Climate Finance Roundup - December 3
Climate risk of Residential Mortgage-Backed Securities; AIIB funds China logistics project; Germany funds AI & Data accelerator for Food; New Zealand's new Infrastructure Financing Framework;
Asia
China-based Asian Infrastructure Investment Bank (AIIB) and French Development Agency (AFD) have signed a strategic Co-Financing Framework Agreement. The agreement, which is the first of its kind between AFD and a multilateral development bank, establishes a mutual reliance framework for collaboration on sustainable development and climate-resilient infrastructure projects globally. The two institutions have previously collaborated on projects in Egypt, India and Türkiye, and will meet again at the Finance in Common Summit in Cape Town on February 26-28, 2025.
The Asian Infrastructure Investment Bank (AIIB) has approved USD400 million in sovereign-backed financing for the Hubei Global Air Cargo Logistics Project in China. The project will establish a bonded logistics park next to the Hubei Ezhou Huahu International Airport, featuring customs operations, bonded warehousing, and international cargo stations. By 2030, the park is expected to handle over 600,000 tons of international air freight and will incorporate green building certifications for all warehouses.
British International Investment, a development finance institution in the UK has announced new commitments of $33.5 million to India's electric vehicle sector, bringing its total EV sector commitments in India to $328 million. The investment includes $15 million each to Everest Fleet and TI Clean Mobility, and $3.5 million to Vecmocon. The investments will enable Everest Fleet to add 1,300 new EVs to its existing fleet of 2,100 EVs across six major Indian cities. TI Clean Mobility will scale its manufacturing of low-carbon vehicles, while Vecmocon will enhance R&D capabilities for EV components and expand into the commercial EV market. BII has committed to invest up to $1 billion in climate-mitigating initiatives and green technologies in India, including previous investments in LoadShare, Euler Motors, Turno, Battery Smart, ChargeZone, and a $250 million commitment to a passenger EV venture with Mahindra & Mahindra.
Europe
Germany's Federal Ministry of Food and Agriculture has launched a €40 million AI and Data Accelerator (KIDA) program to promote sustainable agriculture and food industry. The initiative includes establishment of a service and consulting center with AI and data expertise to help researchers and users better utilize AI technologies for making the agricultural and food industry more environmentally friendly and sustainable.
The Dutch Association of Investors for Sustainable Development (VBDO) has launched its 2024 Benchmark on Responsible Investment by Pension Funds, evaluating 50 largest Dutch pension funds managing €1.44 trillion in assets. Pension Fund Detailhandel has emerged as the overall leader, while Pension Fund TNO topped the Small Funds category. The new benchmark assessment focuses on four critical areas: Governance, Strategic Asset Allocation, Portfolio, and Individual Investments. Three-quarters of participating funds now include biodiversity in their responsible investment policies, showing increased commitment to protecting natural capital alongside financial assets. Here are the top 5 ranked
Africa
USAID Climate Finance for Development Accelerator (CFDA) has launched the Greening Value Chains in Africa (GVCA) funding window in partnership with Power Africa and the Investment Mobilisation Collaboration Alliance (IMCA). The initiative aims to channel blended finance to mobilize investments in renewable energy, green technology, sustainable practices, and local capacity building throughout Africa's energy transition value chains. The program focuses on reducing emissions and helping Africa capture greater local value across energy transition value chains including minerals processing, manufacturing, and circular materials technology.
Asia Pacific
The New Zealand Cabinet has agreed on a new Funding and Financing Framework to reform infrastructure investment decisions. The framework aims to move away from traditional taxpayer funding towards user-pay models and private capital utilization. The framework will apply to sectors including climate adaptation, water, energy, and transport infrastructure, with an emphasis on commercial discipline and efficient resource allocation.
The New Zealand Government has released new guidelines for market-led infrastructure proposals to streamline private sector engagement in infrastructure development. The newly estabished National Infrastructure Funding and Financing Ltd (NIFFCo) will serve as the front-door agency for market-led proposals, focusing on public interest, value for money, and exclusivity considerations.
Australia-based National Renewable Network (NRN) has raised USD 4.28 million in pre-Series A funding to expand its renewable energy marketplace model that provides households with free solar and battery systems. The company aims to deploy solar+storage systems to 2,000 homes monthly.
Australian thermal energy storage developer MGA Thermal has secured new investment from climate tech angel syndicate Electrifi Ventures in partnership with Climate Salad. The funding will support the completion of MGA Thermal's Demonstration Unit for industrial energy storage.
America
The U.S. Department of Commerce's Bureau of Industry and Security (BIS) has announced new export control rules targeting China's semiconductor and AI capabilities. The package includes controls on 24 types of semiconductor manufacturing equipment, 3 types of software tools, new controls on high-bandwidth memory (HBM), and addition of 140 entities to the Entity List plus 14 modifications. The rules establish two new Foreign Direct Product rules and corresponding de minimis provisions, targeting semiconductor manufacturing equipment and entities supporting China's military modernization. The measures will be effective immediately with a delayed compliance date of December 31, 2024 for certain controls.
Interesting read from earlier in 2024
In April, the Reserve Bank of Australia (RBA) conducted its first assessment of physical climate risk in Australian residential mortgage-backed securities (RMBS). Climate risks to residential properties include acute events like flooding and chronic risks like land subsidence due to rising sea levels. These reduce property value, as well the borrower’s ability to pay off debt - due to higher insurance, maintenance and repair costs; lower demand from prospective buyers and jobs getting affected by climate events.
The analysis covered around 2.5 million securitized residential mortgages, representing approximately two-thirds of the public RMBS market in Australia and one-third of Australian residential mortgages by value. It used two risk metrics - Value at Risk (VaR) index and High-Risk Properties (HRP) index.
The VaR index. This is the average of the postcode-level VaR of each mortgage in an RMBS, weighted by loan balance outstanding.
The HRP index. This measures the proportion of properties in an RMBS with a VaR exceeding 1 per cent, weighted by loan balance outstanding
The study found that RMBS with the highest climate risk exposure had a VaR index value roughly three times higher than the Australian average, equating to a technical premium of over $3,000 annually for a $500,000 replacement-value property. It also found that RMBS with a higher physical climate risk tend to be issued by small banks.
The RBA's analysis projects that under a high emissions scenario by 2050, both repo-eligible RMBS and the Australia-wide average would see a 25% increase in annual VaR (by 2050), with the share of high-risk properties in RMBS increasing by an average of 1.25 percentage points.
