Climate Finance Insights

A $125B fund to protect tropical forests is gaining traction, reports Justin Catanoso from #COP16. At COP16 in Colombia, an idea as audacious as it is pragmatic took center stage: the Tropical Forest Finance Facility (TFFF), a potentially transformative step in conservation finance. Conceived as a new model for protecting tropical forests, TFFF aims to establish a reliable, results-based income stream for nations stewarding these biodiverse reserves—essentially treating tropical forests as stakeholders in our planet’s future. Despite a patchwork of conservation funds, financing has simply not kept pace with the rapid rate of forest loss. Enter the TFFF, structured to attract up to $125 billion from a mix of sovereign investors, philanthropies, and private sources. Its ambition is to reward countries for slowing deforestation and safeguarding tropical forests, offering an annual return of $4 billion, contingent upon rigorous satellite monitoring and adherence to conservation targets. While other funds have relied on goodwill and grants, TFFF introduces a model akin to a bond fund, rewarding investors while incentivizing nations to keep forests intact. The initiative’s architects envision a diversified portfolio, combining climate-friendly investments—such as green bonds in developing economies—with fixed-income securities in more established markets, aiming for stable returns to underwrite ambitious payouts. Penalties for deforestation are stringent: each hectare lost forfeits the equivalent of rewards for 100 hectares. Such measures aim to maintain a steady yield over an anticipated 20-year lifecycle, supporting more than 70 tropical nations in preserving, rather than depleting, their natural capital. Beyond its environmental goals, TFFF’s structure addresses the governance and transparency challenges often faced by global finance initiatives. A globally recognized body would oversee fund administration, minimizing political influence and ensuring that proceeds are distributed equitably and transparently. Payments will be tracked and verified, supported by an annual “Global Score Card” to enhance public accountability. If successful, TFFF could represent a shift from traditional conservation financing, creating an asset-backed approach where nature's essential services are finally valued. Tropical forests—indispensable for climate stability, biodiversity, and local livelihoods—have long been absent from balance sheets. As TFFF’s supporters might say, it’s high time forests were valued for their productivity as ecosystems, not just as raw materials. 📰 Catanoso's story: https://lnkd.in/gfmdvyPm Photos: various rainforests I've photographed.

New research from the Cambridge Institute for Sustainability Leadership (CISL)), with risk analysis from global insurance group Howden Group Holdings, demonstrates the transformative economic efficiency of risk-sharing systems to provide vulnerable countries with financial security from climate related disasters. The smallest and most vulnerable countries risk losing over 100% of their GDP from extreme climate shocks next year, according to the findings, which underlines the scale and severity of the risks faced by the Global South. Small Island Developing States (SIDS) and other vulnerable countries bear these overwhelming threats almost alone. This can be solved. The report, which models Loss and Damage (L&D) implementation, reveals these risks are insurable and proposes a solution using the power of (re)insurance and capital markets to dramatically scale up the impact of L&D funding. The modelling shows that the intolerable financial risks faced by this group of countries could be reduced to just 10% of GDP. The research outlines an action plan for L&D implementation across 100 less developed, climate vulnerable countries. It proposes leveraging donor funding to unlock vast sums from (re)insurance and capital markets to provide guaranteed financial protection to exposed communities now, and through to at least 2050.  https://lnkd.in/e-tX4AsP

More than 90% of #ClimateFinance is directed toward mitigation, while frontline communities, especially women, remain dangerously exposed to escalating climate shocks — without the tools to prepare for them or bounce back once they've hit. In Economist Impact, I wrote about the critical link between climate resilience and financial resilience, particularly for women. It’s time to rebalance the conversation around climate finance. Consider this: 1. Less than 10% of total climate finance supports resilience, and far less reaches women. 2. Women are 14 times more likely than men to die in climate-related disasters. 3. 880 million women lack access to digital payments, cutting them off from emergency relief when they need it most. Access to basic #FinancialServices — payments, savings, credit and insurance — are no longer a "nice to have." They are a strategic imperative. If we are serious about climate adaptation and economic stability, we must put women’s financial access at the center of the conversation. Read more: https://lnkd.in/eBFtY6VE

🎉 Today is a historic day for equitable climate action in the U.S. The US Environmental Protection Agency (EPA) announced $20B in transformative funding through the Greenhouse Gas Reduction Fund. This is going to be huge! It's huge for many reasons: reducing carbon emissions, driving investment to marginalized communities, and creating jobs. Here are a few examples of how the funding is going to benefit communities and the planet: 🏠 $2 billion to decarbonize and transform American housing. This funding goes to a powerhouse coalition including Local Initiatives Support Corporation (LISC), United Way, Rewiring America, Enterprise Community Partners, and Habitat for Humanity Power Forward Communities ($2 billion award). At least 75% of investments in low-income and disadvantaged communities. 🏦 $5 Billion to the Coalition for Green Capital to catalyze public-private investing in an existing and growing network of green banks. At least 50% of investments in low-income and disadvantaged communities. 💸 $6.97 Billion to Climate United, a collaboration of Calvert Impact, Self-Help Credit Union, and The Community Preservation Corporation. The program will focus on investing in harder-to-reach market segments like consumers, small businesses, small farms, community facilities, and schools—with at least 60% of its investments in low-income and disadvantaged communities, 20% in rural communities, and 10% in Tribal communities. Big shout out to Elemental Excelerator who is partnering with all three of these winners through the National Climate Investment Fund. But that's not all! 🏦 $6 billion through Clean Communities Investment Accelerator will establish hubs that provide funding and technical assistance to community lenders working in low-income and disadvantaged communities, providing an immediate pathway to deploy projects in those communities while also building capacity of hundreds of community lenders to finance projects for years. 100% of capital under the CCIA is dedicated to low-income and disadvantaged communities. Opportunity Finance Network, Inclusiv, Justice Climate Fund, Appalachian Community Capital, and Native CDFI Network, Inc. will leverage capital deployment and capacity building expertise to drive catalytic impact. For years, the availability of critical financial capital has been a bottleneck to climate action at scale, particularly in marginalized communities. This funding provides a chance to change that dynamic, especially as these public dollars bring multiple times more private capital into the equation. This paradigmatic shift will only reach its potential if these communities and workers can also access the economic benefits of this transition. Every building retrofit, solar installation, and food waste mitigation project requires someone with the skills and job to do the work. Let's go! #climatechange #justtransition #climatefinance #greenjobs

How should banks price the future? Imagine: You’re sitting across from your loan officer, discussing the interest rate on a new business loan. Behind the scenes, The bank isn’t just looking at your credit history; they’re running complex calculations to figure out how likely you are to repay. Now, What if those calculations included your company’s environmental and social practices? This isn’t science fiction it’s where the financial world is heading. Pricing loans and calculating profitability have always been about managing risk. Traditionally, factors like creditworthiness and collateral were the stars of the show. But now, ESG (Environmental, Social, and Governance) metrics are becoming part of the equation. Why? Because ESG risks are real risks. Think about it: A company ignoring environmental regulations could face hefty fines. A business with poor labor practices might experience higher turnover, impacting productivity. These risks affect a company’s ability to repay loans, and banks are starting to notice. Let’s break it down. When a lender sets a loan price, they look at two main factors: 1️⃣ Probability of default (PD): How likely is the borrower to miss payments? 2️⃣ Loss given default (LGD): If they do default, how much will the bank lose? ESG factors can influence both. A business heavily reliant on non-renewable resources might have a higher PD due to potential regulation changes. Meanwhile, a company with strong ESG practices might have more valuable collateral, lowering its LGD. Some banks are already incorporating these considerations into their models. For instance, According to a study by the European Central Bank, companies with poor ESG ratings faced a 20% higher risk of default during the pandemic compared to their peers. This isn’t just theory; it’s happening now. From my perspective, this shift is crucial. As someone deeply invested in sustainability and finance, I see ESG as more than a buzzword it’s a lens through which we can make smarter, more ethical financial decisions. By pricing loans with ESG in mind, banks not only protect themselves but also encourage businesses to operate more responsibly. The future of finance isn’t just about numbers; It’s about values. What do you think? Should ESG risks play a bigger role in loan pricing?

CARB just dropped 3.5 hours of updates on California’s climate disclosure laws. If you missed the public workshop, don’t miss this. Compliance deadlines for companies are holding, but clarity on the final rules are likely delayed until the end of year. Here’s what you need to know and what you can do now to stay on track. 𝗧𝗛𝗘 𝗛𝗘𝗔𝗗𝗟𝗜𝗡𝗘𝗦  • Clarity delayed: While CARB hasn’t officially missed its July 1 target, they are now emphasizing end-of-year delivery for draft rules.   • Deadlines unchanged: Despite the delay, reporting obligations for SB 253 and SB 261 remain intact.   • Final rules likely won’t arrive until 2026: Given required public comment periods, final regulations will likely arrive in late 2025 at the earliest. 𝗦𝗕 𝟮𝟱𝟯: 𝗘𝗺𝗶𝘀𝘀𝗶𝗼𝗻𝘀 𝗗𝗶𝘀𝗰𝗹𝗼𝘀𝘂𝗿𝗲𝘀   • Scope 1 and 2 emissions: due 2026, covering 2025 data   • Scope 3 emissions: due 2027   • CARB will use enforcement discretion in the first year of reporting, companies showing “good faith effort” will not be penalized (although good faith remains undefined)  • Companies “Doing business in CA” may be in scope with as little as $735K in sales or $73K in payroll or property taxes under state tax code reference, bringing even those companies with a modest footprint into scope. 𝗦𝗕 𝟮𝟲𝟭: 𝗖𝗹𝗶𝗺𝗮𝘁𝗲 𝗥𝗶𝘀𝗸 𝗗𝗶𝘀𝗰𝗹𝗼𝘀𝘂𝗿𝗲𝘀   • TCFD-aligned disclosures: currently due January 1, 2026  • Applies to companies with >$500M in revenue   • No implementing guidance yet, but CARB signaled that additional clarity is coming Follow Bespoke ESG to stay informed and let us know if you have any questions!

Venture funding can get a business started, but working capital keeps companies alive. In times of fluctuating federal funding and fleet-footed investors, climate founders need a reliable #workingcapital strategy to extend runway, scale smarter, and avoid unnecessary dilution. We go deep on these under-appreciated financing instruments and the when, what, and how to wield them in Sightline Climate (CTVC)‘s Working Capital Playbook. TLDR: 💳 Debt stabilizes cash flow. Credit lines, term loans & venture debt fund operations but require assets or revenue. 💡 Hybrid instruments bridge early gaps. SAFEs & convertible notes offer flexible funding without immediate dilution. 🏗️ Grants fuel deep tech. Government & catalytic capital de-risk FOAK projects and unlock follow-on investment. 🔄 Creative financing frees up cash. Factoring, revenue-based financing & invoice advances fund growth without equity. 🏛️ Policy & community capital add leverage. Green banks, philanthropy & state incentives provide non-dilutive funding. Nerd out on the full pros & cons analysis, self-assessment questionnaire, and case studies with Enduring Planet, DexMat, Thea Energy, HSBC Innovation Banking, Rondo Energy, and Breakthrough Energy in the report below 👇 https://lnkd.in/ettJuAGv

Just released, 57 banks in the United States could face material financial risk as defined by the SEC. That's what the First Street 11th National Risk Assessment, Portfolio Pressures found. Full download here: https://lnkd.in/eMAs_tGv Using the First Street Correlated Risk Model, we identified the potential climate risk to the loan portfolios of all banks in the United States. Below are the key take aways: 1. Importance of Geographic Diversification: Financial institutions, particularly smaller banks, face higher risks with geographically concentrated portfolios, underscoring the need for strategic diversification to mitigate climate-related financial losses. 2. Comprehensive Climate Scenario Analysis: Effective climate risk assessment requires comprehensive scenario analyses that account for the interactions between different climate perils across various regions and timeframes. 3. Regulatory Challenges: Current regulatory frameworks do not mandate climate scenario analyses for smaller banks, creating a significant gap in climate risk oversight and leaving these institutions unprepared for future climate impacts. 4. Impact on Communities and Property Values: Climate events not only cause immediate losses from physical damage but also have long-term effects on property values and the broader economy, making comprehensive risk assessment crucial for financial stability. 5. Advancement in Risk Modeling: The First Street Correlated Risk Model (FS-CRM) is the climate risk financial modeling (CFRM) tool for a complete understanding of climate risk through the integration of correlations among multiple perils, with the precision of property-specific damage estimates and more accurate projections through the integration of forward looking climate data, a significant industry advancement. all of which allows for a clearer picture of potential financial impacts. 6. Strategic Risk Mitigation: By using advanced models like the FS-CRM, stakeholders can better understand and mitigate the risks associated with climate change, enhancing resilience in both the financial sector and the communities they serve. Reach out if you would like to learn more.

Amidst the conversations around bridging climate finance and gender equality, this insightful The Brookings Institution article highlights a key point: increasing access to finance is not enough. As the world focuses on boosting climate finance, a critical gap remains... the lack of attention to gender inequality. Global reform agendas often overlook barriers women face in accessing resources, leaving vital sectors like small-scale agriculture underfunded. At Grameen Foundation, we address these challenges by: 1.Investing in the power of women farmers with climate-smart tools and financing. 2. Creating gender-focused financial products like gender bonds. 3. Promoting community-based resilience through women-led initiatives. 4. Tackling structural under-investment in women-owned businesses through systemic interventions including focus on men as allies. 5. Advocating for greater focus on adaptation finance to benefit women-dominated sectors like agriculture. Climate action must include gender equality to ensure a sustainable and just transition. Let’s work together to make it happen! #ClimateFinance #GenderEquality #GrameenFoundation #InvestInHERPower

#𝗘𝗦𝗚𝗶𝗻𝗧𝗵𝗿𝗲𝗲: 𝗧𝗵𝗲 𝗦𝗘𝗖 𝗖𝗹𝗶𝗺𝗮𝘁𝗲 𝗥𝘂𝗹𝗲 𝗦𝘁𝗮𝘆 – 𝗻𝗼𝘄 𝘄𝗵𝗮𝘁? On April 4, 2024, the SEC voluntarily stayed the effectiveness of the Climate Disclosure Rule, stating it “will continue vigorously defending the [climate rule’s] validity in court”, but issued the stay to “facilitate the orderly judicial resolution of” challenges presented against the climate rule & avoid “potential regulatory uncertainty if registrants were to become subject to the [climate rule’s] requirements” before the legal challenges were settled. However, this stay 𝙙𝙤𝙚𝙨 𝙣𝙤𝙩 𝙧𝙚𝙫𝙚𝙧𝙨𝙚 𝙤𝙧 𝙘𝙝𝙖𝙣𝙜𝙚 𝙖𝙣𝙮 𝙤𝙛 𝙩𝙝𝙚 𝙧𝙚𝙦𝙪𝙞𝙧𝙚𝙢𝙚𝙣𝙩𝙨 𝙞𝙣 𝙩𝙝𝙚 𝙘𝙡𝙞𝙢𝙖𝙩𝙚 𝙧𝙪𝙡𝙚 𝙤𝙧 𝙞𝙢𝙥𝙖𝙘𝙩 𝙞𝙣 𝙖𝙣𝙮𝙬𝙖𝙮 𝙩𝙝𝙚 𝙎𝙀𝘾’𝙨 𝙚𝙭𝙞𝙨𝙩𝙞𝙣𝙜 2010 𝙞𝙣𝙩𝙚𝙧𝙥𝙧𝙚𝙩𝙞𝙫𝙚 𝙧𝙚𝙡𝙚𝙖𝙨𝙚 𝙤𝙣 𝙘𝙡𝙞𝙢𝙖𝙩𝙚-𝙘𝙝𝙖𝙣𝙜𝙚 𝙙𝙞𝙨𝙘𝙡𝙤𝙨𝙪𝙧𝙚𝙨. So what now for US publicly listed companies? 1. The focus of the stay is on the SEC’s Climate Disclosure Rule, not 𝗺𝗮𝘁𝗲𝗿𝗶𝗮𝗹 𝗰𝗹𝗶𝗺𝗮𝘁𝗲 𝗿𝗶𝘀𝗸 𝗱𝗶𝘀𝗰𝗹𝗼𝘀𝘂𝗿𝗲 – 𝘁𝗵𝗶𝘀 𝗶𝘀 𝘀𝘁𝗶𝗹𝗹 𝗿𝗲𝗾𝘂𝗶𝗿𝗲𝗱. 2. 𝗧𝗵𝗲 𝘀𝘁𝗮𝘆 𝗱𝗼𝗲𝘀 𝗻𝗼𝘁 𝗺𝗲𝗮𝗻 '𝗽𝗲𝗻𝗰𝗶𝗹𝘀 𝗱𝗼𝘄𝗻’, most SEC registrants are subject to climate-related disclosure req under #CSRD & the California climate legislation, both of which will apply in 2025 for many. CSRD is more extensive than the SEC climate rule, requiring assurance over all disclosures rather than only GHG emissions, from the 1st year of reporting. If the SEC climate rule is delayed, many registrants will make CSRD or CA disclosures before providing comparable disclosures in their SEC filings. Additionally, many orgs continue to provide voluntary disclosures (e.g., CDP, TCFD/ISSB) that will be subject to significantly increased scrutiny, & should increase attention to data, governance, processes, & controls over that information given potential future inclusion in an SEC filing. 3. Some ‘𝗻𝗼 𝗿𝗲𝗴𝗿𝗲𝘁𝘀’ moves & questions that boards & mgmt teams can continue to prioritize, through a risk protection lens, now & that I shared on the #ElectricLadies Podcast (https://lnkd.in/gpniqXGV) w/ Joan Michelson (prior to the SEC stay) include: o How well do we understand the financial materiality of climate related risks & existing voluntary climate-related disclosure? o Do we understand how our existing publicly stated (or internal) climate-related targets & goals could trigger disclosure req. under the final SEC climate rule? o Have we engaged our auditor to understand how they will evaluate preparedness for SEC climate disclosures as well as other requirements? Take time now to stress test current climate governance systems. The risk of inaction is not w/o consequences & acting now to deepen understanding of preparedness for disclosure req. can surface opps to get ahead of competitors by strengthening trust with investors & other stakeholders. #deloitteesgnow