Eka’s Weekly Roundup (11 November 2022)
Issue 8 l COP 27: Implementation > Commitments
Action has been the key focus so far at COP27. Talks and panels have focussed on progress since COP26, rather than re-setting multiple targets. We’ve been following discussions closely, and pulled out a few recurring themes from the initial days of the conference.
Shifting to execution at COP 27 🗞️
🌎 Power of markets in climate change
Al Gore gave a powerful interview on the potential power of markets in addressing climate change.
The good news. He was optimistic that 90% of new electricity generation projects were renewable, which has seen a significant decrease in cost. The decrease is mainly around new renewable projects having lower discount rates than fossil fuel projects which may themselves have much lower terminal values.
The bad news. Al Gore pointed to a mismatch between emissions and funding capacities: 90% of future emissions will come from LEDC countries compared to the 86% of funding coming from the private sector, usually located in the OECD countries.
How to fix it. As with other attendees, Al Gore called for increased reform around the World Bank’s leveraging, drawdown policies, and capital flows internationally around climate. As a reminder, the World Bank’s director was previously accused of climate denial earlier in the year.
🚧 Matching capital with projects
Finance Day focussed on funding opportunities and challenges around climate. UN experts published a list of projects worth $120b aimed at projects in developing countries to cut emissions and start adaptation projects.
Another report released on Tuesday suggested $1tn was needed in external financing every year by 2030, matched with their own funds, to prevent runaway climate change. This is in stark contrast with the leading development banks issuing $51b in debt in 2021, of which private investors were only $13b (note these relate to different types of projects than the implied private market split in the previous section).
The Emissions Gap Report went further, calling for at least $4-6tn a year to transform our current economy to a low-carbon economy. In the context of total global AUM this is quite small a(1.5-2%), but would be significant as incremental climate resources: +20 to +28% according to the report. The graph below is a helpful illustration of the funding gap across sectors and economies.
💸 Fundraising for climate
There were a few themes around climate fundraising:
Energy Transition Accelerator. John Kerry unveiled the US’s Energy Transition Accelerator in a bit to finance the clean energy transition (in partnership with the Rockefeller Foundation and the Bezos Earth Fund). The partnership will work like the carbon offset markets, by trying to avoid leakage and align with local strategies around climate. The initiative had mixed reviews at launch: supporters call out the scale of the ETA as encouraging in the context of the US’s previous silence around climate change, while critics doubt if voluntary carbon markets achieve material impact for the most vulnerable.
Revisiting the $100b goal from COP26. Under the Paris Agreement, developed countries had pledged $100b per year for developing countries to a) cut greenhouse gas emissions b) fund mitigation & adaptation policies. This was only $83b back in 2020 according to the OECD report released earlier this year.
🇬🇧 What has the UK said?
The PM launched a new climate package at COP27. This includes:
£66m for clean energy and green tech innovation and clean energy investments in Kenya and Egypt.
£150m for rainforest protection through a Forests and Climate Leaders’ Partnership. This includes the Congo Basin and Amazon.
Climate Resilient Debt Clauses as described by Treasury Minister James Cartlidge. He outlined key design principles for CRDCs in private sector lending, and called for a wider variety of creditors (including private banks, bilateral lenders, and international financial institutions) to adopt these clauses.
US & UK energy deal is set to be in the final stages of talks, where the US could sell as much as 10b cubic meters of liquefied gas to the UK over the next year.
🤔 So … are we hopeful?
GlobalData suggests that environment-focused tech companies have raised over $2.4b in 2022 YTD. Of this, $1.5b was from venture capital funding rounds. PwC’s State of Climate Tech suggested this number was closer to $50b this year. That’s still small compared to the suggested $1-4tn annual figure suggested in the latest Emissions Gap report.
However, early stage private capital is only one part of the climate puzzle. As we’ve previously written, decarbonisation is a team sport, and all stakeholders need to come together to solve the climate crisis. The current data is not promising, but we remain strongly optimistic around future potential for disruption in climate tech.
3 Key Charts 📊
1. Increase in prevalence of depressive episodes in young adults
2. Spend across the UK has seen diverging recovery rates by area
3. Watch out for country targets
Deal Capture 💰
Deals in the impact space across the UK and Europe
Cement decarbonisation start-up Carbon Re raised £4.2m. Led by Planet A Ventures.
Net zero intelligence company Faradai raised £2.1m. Funding from Sangha Capital, Edenbase, ACTAI Ventures, Goldacre, and EthAum Ventures.
Second hand fashion marketplace Faume raised €7m. Included Daphni and Bpifrance Digital Ventures.
Health monitoring company Kalium Health raised £1m. Included Kidney Research UK and Martlet Capital.
Video therapy app MyndUp raised £4m in its Series A. Included family offices and angels.
Ocean tech company SeaQurrent raised €5m. Included EIT InnoEnergy and PMH Investments.
Upcoming Events… ⌛
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… and Getting in Touch 👋
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