Carbon Outlook

Newsletter Issue 04/28/24

Originally published as a part of the NyxCarbon Quarterly Newsletter: https://share.hsforms.com/1YXfQ9Z8YRY2fuFz4Kwu3Vgcdvye

“We think we believe what we know,
but we only truly believe what we feel.”

Laurence Gonzales, Deep Survival

Anyone following corporate reporting over the past couple of months is recovering from whiplash. The US SEC almost made a lot of progress on climate related financial disclosure. The climate rule holds companies accountable for reporting emissions, (aka pollution) that can impact a company’s ability to make money. Pushback against the decision was expected, especially from US States that are heavily reliant on businesses that struggle to reduce pollution. Those who are familiar with the legal process are hopeful that the ruling will be enforced.

There was also drama in the world of companies who go out of their way to voluntarily report on pollution when the hawks 🦅 of emissions reporting almost made friends with the doves in the carbon market 🕊️. The Science Based Target Initiative (SBTi) is a well respected organization that holds corporates accountable for their sustainability commitments. Earlier this month, SBTi dropped news that they will explore how market incentives, like environmental credits, could play a role in mitigating climate change.

The news caused a lot of drama among staff and the tea went straight to social media. Those who take issue with this stance believe that companies will lose motivation to reduce the environmental impact of their operations. Those who view environmental credits favorably, see them as a way to increase investment in solutions that help the world adapt to climate change. According to MSCI, if SBTi allowed for the use of credits to cover just 50% of Scope 3 emissions (pollution created by a company’s customers and service providers), there could be an additional $19B USD for carbon removal and ecosystem restoration.

Luckily, the back and forth on reporting doesn’t seem to impact the speed of innovation in climate. While disclosure requirements would create extra motivation for companies to reduce their environmental impact, even without them, there is a solid community of builders, do-ers, and stubborn optimists who won’t take impossible for an answer. Demand for carbon removal and ecosystem restoration continues as companies set sustainability commitments and governments create budgets for environmental services.

At a national level, the US is buying $35M of carbon removal credits. On top of that, the US Department of Energy is in the process of awarding $1.3M to carbon removal innovation platforms like New Lab and gener8tor. Nature-based solutions like forest and watershed restoration will get a boost with a recent $95M commitment through Investing in America. April also brought news of $14B allocated to non-profit banks as part of the National Clean Investment Fund. The funding is designed to decrease the risk of private investment in commercially viable solutions that “reduce or avoid” pollution, with the overall goal of lower the cost of project finance. 🎉

Investment in the US is complemented by the European market as well. Denmark just decided to make a $23.75M purchase of removal credits. Plus, Klarna is making moves with a $700K Climate Transformation Fund that will be used for investments in ecosystem restoration, carbon removal, and technology that can lower the environmental impact of business operations. Anyone curious about corporate moves in this space should check out the “internal carbon tax” Klarna used. It was implemented to create a clear link between the company’s environmental impact and investment into solutions that reduce pollution.

All of this is taking place while institutional investors become more rigorous in their ability to link positive environmental impact to new financing opportunities. The UN-Convened Net-Zero Asset Owner Alliance which makes up 89 institutional investors, with $9.5T in assets under management, reaffirmed their commitment to decreasing the negative environmental impact of their work. HASI’s Carbon Count facility is an example of one of the many ways these commitments can be carried out.

It’s true that the lagging pace of disclosure requirements does not sit well with anyone who feels an underlying sense of urgency brought on by climate change. But as Shunryu Suzuki said “In the beginner’s mind there are many possibilities. In the expert’s mind, there are few.” Increased investment in climate solutions will continue to create new opportunities for every sector of the economy, leaving room for an optimistic mindset.

About NyxCarbon

NyxCarbon streamlines lending to companies with sustainability-linked business models, like carbon removal and ecosystem restoration. The platform simples loan servicing and gives companies access to project finance at the earliest stages.

• Financial institutions and asset managers can scope out new lending opportunities in carbon removal and ecosystem restoration. They can also use the end-to-end solution for support with underwriting and loan servicing.
• Companies seeking project finance can create a profile to get in front of financial institutions and asset managers. (For free!)