Here’s a roundup of seven stories on impact investing and sustainable finance as of Jan. 4 compiled by Equities staff.
1. Carbon capture: The industrial sector, which accounts for a quarter of CO2 emissions and 40% of global energy demand, can play an outsized role in reducing emissions, according to a post by Calamos Investments on Equities. Companies in that sector produce materials such as cement, steel and chemicals, areas that are highly carbon intensive yet do not currently have other decarbonization options available.
2. Impact management: More impact fund managers are tying their compensation to impact alongside financial performance, according to Impact Alpha. Sustainable forestry fund manager New Forests is allocating 20% of its profits to impact outcomes for its Africa fund. In addition, Impact Partners is linking all of its carry to impact performance. And British International Investment factors impact performance into bonuses for its investment teams, demonstrating a growing trend where financial incentives align with impact achievements.
3. Deal flow in transition: The Canada Growth Fund invested $200 million in Calgary-based Entropy’s carbon capture and storage (CCS) technology, according to Brookfield Asset Management. The government-backed fund also entered into a long-term offtake agreement for stored carbon. This investment reflects a commitment to innovative environmental solutions. Still, there are concerns about diverting resources from green projects and potentially supporting fossil fuel expansion.
4. Dry impact powder: Private impact funds hold $741 billion in assets under management, according to PitchBook data. About a quarter of that amount is so-called dry powder waiting to be allocated. That suggests the potential for substantial impact investments ahead.
5. Transition finance: This concept is gaining steam, resulting from discussions at the COP28 climate summit in Dubai five weeks ago, according to Investment News. Transition finance involves investments mainly in industries and infrastructure that help drive efforts toward a net-zero economy. There’s an emerging consensus that financial institutions should support high-emitting companies in transitioning to less-polluting activities or an emissions-light pathway. In that way, transition finance is distinct from green investing.
6. Standards in transition finance: The Glasgow Financial Alliance for Net Zero proposes that transition finance should include funding for both traditional green activities and companies planning to decarbonize, according to Bloomberg. Establishing standards is crucial to ensure genuine progress in decarbonization and to avoid investments in assets that are not effectively reducing emissions.
7. Equities News’ new focus: Paula DeLaurentis, CEO of Equities, wrote an open letter announcing the financial website’s foray into impact investing, sustainable finance and ESG. “We’re a mission-oriented community aiming to empower individuals like you and me to invest in what truly matters and to forge a positive path forward,” she wrote. DeLaurentis said she’s inviting readers to advise and give input as the company “cultivate[s] a supportive community that champions both social and environmental causes alongside financial success.”