Committing to Climate-Positive Project Finance Bob Hinkle

January 4th, 2021


The world of project finance has a distinct opportunity—and responsibility—to commit its expertise and resources to climate positive investing and ensure that we are doing our part to decarbonize the built environment. As an industry, we must recognize the urgency of the climate crisis and quickly act to put forward enduring, sustainable energy investment structures as well as programmatic financing solutions that are designed to enable businesses, schools, and hospitals to decarbonize their operations.

Carbon-neutral options

Carbon neutral, and even carbon negative, operations are becoming the new baseline across campuses and corporate facilities alike. As companies are forging ahead and committing to carbon neutral operations; some have plans on how they will fund it, but many don’t. A growing list of major companies — including Anheuser-Busch, General Mills, Danone, L’Oréal, Microsoft, Timberland and Walmart (among others) — have even set their sights on moving beyond net zero impacts to having a regenerative effect on the natural environment.

Investing in climate change solutions

As companies embark on these ambitious plans, they will require significant amounts of (both internal and external) capital to finance and fund sustainable energy upgrade programs that bundle a wide range of energy efficiency and clean energy measures together.

The tenets of climate-positive investing

Project finance can play an important role by making climate positive investments that adhere to the following tenets:

  • Commit to funding projects that reduce direct emissions (Scope 1) within a customer’s operations and built environment. Once direct emissions have been addressed, investments should move on to address electricity supply (Scope 2) and indirect emissions (Scope 3).
  • Offer programmatic financing solutions that add scale and speed to the implementation of projects and sustainability initiatives across a portfolio of facilities.
  • Provide a range of solutions that meet corporate requirements with respect to capital expenditures, accounting treatment, and outsourcing or direct control of assets.
  • Finance projects that bundle sustainable energy technologies (energy efficiency, renewables and electric vehicle (EV) charging infrastructure) and sites with varying economic profiles into a single investment to increase realized reductions in CO2 emissions.
  • Incorporate carbon reduction into the metrics by which project investments are evaluated to integrate environmental value into decision-making processes.

The profitability of investing in energy efficiency

Committing to climate positive investments shouldn’t be a radical idea. It is profitable from both a micro and macro level investment perspective. If a project emits more carbon than it saves, it not only harms our planet for generations to come, but it also carries a huge, long-lasting economic cost. In the last five years alone, the U.S. has experienced more than $500 billion in losses directly from climate-fueled weather disasters. Climate change, however, also represents the largest single investment opportunity of the 21st century. The Ceres Clean Trillion initiative highlights the need for an additional $1 trillion per year in clean energy investment to limit global temperature rise to below 1.5 degrees Celsius. These investments will not only combat climate change but carry attractive returns for investors and large-scale economic gains for businesses, schools, hospitals, cities and states.

Climate-positive project finance

The time is now to establish industry standards for climate positive project finance; it is better for the environment, and better for the bottom line. We can’t afford to wait, and the market is more than ready.

This post was originally published in Greenbiz on December 10, 2020.