Canada: Brookfield Fundraises for First Impact Fund

Canada’s Brookfield Asset Management announced on June 22, 2022 that it raised U.S.$15 billion for its first impact fund focused on climate initiatives. The Brookfield Global Transition Fund will focus on investments that facilitate the transition to a net-zero carbon economy, specifically reducing emissions, reducing energy consumption and increasing low carbon energy capacity, among other climate initiatives. The Brookfield Global Transition Fund drew commitments from more than 100 investors.

Approximately U.S.$2.5 billion from the Brookfield Global Transition Fund has already been committed to purchase solar power and battery developers, for a development partnership with a battery storage provider, and for an investment in a carbon capture and storage developer. The fund exceeded its U.S.$12.5 billion hard cap and is the largest private equity fund dedicated to the net-zero carbon economy initiative to date.

U.S. climate-focused funds have seen an increase in investments in the past two years. In 2021, a total of U.S.$69.2 billion was raised for environmental, social and governance (ESG) focused funds. In the first five months of 2022, a total of U.S.$7.5 billion was committed to such funds.

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Global: Net-Zero Asset Owner Alliance Publishes Position Paper Calling for Carbon-Pricing Policy Redesign

A new position paper by the UN-convened Net-Zero Asset Owner Alliance (“NZAOA”) argues that in order for carbon pricing to be effective, it must be supported by policies that deliver predictable price signals to businesses and ensure a just transition for consumers. The paper was released ahead of this week’s G7 Leaders’ Summit in Berlin, and it offers five guiding principles for policymakers to consider when designing governmental carbon-pricing policy that serves as “a necessary part of the climate policy toolkit required to achieve net-zero emissions and reach the Paris Agreement goals.” The NZAOA is a group of 73 leading institutional investors with $10.6 trillion in assets under management.

The NZAOA paper addresses the inequities of surging energy prices, arguing that well-designed pricing instruments have the ability to maximize benefits from emissions reductions while also minimizing risks that force negative impacts on lower income earners. The five guiding principles proposed by the paper call for:

1. ensuring appropriate coverage of global greenhouse gas emissions consistent with reaching a 1.5°C target;
2. delivering a just transition, such that policymakers must account for the shifts in economic activities driven by carbon pricing that could be concentrated in disadvantaged communities;
3. providing a predictable price signal to provide a planned and orderly transition to a low-carbon economy;
4. minimizing competitive distortions while maintaining the incentive to abate emissions; and
5. promoting international cooperation on carbon pricing to raise ambition and meet the Paris Agreement goals.

Günther Thallinger, board member of Allianz and Chair of the NZAOA, said: “[s]tructural change will need policy incentive, such as carbon pricing. These take time to implement and should not be delayed.” The preface to the report states that the members of the NZAOA are committed to transitioning investment portfolios to net-zero greenhouse gas emissions by 2050, and it includes a call to policymakers to follow through on Paris Agreement commitments and design appropriate carbon-pricing instruments.

Links:
NZAOA position paper on governmental carbon pricing
Carbon pricing policy instruments need a radical redesign and competent implementation

UK: PRI, IIGCC and UKSIF Call on UK Prime Minister to Exclude Natural Gas Activities from the UK’s Green Taxonomy

In an open letter dated June 21, 2022, the Principles for Responsible Investment (“PRI”), the Institutional Investors Group on Climate Change (“IIGCC”) and the UK Sustainable Investment and Finance Association (“UKSIF”) urged Prime Minister Boris Johnson to exclude natural gas activities from the United Kingdom’s Green Taxonomy, which is a road map for sustainable finance and disclosure. The United Kingdom’s taxonomy would be a national version of the European Union’s taxonomy framework, which sets out a list and criteria of economic activities that can be classified as environmentally sustainable. Inclusion of natural gas in the taxonomy would send the message that use of natural gas as an energy source qualifies as a sustainable activity.

The group warns that including natural gas would undermine the Taxonomy’s purpose and significantly damage the United Kingdom’s global leadership position on sustainable finance. The group acknowledges that natural gas may be a necessary bridge in the transition to carbon neutrality but that it should not be considered “green”. In the letter, the group argues that excluding natural gas from the Taxonomy will not deprive gas-related activities from funding in the capital markets, but its inclusion would send a “very misleading” signal to investors trying to align their asset holdings with carbon neutrality.

Notably, in their letter, the group did not address inclusion of nuclear energy in the Taxonomy, something that has raised concerns in the context of the EU Taxonomy. Two of the European Parliament’s lead committees recently voted against the inclusion of both natural gas and nuclear energy in the EU’s green finance taxonomy, which was viewed as a vote against greenwashing, though the proposal will go before the full European Parliament in early July. In contrast, the UK government has indicated that nuclear energy will be included in the United Kingdom’s green taxonomy and thus may be considered “green” under the UK taxonomy.

Links:
Letter
EU Parliament Committees Vote Against Gas and Nuclear Inclusion

Renewable Investing Webinar Series: ESG & Renewables

In the first of a webinar series looking at the legal and regulatory frameworks surrounding renewable energy investing, Debevoise hosted a panel of speakers earlier this month discussing ESG and renewables.

The quest for net zero and concerns around energy security are pushing increasing investment—from public and private sources—to renewable and clean energy sources.

The growth of renewable and clean energy is an increasing imperative as part of an ESG framework, but renewables investments and operations also carry significant ESG risks.

In this webinar, Debevoise hosted speakers from Helios Investment Partners, the Principles for Responsible Investment, and General Electric, to consider ESG regulatory and non-regulatory drivers around renewables, managing ESG opportunities and risks around renewables, appropriate metrics, and predictions and hopes for the future.

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Renewable Investing Series: ESG & Renewables