected to ensure they will be by 30 September 2025.

Asset management companies will also be expected to obtain independent reasonable assurance annually to show that their funds comply with these rules. These assurances will be on a ‘comply or explain’ basis for the 2022-2023 financial year and then become mandatory.


Price, speed, quality – and now carbon. Australia to measure indirect emissions from public works

By: - The Guardian

Emissions from materials and vehicles used in infrastructure construction will soon be measured consistently across Australia so governments can consider pollution, as well as cost, speed of completion and build quality of construction firms’ competing bids.

The commonwealth and states and territories have endorsed a plan from the New South Wales government to decarbonise infrastructure projects, a key part of which is measuring and valuing embodied emissions.

In construction, embodied emissions refers to the carbon emitted through the production and transportation of materials such as concrete and steel, as well as from a project’s eventual decommissioning.

Unlike emissions generated directly by a project’s function – on a railway line, for example, the diesel or electricity used to power the rolling stock – embodied emissions have been notoriously difficult to measure and have largely not been factored into the bidding process.

Industry and climate advocates have warned that construction companies have had little incentive to innovate their supply chain and design choices to minimise indirect emissions.

These emissions are thought to account for up to 10% of Australia’s total emissions, according to government estimates, and are considered important to address for the country and states to meet net zero commitments.

NSW has been a frontrunner in planning to tackle embodied emissions, with the infrastructure minister in the former Coalition government, Rob Stokes, outlining a plan last year to reduce the emissions inpublic works by 2027.

The plan has been continued by the Labor government and transport minister, Jo Haylen.

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One year old, US climate law is already turbocharging clean energy technology


FRANKFORT, Ky. (AP) — On a recent day under the July sun, three men heaved solar panels onto the roof of a roomy, two-story house near the banks of the Kentucky River, a few miles upstream from the state capitol where lawmakers have promoted coal for more than a century.

The U.S. climate law that passed one year ago offers a 30% discount off this installation via a tax credit, and that’s helping push clean energy even into places where coal still provides cheap electricity. For Heather Baggett’s family in Frankfort, it was a good deal.

“For us, it’s not politically motivated,” said Baggett. “It really came down to financially, it made sense.”

On August 16, after the hottest June ever recorded and a scorching July, America’s long-sought response to climate change, the Inflation Reduction Act, turns one year old. In less than a year it has prompted investment in a massive buildout of battery and EV manufacturing across the states. Nearly 80 major clean energy manufacturing facilities have been announced, an investment equal to the previous seven years combined, according to the American Clean Power Association.

“It seems like every week there’s a new factory facility somewhere” being announced, said Jesse Jenkins, a professor at Princeton and leader of the REPEAT Project which has been deeply involved in analysis of the law.

“We’ve been talking about bringing manufacturing jobs back to America for my entire life. We’re finally doing it, right? That’s pretty exciting,” he said.

The IRA is America’s most significant response to climate change, after decades of lobbying by oil, gas and coal interests stalled action, while carbon emissions climbed, creating a hotter, more dangerous world. It is designed to spur clean energy buildout on a scale that will bend the arc of U.S. greenhouse gas emissions. It also aims to build domestic supply chains to reverse China’s and other nations’ early domination of this vital sector.

One target of the law is cleaner transportation, the largest source of climate pollution for the U.S. Siemens, one of the biggest tech companies in the world, produces charging stations for EVs. Executives say this alignment of U.S. policy on climate is driving higher demand for batteries.

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Heathrow asks airlines to carry excess fuel despite carbon impact

By: - The Guardian

Airport cites supply issues, but says there has been no impact on passengers or flights

Airlines flying to Heathrow have been told to carry as much fuel as possible in their tanks because of supply problems at Britain’s largest airport, in a controversial practice that can increase carbon emissions.

The airport asked airlines to carry excess fuel on the way to London and to avoid carrying too much when departing, citing supply issues, in a notice sent on Sunday. The notice covered nine days from Sunday 23 July to Monday 31 July.

Heathrow said there had been no impact on passengers or flights from the request.

Fuel tankering is controversial because the practice significantly increases the weight of kerosene stored in the aircraft’s wings. That extra weight increases the amount of fuel burned on a flight, and therefore its carbon footprint. Yet despite the extra cost and carbon emissions, it can be financially worthwhile for airlines if fuel is cheaper at one airport than at another.

In Europe alone the practice produces 900,000 tonnes of unnecessary carbon emissions a year – equivalent to about 2,800 flights between Paris and New York – according to a 2019 study by Eurocontrol, an air traffic controllers’ group. The main reason for tankering was to avoid higher prices at some airports, saving airlines a combined €265m (£229m), Eurocontrol said, although airlines also used it occasionally if strikes threatened to disrupt refuelling.

British Airways, the UK’s flag carrier airline, is among companies that have previously been accused of regular tankering. The Times last month reported that BA had regularly used fuel tankering since 2019, when it had promised to “review” the practice after a BBC Panorama investigation.

The world’s bestselling plane, the Airbus A320, has the capacity to carry upwards of 24,000 litres of fuel, weighing 19 tonnes, in tanks in its wings and the main body of the plane. For shorter routes not all of the capacity would be required.

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