Impact Investing | November 3, 2021

Finance to the fore as catalytic climate capital rallies COP26

Amy Cortese
ImpactAlpha Editor

Amy Cortese

ImpactAlpha, Nov. 3 – Pledges and pessimism gave way to concrete commitments of climate capital as world leaders clinched two major agreements before departing the COP26 global climate summit. 

More than 90 countries agreed to cut methane emissions by 30% by 2030. Slashing the short-lived but potent greenhouse gas is considered the most expedient way to slow warming over the next decade.

And a sweeping accord to halt and reverse deforestation by 2030 drew backing from 100 nations representing 85% of the world’s forests, including China, Brazil and Russia, and dozens of corporations and financial firms. 

The Declaration on Forests and Land Use, led by the U.K., is backed by nearly $20 billion in government and private funding to help countries protect or restore 13 million square miles of forests. Additionally, 30 financial firms representing some $8.7 trillion in assets, including Axa, Schroders and Aviva, said they would work to eliminate deforestation from cattle, palm oil, soy and pulp production from their portfolios by 2025.

“This is by far the largest historic commitment for the protection of the world’s forests that we’ve seen,” Eron Bloomgarden of the nonprofit intermediary Emergent told ImpactAlpha. Emergent is coordinating the LEAF Coalition, which is creating a market for forest protection by connecting forest countries and corporations looking to offset their emissions. 

“There have been a lot of conferences and a lot of talk over the last 20 years about forests, but nothing in terms of financial commitments.” 

The LEAF Coalition has mobilized $1 billion from governments and corporations, including new partners BlackRock, Burberry, EY, Inditex, Intertek, SAP, and, to support countries’ deforestation efforts. The coalition will help fulfill the zero-deforestation pledge by engaging corporations to pay countries for verified deforestation reductions through emissions reduction purchase agreements, or ERPAs. 

“These are legally binding commitments from corporations and from donor governments to pay once these emission reduction credits are generated. So this is real money that’s been being committed,” added Bloomgarden, who was in Glasgow for COP.

Other major developments:

Corporate offtakes. Advance purchase or offtake agreements by corporations are emerging as an essential tool in catalyzing decarbonization efforts, in the same way power purchase agreements helped jumpstart the solar industry by guaranteeing buyers for new solar power. The First Movers Coalition, led by the U.S., is lining up corporations to commit to buying low-carbon products to decarbonize their industrial supply chains. Apple, AP Møller–Mærsk, Dalmia Cement, Volvo Group and Fortescue Metals Group are among the participants.

Energy access. The Rockefeller and Ikea foundations and the Bezos Earth Fund launched the Global Energy Alliance for People and Planet to accelerate access to clean energy to one billion energy-poor people around the world, avert four billion tons of carbon emissions and create jobs. The three anchor partners are contributing $1.5 billion in hopes of unlocking $100 billion over the next decade. Also participating are development finance institutions and the governments of the U.K., Italy and Denmark. 

Commercializing climate tech. Citi and the IKEA Foundation are the newest backers of Breakthrough Energy Catalyst, the initiative by Bill Gates’ Breakthrough Energy to mobilize funding to accelerate key climate tech such as clean jet fuel, direct carbon capture, and green hydrogen. The initiative has raised $1.5 billion, a figure Gates expects to double, and would attract 10x that amount in additional financing  

Low carbon infrastructure. BlackRock reached a final fundraise of $673 million for its Climate Finance Partnership, a blended finance fund aimed at accelerating low-carbon infrastructure in developing markets. The German, Japanese and French governments and three foundations put up initial first-loss capital of more than $100 million. That has helped attract new funding from institutional investors, exceeding BlackRock’s $500 million target.

“We could have raised a lot more,” Fink said at the Green Horizon conference. “This is a great example of what public capital can do in leveraging much more.”