Climate Technology Finance

📣 Breaking Down Capital Structure in #ClimateTech Startups Understanding the capital structure in climate tech #startups, particularly those hardware-based, can differ greatly from digital startups. 👇 Hers’s an illustration of the evolution of capital types over time - equity, grants, and debt - with actual 💶 figures. Key takeaway: The name of the game is Non-Dilutive Capital ⭐ 1️⃣ Embrace Non-Dilutive Capital: Scaling with equity alone is a non-starter. There's insufficient climate-dedicated VC money out there and it's far from the most efficient way to finance CAPEX due to ownership dilution and the Cost of Equity. 2️⃣ Optimise Timing: With careful planning, each funding round can be delayed, allowing your company value to mature by achieving higher TRLs. Leverage grants wisely and delay equity funding rounds. 3️⃣ Strike a Balance with Grants: While grants are attractive, an overdose can divert you from your main focus of selling products and turn you into an R&D centre. Exercise caution! 4️⃣ Consider Debt Early: It's rocket fuel for growth. Proper measures can ensure you secure it even before hitting TRL9. 💡Tips for Raising Non-Dilutive Capital: General: - Begin early, it takes time - Build a solid funnel (4:1 ratio is a good rule) - Engage experts, it saves time and ups your chances Grants: - Be prepared to have some fresh equity to unlock certain grants - Participate in competitions - every sum counts and it's free exposure! Debt: - Sign off-takes to significantly boost your chances - Get in touch with your regional bank - they look at more than just ROI. It's time to rethink and redesign your capital strategy! #venturecapital #funding #innovation

📊 Exciting new research from the European Central Bank (ECB) sheds light on how banks are pricing climate risk in their lending practices! 🌿 In their working paper, Carlo Altavilla, Miguel Boucinha, Marco Pagano, and Andrea Polo combine euro-area credit register data with carbon emission information to uncover fascinating insights into the intersection of finance and climate change. 🏦 The study finds that banks are indeed factoring climate risk into their lending decisions. Firms with higher carbon emissions face higher interest rates, while those committed to reducing emissions enjoy lower rates. Interestingly, banks that have publicly committed to decarbonization goals (through initiatives like Science Based Targets initiative) are even more aggressive in this pricing strategy. 💶 But here's where it gets really intriguing: the researchers uncovered a "climate risk-taking channel" of monetary policy. When the ECB tightens monetary policy, banks not only increase their overall credit risk premiums but also amplify their climate risk premiums. This means that during periods of monetary tightening, high-emission firms face a double whammy of increased borrowing costs and reduced access to credit compared to their greener counterparts. The authors argue that while restrictive monetary policy may slow down overall decarbonization efforts, it inadvertently creates a more favourable environment for low-emission firms and those committed to going green. 🌍 These findings are crucial for understanding how the financial sector is adapting to climate change and how monetary policy interacts with climate-related financial risks. It's also clear that the greening of finance is not just a trend, but a fundamental shift in how risk is assessed and priced in our economy. #ClimateFinance #SustainableBanking #MonetaryPolicy #ECB #GreenEconomy #ClimateRisk

Nature finance has an investability problem disguised as a data problem. A few years ago, it was reasonable to argue that nature markets lacked data, tools and MRV infrastructure. Today we have more frameworks, more nature-risk tools, more disclosure initiatives, more MRV providers, more biodiversity datasets, and a growing number of MRV nature-tech startups. And yet, capital is still not flowing at anything close to the scale required. So maybe the bottleneck was never just “more and better data”. Maybe the harder issue is that many nature-related investments still do not fit into the underwriting frameworks investors know and is able/comfortable investing in. The risks are real. The timelines are long. The projects are often small or highly site-specific. Many benefits have no obvious buyer, no contracted revenue stream, and no clear market price. And in many cases, the cost of measuring and verifying outcomes can be material relative to the financial value created. That does not mean nature cannot be investable. Timberland and sustainable forestry have long been investable. I am quite proud of the work we have been able to do at BTG Pactual Timberland Investment Group making nature posetive outcomes investable. Structured the right way investments can have outsized nature and climate outcomes. Not all nature outcomes are investable simply because they are measurable. and MRV is not a business model in it self. • A dashboard does not create a buyer. • A biodiversity metric does not create cash flow. • More granular data does not automatically make a project investable. I think we sometimes overstate the data gap because it is the easier gap to talk about. It is easier to say "𝘸𝘦 𝘯𝘦𝘦𝘥 𝘣𝘦𝘵𝘵𝘦𝘳 𝘥𝘢𝘵𝘢" than to say: "𝘞𝘦 𝘥𝘰 𝘯𝘰𝘵 𝘺𝘦𝘵 𝘬𝘯𝘰𝘸 𝘩𝘰𝘸 𝘵𝘰 𝘶𝘯𝘥𝘦𝘳𝘸𝘳𝘪𝘵𝘦 𝘵𝘩𝘪𝘴" "𝘛𝘩𝘦 𝘳𝘪𝘴𝘬/𝘳𝘦𝘵𝘶𝘳𝘯 𝘥𝘰𝘦𝘴𝘯'𝘵 𝘴𝘵𝘢𝘤𝘬 𝘶𝘱" "𝘐𝘵 𝘥𝘰𝘦𝘴𝘯’𝘵 𝘧𝘪𝘵 𝘸𝘪𝘵𝘩 𝘰𝘶𝘳 𝘢𝘴𝘴𝘦𝘵 𝘢𝘭𝘭𝘰𝘤𝘢𝘵𝘪𝘰𝘯 𝘧𝘳𝘢𝘮𝘦𝘸𝘰𝘳𝘬" "𝘚𝘩𝘰𝘸 𝘮𝘦 𝘵𝘩𝘦 𝘮𝘰𝘯𝘦𝘺" "𝘛𝘩𝘢𝘵’𝘴 𝘰𝘶𝘵𝘴𝘪𝘥𝘦 𝘰𝘶𝘳 𝘪𝘯𝘷𝘦𝘴𝘵𝘮𝘦𝘯𝘵 𝘶𝘯𝘪𝘷𝘦𝘳𝘴𝘦" "𝘛𝘩𝘦 𝘱𝘰𝘭𝘪𝘤𝘺 𝘴𝘪𝘨𝘯𝘢𝘭s 𝘪𝘴 𝘴𝘵𝘪𝘭𝘭 𝘵𝘰𝘰 𝘸𝘦𝘢𝘬" "𝘐𝘵 𝘥𝘰𝘦𝘴𝘯’𝘵 𝘧𝘪𝘵 𝘪𝘯𝘵𝘰 𝘮𝘺 𝘢𝘴𝘴𝘦𝘵 𝘤𝘭𝘢𝘴𝘴" Or simply: “𝘛𝘩𝘪𝘴 𝘪𝘴 𝘷𝘢𝘭𝘶𝘢𝘣𝘭𝘦 𝘧𝘰𝘳 𝘴𝘰𝘤𝘪𝘦𝘵𝘺, 𝘣𝘶𝘵 𝘯𝘰𝘵 𝘺𝘦𝘵 𝘧𝘪𝘯𝘢𝘯𝘤𝘦𝘢𝘣𝘭𝘦 𝘰𝘯 𝘤𝘰𝘮𝘮𝘦𝘳𝘤𝘪𝘢𝘭 𝘵𝘦𝘳𝘮𝘴” The next phase of nature finance I think should not ignore data. But it should stop treating data as the primary unlock. The unlock is not just more measurement. It is structuring and good sound cash flows. Aligning long-term capital, operational execution, market demand, risk allocation, and credible environmental outcomes.

Alastair Marsh's recent thought-provoking piece in @Bloomberg highlights critical challenges with the current climate tech investing landscape Climate tech projects are capital-intensive with long timelines. Unlike software, much of climate tech requires massive upfront capital for R&D, pilot plants, and manufacturing before significant revenue. This demands longer development and deployment cycles (often 7+ years to scale) that exceed typical 5-7 year VC exit horizons. The classic VC model - built for rapid, asset-light scale-ups - often misaligns with the realities of many climate tech solutions, especially "hard tech." While there’s an abundance of early-stage VC capital for entrepreneurs, later-stage growth that bridges these projects from venture to infrastructure stage is basically absent—that’s called the missing middle. We need to adapt and supplement that approach by layering in other types of capital and bridge the "missing middle." A broader array of financing instruments is essential for climate tech to scale, including patient equity and growth capital, project finance, blended finance, and specialized debt models. Marsh’s piece lays out how family offices are uniquely positioned to be catalyzing players in this space. Their flexibility allows them to deploy capital across diverse segments, filling the gap and driving significant financial returns alongside impact. https://lnkd.in/gUf85Bwy

𝗜𝗻𝘀𝘂𝗿𝗮𝗻𝗰𝗲 𝘄𝗶𝗹𝗹 𝗯𝗲 𝘁𝗵𝗲 𝗳𝗶𝗿𝘀𝘁 𝘀𝘆𝘀𝘁𝗲𝗺 𝘁𝗼 𝗰𝗿𝗮𝗰𝗸 𝘂𝗻𝗱𝗲𝗿 𝗰𝗹𝗶𝗺𝗮𝘁𝗲 𝗿𝗶𝘀𝗸 — 𝗮𝗻𝗱 𝗶𝘁 𝘀𝗵𝗼𝘂𝗹𝗱 𝗰𝗼𝗻𝗰𝗲𝗿𝗻 𝘂𝘀 𝗮𝗹𝗹. Natural disasters caused $𝟯𝟲𝟴 𝗯𝗶𝗹𝗹𝗶𝗼𝗻 in global economic losses last year, according to Aon — the ninth year in a row losses topped $300 billion. Only 𝟰𝟬% of those losses were insured. The protection gap is widening. As insurers retreat from high-risk regions, public safety nets — often overstretched — are stepping in. More households, businesses, and governments are being left to absorb risks they cannot afford. This isn’t just about insurance anymore. When insurance breaks down, so does credit. When credit dries up, property values fall, costs rise, and resilience weakens — just when it’s needed most. @Günther Thallinger 𝗳𝗿𝗼𝗺 𝗔𝗹𝗹𝗶𝗮𝗻𝘇 put it starkly: “𝘛𝘩𝘦𝘳𝘦 𝘪𝘴 𝘯𝘰 𝘤𝘢𝘱𝘪𝘵𝘢𝘭𝘪𝘴𝘮 𝘸𝘪𝘵𝘩𝘰𝘶𝘵 𝘧𝘶𝘯𝘤𝘵𝘪𝘰𝘯𝘪𝘯𝘨 𝘧𝘪𝘯𝘢𝘯𝘤𝘪𝘢𝘭 𝘴𝘦𝘳𝘷𝘪𝘤𝘦𝘴. 𝘈𝘯𝘥 𝘵𝘩𝘦𝘳𝘦 𝘢𝘳𝘦 𝘯𝘰 𝘧𝘪𝘯𝘢𝘯𝘤𝘪𝘢𝘭 𝘴𝘦𝘳𝘷𝘪𝘤𝘦𝘴 𝘸𝘪𝘵𝘩𝘰𝘶𝘵 𝘵𝘩𝘦 𝘢𝘣𝘪𝘭𝘪𝘵𝘺 𝘵𝘰 𝘱𝘳𝘪𝘤𝘦 𝘢𝘯𝘥 𝘮𝘢𝘯𝘢𝘨𝘦 𝘤𝘭𝘪𝘮𝘢𝘵𝘦 𝘳𝘪𝘴𝘬.” The Institute and Faculty of Actuaries (IFoA) project a 𝟱𝟬% 𝗰𝗼𝗹𝗹𝗮𝗽𝘀𝗲 𝗶𝗻 𝗴𝗹𝗼𝗯𝗮𝗹 𝗚𝗗𝗣 𝘄𝗶𝘁𝗵𝗶𝗻 𝗱𝗲𝗰𝗮𝗱𝗲𝘀 if climate risk is not properly managed. Climate risk is no longer a future scenario. It is here. It is compounding. And it is reshaping our economy in real time. There are positive signs: ➤ Hannover Re and Swiss Re are restricting fossil fuel underwriting. ➤ Parametric insurance models are speeding up disaster recovery. ➤ EIOPA and the European Central Bank are pushing for public-private risk sharing. These are encouraging — but early signs. 𝗠𝘆 𝘁𝗮𝗸𝗲: Climate risk is already disrupting the systems we rely on: insurance, credit, asset valuation, and public finances. Systems change is needed. The insurance sector holds a unique vantage point — but leadership now demands rethinking long-held assumptions about risk, resilience, and responsibility. The sector has an opportunity to lead: ➤ Embed forward-looking climate risk into underwriting ➤ Signal future exposures more transparently ➤ Drive transition finance to accelerate decarbonisation ➤ Redirect investment into adaptation ➤ Co-design shared risk pools and resilience bonds Collaboration between insurers, financiers, and governments is no longer optional — it is the foundation for economic stability in a climate-disrupted world. The sooner we align risk pricing with physical reality, the stronger our chances of building a more resilient economy for the future. #climaterisk #insurance #resilience #finance #sustainability #systemicrisk #adaptation –––––––––– For updates on sustainability, climate, and innovation, follow me on LinkedIn: @Scott Kelly

Blackrock just took a big write-down on its Global Renewable Power Fund III. Because of two ill-fated investments in Northvolt and SolarZero. Surprisingly, a $4.8 billion fund saw its internal rate of return plummet due to just two portfolio companies faltering. This fund was BlackRock's third flagship GRP fund, part of its bet on the energy transition and a push towards renewable energy and infrastructure. Many of the funds’s assets are early-stage climate infrastructure investments in: EV charging, renewable generation, and power storage and transmission. Are they simply making bad investments or is this a prequel to what to expect? What this tells me about climate tech investing: 1. The significant impact of two companies on a $4.8 billion fund suggests that traditional risk models needs reevaluation. The conventional playbook for diversification doesn't quite work in climate tech. When companies in your portfolio are all betting on similar technological advances or regulatory shifts, they tend to sink or swim together. Traditional risk models might be missing these hidden correlations. 2. The Northvolt situation is a wake-up call - throwing money at climate tech isn't enough. These companies need investors who roll up their sleeves and get involved. We're seeing a shift from passive to active investing, where deep operational expertise is just as crucial as the capital itself. 3. SolarZero, a major player in New Zealand Energy Sector, was far from an early-stage startup when BlackRock acquired it in 2022. Despite its 50-year history , something went wrong. It hints at a broader challenge: global funds rushing into new markets might be overlooking local market dynamics and regional complexities in their eagerness to deploy capital in the renewable space. As this sector matures, we need a new framework for resilient investment strategies that can better weather the failures of individual companies while capitalizing on the overall growth trend in clean energy. #climatetech #VC #investment #newbook #fundclimatetech #blackrock Link for the news in the comments.

In recent posts, I’ve critiqued two widespread fallacies in sustainable investing: - That understanding “#systemicrisk” will somehow lead investors to mitigate planetary risks. - That entity-level targets and disclosures—no matter how rigorous—can drive the systems-level transformations we need. This post offers a constructive alternative: what pragmatic climate investment actually looks like. First, we need to stop conflating two distinct tasks: managing risk and addressing climate change. Managing financial and physical risks is essential—but it is not the same as financing decarbonization. Misunderstanding this distinction has led to frameworks that create at best, ineffective, and at worst, perverse, outcomes. Addressing climate change requires financing transformative systems change: reshaping energy systems, transport, industry, and digital infrastructure. These transformations cannot be delivered by the sum of firm-level targets or strategies, nor by any reallocation of capital by financial firms alone. They require multi-actor coordination around coherent roadmaps—combining technology pathways, institutional reform, enabling policy, and investment strategies. These are the transformations that will have the most decisive impact on decarbonizing our economy. They are not theoretical or impossible. They’re mapped out in reports like the International Energy Agency (IEA)’s Net Zero by 2050, as well as many regional and sectoral pathways. And yet, we remain far off course from global climate targets precisely because we are not orienting our actions around these roadmaps. Instead, we’ve focused on corporate commitments and disclosures that are not proxies for real decarbonization. They neither incentivize nor reflect the systemic changes required. Many of the most critical investments must happen in EMDEs, where future emissions growth will be concentrated. But most institutional investors do not invest in these markets due to high perceived risk (not a single low-income country is deemed credit-worthy by CRAs). That’s why a core part of pragmatic climate investing is addressing the actual barriers to capital mobilization: lowering the #costofcapital in EMDEs, designing innovative risk-sharing mechanisms, and the strategic use of public finance and guarantees to catalyze private investment. These challenges are structural—but solvable. Improving risk assessment and resilience is also essential. We need better integration of science and risk tools to inform strategic investments in adaptation and resilience. But this work must not be confused with—or take priority over—the urgent need to finance mitigation at scale. With clarity on these distinctions, and alignment around real decarbonization roadmaps, we can move from misplaced proxies to effective strategies—and deliver the transformative outcomes the planet urgently needs. Columbia Center on Sustainable Investment Darius Nassiry Allan Marks Mahmoud Mohieldin De Rui Wong

Working in climate sometimes feel like a time-warp. As #COP29 in #Baku is kicking off, I'm sharing an update of one of my most read posts from last year: ✨ What is Article 6.4 and why am I excited about it. First, the 30 second recap: 🌿 The Paris Agreement paved the way for a new era of carbon trading with the establishment of #Article6, which enables countries to collaborate in achieving their Nationally Determined Contributions #NDCs by trading mitigation outcomes. 🌿 At its best, A6 offers countries a way to invest in actions outside their borders and raise global ambition (as you know, even if everyone achieves their NDCs we will fall short of where we need to be). 🌿 However, this is only possible with clear and transparent accounting around what is traded and how countries plan to meet their NDCs. Two articles were crafted to help countries use resources efficiently and maximize impact: - - > Article 6.4 focuses on creating a global level international carbon market - - > Article 6.2 focuses on enabling bilateral collaboration mechanisms for G2G, or G2B collaboration. 🌿 So how will it work? UN Climate Change will set up a shared marketplace for global climate projects. This will look like a digital registry where approved project developers “list” credits for purchase by governments. We already have the VCM - why am I excited about 6.4? 🦎 An A6 marketplace can benefit from ambitious recent efforts such as the claims codes from VCMI determining what a 'credible corporate claim' is, as well as The Integrity Council for the Voluntary Carbon Market (ICVCM) principles for high-quality carbon credits 🦎 VCM is suffering from sitting between Paris and NetZero. What do I mean? Many VCM buyers are operating on a voluntary basis, out of good will. A6.4 moves us closer to a more regulated space (or one with potential for stronger accountability) 🦎 6.4 sets a high bar for environmental integrity, by requiring that all credits deliver an "overall mitigation in global emissions” (#OMGE) reducing the risk of fraudulent credits being listed. 🦎 It can help even the playing-field, empowering countries to have a stronger say in what types of projects are prioritized in their jurisdictions and how those proceeds are divided and allows them to trade reductions in carbon emissions in a manner that goes beyond zero-sum offsetting. 🐢 We had way less progress on 6.4 at COP28 in #Dubai than expected. Crossing fingers for a bit more clarity as we move into #Baku. ✨ For anyone interested in learning more about A6 - The Nature Conservancy published an excellent explainer. I still find the infographics some of the best for this space. Kudos to Svetoslav Gatchev Rachel Pasternack Maggie Stone Kelley Hamrick Malvar Naabia Ofosu-Amaah Beatriz Granziera Fernando Cesário Olga Gassan-zade Lucy Almond Samarrth Khanna Chandra Shekhar Sinha Leticia Guimaraes and John Verdieck Alexia Kelly Lydia Sheldrake Tomas Thyblad #carbon #carboncredits

What's going to close the $7 trillion gap in climate finance? One of my favorite reports each year from Climate Policy Initiative has some ideas for scaling the investments needed to align with a net-zero pathway. To my mind, this is the best report each year on the state of climate finance. It shows you: -Where financial flows are going from (across public and private sources) -Where money is going to (in industry, location, and activity) -What our estimated needs are across sectors and regions -The mitigation potential to unlock across sectors -Strategies for scaling both public and private investment. Here's a look at the sector gaps we are seeing to date and how they can be overcome. Energy systems- need a 2.5-fold increase in mitigation finance to align with average 2024 to 2030 needs. This sector has the highest emissions reduction potential, requiring investment in renewables, grid modernization, and storage solutions. Transport- also requires an almost 2.5-fold increase in mitigation finance, alongside a significant shift away from high-carbon investments. With a mitigation potential of 3.2 GtCO2e, priorities include electric mobility, public transport expansion, and freight decarbonization. Buildings and infrastructure- mitigation finance must rise nearly 4-fold. This is sector is generally climate-aligned, but further investment can realize its 3.2 GtCO2e mitigation potential. Focus areas include efficiency upgrades, sustainable construction, and low-carbon heating and cooling. Industry- a nearly 24-fold mitigation finance increase, along with reallocation from high-carbon activities, is needed to tap the sector's 4.4 GtCO2e abatement potential. Key areas include clean hydrogen, low-emission manufacturing of cement, steel, and ammonia, and carbon capture, and storage. AFOLU- holds great untapped emissions reduction opportunities—mitigation flows should increase 64-fold from USD 18 billion to USD 1,170 billion annually through 2030 to realize this potential. There is also a need to improve definitional boundaries and enhance tracking of finance flows to this sector. Check out the full report here along with the data and dozens of interactive charts: https://lnkd.in/esqBmpfe #climatefinance #climateinvestment #netzero #decarbonization #climatepolicy #climateaction #emissions

The Baku to Belém Roadmap to 1.3 Trillion is a plan for action, building on COP29's finance milestone agreement, and carrying momentum into #COP30.  At its core, the Roadmap is about turning commitments into practical, inclusive climate finance action that’s effective in delivering outcomes that protect lives and strengthen economies.   For the first time, more than 200 governments, banks, businesses, and communities have joined forces to outline workable solutions for mobilizing climate finance.     The Roadmap shows how, by working together, we can scale up climate finance towards USD 1.3 trillion a year by 2035, helping developing countries meet their climate goals.     This can bring tremendous benefits for the global economy – generating jobs, protecting communities, and driving innovation.    The task is ambitious, but achievable. The tools exist; what’s been missing is coordination and shared commitment.     This Roadmap provides a guide to both, aligning public and private finance behind a common direction, and building confidence that 1.3 trillion is within reach.     Times are tough; many governments have scarce resources and hard choices. But positive tipping points are already taking hold: from dramatic declines in the cost of clean energy, to innovation in sectors of the economy we thought would take decades to decarbonise.     It's also high time for a paradigm shift. Treating climate finance purely as cost, or as charity, is misguided and self-defeating, and has held back the progress we need.    Make no mistake: scaling up climate finance hugely benefits every nation. It’s a vital investment in resilient global supply chains, supporting low-inflation growth, food security, and a stronger, more productive global economy that underpins peace and prosperity.    Getting finance flowing means expanding access to catalytic grant finance. It also means unlocking low-interest capital, creating fiscal space, managing debt pressures, and de-risking investment.     Innovative tools – such as debt swaps and private capital reinvestment – can help put money to work where it matters most: into clean energy and resilience, enabling countries to implement Nationally Determined Contributions and National Adaptation Plans more quickly and fairly.    Recent climate shocks show what’s at stake, as climate disasters like Hurricane Melissa rip through communities and economies. So, every early dollar deployed now helps avoid far greater costs later for all nations. There’s no time to waste.    The Paris Agreement is working to deliver real progress, as our three recent reports show, but not nearly fast enough.     By scaling climate finance to match the scope of the climate crisis, we can turn ambition into momentum, making climate action a driver of economic growth, stability, and shared prosperity.    From Baku to Belém, we are moving from agreement to action, focusing on solutions and alignment for people, prosperity, and the planet.