Global Climate Finance News - December 10
Australia funds critical minerals; UK to regulate ESG rating providers; Sustainable bond issues from Hydro One, Brookfield, Mexico, Thailand; Assessing Climate risk in the EU financial sector;
In this newsletter
Australia funds critical minerals, offshore decommissioning
Electricity costs in Australia
News from Governments - UK to regulate ESG rating providers & more
Deals and Funding - sustainable bond issues from Hydro One, Brookfield, Mexico, Thailand
Assessing Climate risk in the EU financial Sector
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Writing largely by Claude.
Australia funds critical minerals, offshore decommissioning
The Australian government is establishing an offshore decommissioning directorate with an AUD 30 million investment to coordinate the dismantling and recycling of offshore oil & gas infra, estimated to be worth AUD 60 billion. The government has also published an Offshore Resources Decommissioning Roadmap.
(December 6) Australian government will provide upto AUD 475 million to help develop the Eneabba Rare Earths Refinery project in Western Australia, the country’s first integrated rare earths refinery. The Eneabba project is being developed by Iluka Resources. It has progressed through three phases, starting with a screening plant in 2020, followed by a concentrator completed in 2022, and now moving to the final refinery phase. The refinery will process rare earth feedstocks from both Iluka's stockpile and third-party suppliers. Supported by $1.25 billion in government funding plus an additional $475 million in finance, the project will create 900 construction jobs and 250 permanent operational positions. Commissioning is scheduled for 2026.
(December 9) Australia is providing a further USD 75 million funding for production of critical minerals, particularly lithium, nickel and copper. Other critical minerals grants include
AUD 3.8 million for a high-purity vanadium project
AUD 3 million for a proposed graphite refinery
AUD 7.39 million for a Fluorite project
AUD 5 million for a demonstration plant of ionic clay hosted rare earth elements
AUD 2.7 million for a battery-grade vanadium electrolyte production chain
Electricity costs in Australia
Australia's CSIRO and AEMO have released their seventh annual GenCost 2024-25 Consultation Draft, which provides comprehensive analysis of electricity generation costs across different technologies in Australia.
The report reveals significant cost reductions in renewable technologies, with large-scale solar PV costs falling 8% for two consecutive years and battery storage costs dropping by 20% in 2024-25. Onshore wind costs have shown modest increases of 2% in 2024-25, while gas turbine costs have risen due to new hydrogen-ready requirements.
The analysis includes detailed assessment of nuclear power generation, examining operational life advantages, capacity factors, and development lead times. The report concludes that nuclear projects would not be operational before the 2040s in Australia, with development lead times of at least 15 years.
The report confirms that variable renewables (solar PV and wind) with integration costs maintain the lowest LCOE (Levelised Cost of Electricity) range among all new-build technologies in both 2024 and 2030 projections.
The consultation period for the draft report runs from December 11, 2024, to February 11, 2025, with the final report scheduled for release in Q2 2025. The findings will serve as a key input for AEMO's Integrated Systems Plan (ISP), which guides Australia's electricity infrastructure development.
Executive Summary (PDF) | GenCost 2024-25 Consultation Draft (PDF)
News from Governments
The UK government will partner with Zambia to channel upto £2.5 billion of UK private investment to green investments in Zambia and collaborate on energy projects.
(November 15) The UK government released draft legislation that aims to regulate providers of ESG ratings and where these ratings are used for investment decisions. To implement the legislation, which is expected to finalised early in 2025, the UK’s Financial Conduct Authority (FCA) will align with the recommendations from International Organisation of Securities Commission (IOSCO).
In 2023, the FCA introduced measures to help investors more reliably identify sustainable investments. This included 4 labels for investments with sustainability objectives. The FCA has now published more examples on the use of these labels.
The UK and Switzerland have updated their science and research agreement to focus on green energy transition and other challenges. Innovate UK and Swiss innovation authority Innosuisse have awarded £8 million in joint funding to 11 UK-Swiss research projects, including work on CO2 emissions capture. The agreement includes commitments to deepen collaboration in space, AI, and climate research.
APEC leaders meeting in Lima, Peru has adopted several climate-related initiatives including the APEC Policy Guidance for Clean and Low-carbon Hydrogen Policy Frameworks and a Sustainable Finance Initiative.
Deals and Funding Announcements
Canada's Hydro One Inc., Ontario's largest electricity transmission and distribution company, has priced an offering of $750 million Medium Term Notes under its Sustainable Financing Framework. The offering consists of
$375 million of 4.46% Series 55 Notes due 2053 and
$375 million of 4.25% Series 60 Notes due 2035,
with net proceeds of approximately $762 million to be allocated towards eligible green and social projects. Here’s an example of eligible uses of sustainable financing proceeds as per Hydro One’s updated framework.
Canada-based Brookfield Renewable has agreed to issue C$200 million of Fixed-to-Fixed Reset Rate Subordinated Hybrid Notes due March 12, 2055. The green-labeled notes, which will be issued through Brookfield Renewable Partners ULC and close around December 12, 2024, represent the company's fifteenth green labelled corporate securities issuance in North America and will bear interest at an annual rate of 5.450% with five-year resets.
US-based Dow Inc. has entered into a definitive agreement with Macquarie Asset Management to sell a 40% equity stake in select U.S. Gulf Coast infrastructure assets, forming Diamond Infrastructure Solutions.
Diamond is comprised of certain non-product producing assets (power and steam production, pipelines, environmental operations and general site infrastructure) located at five of Dow's manufacturing sites in the U.S. Gulf Coast (USGC): Freeport, Texas City, and Seadrift in Texas, as well as Plaquemine and St. Charles in Louisiana. Pipeline and storage assets span across the USGC with connections to major natural gas, NGL and olefin hubs.
The deal is expected to generate initial cash proceeds of approximately $2.4 billion for Dow, with potential to reach $3.0 billion if Macquarie exercises its option to increase its stake to 49%, and includes infrastructure assets across five manufacturing sites in Texas and Louisiana.
Dow also announced nine new collaborative projects through its 2024 Business Impact Fund to address social and sustainability challenges globally. The projects span multiple countries including Colombia, Kenya, Mexico, Türkiye, United States, Canada, Brazil and South Africa, focusing on initiatives such as affordable housing, food waste reduction, sustainable construction, and community revitalization. Two of the nine projects are receiving continuity grants to build upon previous work, including Project Ybá in Brazil for Amazon conservation and Oliver's Village in South Africa for sustainable agriculture.
US Department of Energy's Loan Programs Office (LPO) has announced a conditional commitment for a loan guarantee of up to $305.54 million to Nostromo Energy's subsidiary IceBrick Energy Assets I, LLC to finance Project IceBrick. The project will deploy 193 cold thermal energy storage installations across California over a 5-year construction period. The IceBrick storage cells will be manufactured entirely in the US across Texas, Iowa, and California.
Nostromo's IceBrick system operates by using regular electricity to freeze a water-based solution during the hours when the grid's electricity supply is at its most abundant and clean. The stored energy in the frozen IceBricks is then used to help power the building's cooling system during hours of peak demand, reducing the need to rely on power from the grid at these times, which are the most expensive and when the grid faces highest demand and produces electricity from the most carbon-intensive and polluting sources. Nostromo's VPP software can control operation and performance of IceBrick systems either as standalone systems or in concert as a VPP.
California's South Coast Air Quality Management District (South Coast AQMD) has approved more than $109 million to accelerate the development of zero-emission charging and hydrogen infrastructure. The funding will support 30 projects including 21 electric charging stations with over 800 connectors and seven hydrogen refueling stations, with 93% of emissions reductions benefiting environmental justice areas.
Sweden-based Boliden has entered into a definitive agreement with Lundin Mining to acquire the Neves-Corvo mine in Portugal and the Zinkgruvan mine in Sweden for USD 1,300 million plus contingent payments up to USD 150 million. The transaction will significantly increase Boliden's mine production with zinc production increasing by 95% and copper by 43%. The company plans to finance the acquisition through a bridge loan to be refinanced through a share issue and medium/long-term debt financing.
(December 6) Singapore-based BE C&I Solutions Holding Pte. Ltd. (BECIS) has secured US$53 million in new equity financing from existing shareholders FMO, KLP Norfund Investments, Pula Investments, and Siemens Financial Services. The company, operating across eight Asian markets, is targeting to achieve a portfolio of more than 600 MWp of Solar and 400 TPH of Bioenergy assets, along with significant growth in its New Solutions portfolio over the next 2 years.
(December 3) Mexico's FIRA (Trust Funds for Rural Development) has issued the country's first blue bond for sustainable fisheries and aquaculture, raising 4.5 billion pesos (USD 220 million) with a 6-year maturity period. The bond, listed on the Institutional Stock Exchange (BIVA), was developed with technical support from the Global Green Growth Institute (GGGI) and aims to finance environmentally low-impact coastal fishing, sustainable offshore fishing, and responsible aquaculture projects that meet strict sustainability certifications like Marine Stewardship Council (MSC) and Aquaculture Stewardship Council (ASC).
(November 27) Thailand has issued Asia's first sustainability-linked sovereign bond (SLB), raising 30 billion baht ($880 million) with a 15-year maturity. The bond, supported by the Asian Development Bank (ADB), aims to reduce the country's greenhouse gas emissions by 30% by 2030 and increase zero emission vehicles by 440,000 passenger cars and pickup trucks by 2030.
(November 27) Vietnam-based International Development and Investment Corporation (IDI), a subsidiary of Sao Mai Group, has issued its first green bond worth VND 1,000 billion (USD 40 million), marking the first green bond by a non-financial institution in Vietnam's aquaculture sector. The issuance is fully guaranteed by GuarantCo and subscribed by Manulife and AIA, with technical support from the Global Green Growth Institute (GGGI) under the Viet Nam Green Bond Readiness Program funded by the Government of Luxembourg.
Assessing Climate Risk in the EU Financial Sector
The European Commission, European Supervisory Authorities (ESAs), European Central Bank (ECB) and European Systemic Risk Board (ESRB) have conducted the first EU-wide climate stress test to assess the financial sector's resilience to climate-related shocks and its ability to support the green transition.
The comprehensive exercise covered over 110 banks, 2,331 insurers, 629 IORPs and around 59,000 investment funds, representing a significant portion of the EU financial system. The analysis examined both first-round direct impacts and second-round amplification effects across sectors.
The stress test evaluated three scenarios: a baseline scenario implementing the Fit for 55 package requiring EUR 3.7 trillion in energy investments, and two adverse scenarios incorporating severe transition risk shocks. Under the baseline scenario, banks faced losses of EUR 343 billion (5.8% of exposures), insurers EUR 153 billion (2.2%), IORPs EUR 54 billion (3%), and investment funds EUR 396 billion (4%).
The results showed that while a potential 'run on brown' scenario would have limited impact, adverse macroeconomic developments could substantially increase losses and impair financing capacity. However, major financial institutions demonstrated sufficient resilience through strong capitalization and diversification.
The exercise marked an important milestone in climate stress testing methodology and helped identify key vulnerabilities and potential contagion effects, enabling targeted future initiatives to monitor climate-related risks in the EU financial system.
European Banking Authority, November 19 2024 | Report on Fit for 55 climate scenario analysis (PDF)
Consolidated by Soumya Gupta (Twitter, LinkedIn).
