A Surge in Green Financing Boosts Climate Businesses: Renewables, Heavy Industry Efficiencies and Novel Transport Ideas Are Attracting Mainstream Investors

Business News/Analysis, Funding/Financing/Investing, United Arab Emirates UAE

January 28, 2021

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by Steven Mufson (Washington Post) … But now, as the cost of renewable energy plummets and awareness of the magnitude of climate change grows, market forces are luring investors into all sorts of “green” finance, nearly doubling the size of green bonds and green equity funds. These investors are looking up and down supply chains and searching not only for established companies, but also for innovative ones at early stages of development.

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Biden’s plan still will provide only a small part of the investment needed to slow climate change.

The International Energy Agency estimates that global investment in low-carbon energy will have to increase 2½ times by 2030 from its current level of about $620 billion a year to meet targets in the Paris climate agreement.

Private capital is essential to meet those targets, and the money has started to flow.

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Many people are urging Biden to ask Congress for money to start green banks that could unlock even more private capital. (Supporters often call these institutions “accelerators” to make them more appealing to lawmakers.)

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And Etihad Airways, a flagship airline of the United Arab Emirates, last October sold a $600 million five-year Islamic bond — which does not offer conventional interest in keeping with Islamic law — to help decarbonize its fleet and purchase carbon offsets. The loan carries penalties if the airline fails to meet its targets.

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The realm of climate finance does have its own controversies. PepsiCo, for example, issued a $1 billion green bond, much of which went to buying recycled plastic. Many investors said that PepsiCo would have had to buy that recycled plastic anyway and that Pepsi was engaged in greenwashing. The bond offering was excluded from some green bond indexes.

The company, in a green bond annual report, countered that “by displacing virgin plastic with recycled plastic, PepsiCo can help to reduce plastic waste while lowering our dependency on non-renewable fossil resources and boosting the carbon and resource efficiency of our packaging.” It said it was lowering greenhouse gas emissions and saving energy.

Many investors also have steered away from financing green buildings at airports, asserting that they only lure passengers to planes that spew greenhouse gases.

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A handful of the big oil and natural gas companies, such as BP and Total, whose capital investment budgets dwarf those of most companies, are increasing their investments in solar and wind. READ MORE

BlackRock’s Message to Companies: Adapt or Die (Our DailyPlanet)

Etihad raises $1.2 billion in aviation’s first-ever sustainability-linked loan tied to ESG targets (GreenAir Online)

Excerpt from GreenAir Online: Etihad Airways has secured $1.2 billion through its first sustainability-linked loan (SLL) tied to environmental, social and governance targets (ESG), its third sustainable financing deal. The airline reported the transaction as the largest of its kind so far, taking to over $1.9 billion the total funds it has raised through ‘green’ instruments since 2019, and claims it is the first-ever SLL tied to ESG targets in the aviation sector, writes Tony Harrington. The national airline of the United Arab Emirates said the funds would be used for multiple, undisclosed initiatives as part of its Greenliner sustainability programme, through which it works with partners within and outside the aviation sector to reduce emissions. The funding partners for the loan were HSBC and First Abu Dhabi Bank, which structured and coordinated the deal. Etihad has committed to achieving net zero carbon emissions by 2050, with interim milestone goals set for 2025 and 2035. READ MORE

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