Green Finance Opportunities

April 6th: A bright spring day in Germany, one that perfectly illustrates the need for battery storage systems. Like so many other sunny days, PV generation in Germany covered a large portion of the electricity demand for several hours in the middle of the day, thanks to the cloudless sky and millions of solar modules. But there is a darker side to the sunshine. Large amounts of daytime solar can overload the grid and cause severe electricity price fluctuations: on April 6th, intraday electricity prices dropped to -200€/MWh at their lowest point. In cases where more electricity is generated from solar energy than the grid can handle, grid operators regularly require solar installations to curtail their production. This means that energy that could otherwise be made available to consumers cannot be used. And when the sun goes down, most of the demand must quickly be met with flexible sources. This adds an extra layer of complexity: deciding which conventional power plants can be shut down during the day and switched on again in the evening is a careful balancing act. This is precisely the situation where battery energy storage systems (BESS) can bridge the gap, with several advantages: - By storing part of the solar energy at peak generation times and dispatching it later, BESS can help shift the curve to more closely align with evening demand. - Better management of volatile generation from renewables also helps keep prices stable. - Provided they are close to the overproducing solar systems, BESS contribute to grid stability by helping balance supply and demand. Of course, there is no one-size-fits-all technology. A secure and flexible energy system needs a diverse mix. But batteries are playing an increasing role, especially as they become more and more affordable. We at RWE are harnessing the benefits: we have 1.2 GW of installed BESS capacity worldwide, of which nine systems totalling 364 MW of capacity operate in Germany alone. We’re scaling fast, with new large-scale projects recently commissioned in Germany and the Netherlands. And we have just decided to build a BESS facility in Hamm with an installed capacity of 600 megawatts. So, let’s continue to make the most of those sunny days — by creating the right framework conditions to build up affordable and flexible support.

The UK has some of the oldest and least energy efficient housing stock in Europe. As one of the largest funders of the UK housing sector, we at Lloyds Banking Group have a responsibility to help change this. One potential solution to this challenge is Property Linked Finance (PLF), an innovative financing solution that’s already been successfully launched in several countries around the world. Today, we’ve published the ‘greenprint’ for how PLF could be introduced to the UK in collaboration with the Green Finance Institute and NatWest Group. With PLF, homeowners and commercial property owners could finance 100% of their energy efficiency upgrades upfront, with finance linked to the property rather than the individual – so owners only invest until they sell their property or have paid off the measures and buyers benefit from the increased energy efficiency. As a new form of long-term finance, where the term can match the useful lifetime of the improvements, PLF addresses a gap in the UK market. In addition, PLF could also unlock: • Lower bills for homeowners through energy savings • Between £52-70 billion of investment in upgrading the UK’s inefficient building stock • The creation of skilled jobs across the UK PLF increases the range of financial solutions available to property owners. This time last year, we published a Housing Stocktake report, which found that while over half of homeowners would like to make their properties more efficient, few feel confident about how to get there. Retrofit options need to be more accessible, affordable and simple for our customers to implement – this is an exciting development that would empower them to do so. Read the report here: https://lnkd.in/emCtWUJ2 #GreenHomes #RetrofitFinance #Sustainability #ClimateAction #NetZero

2-sided Contracts for Difference (CfD) – a good model to ensure the offshore wind expansion.   What does it take to achieve the ambitious offshore wind expansion targets in Germany and Europe? Among other things, investment security for the developers' projects and the supply chain. This is offered in particular by 2-sided CfDs. They have been introduced in several markets and have become an effective tool for the expansion of offshore wind across Europe.   The primary function of a 2-sided CfD is to reduce future electricity price risk for producers as well as consumers, thereby decreasing costs and leveraging the potential of offshore wind. With two positive effects: Lower financing costs meaning a lower levelised cost of energy and reduced risk of project cancellations. Under a 2-sided CfD, governments not only make payments to the developer, they also receive payments when the electricity price exceeds the CfD price.   We at RWE believe a well-designed and inflation-indexed 2-sided CfD, in line with the EU Electricity Market Design, should become the standard of choice for offshore auctions everywhere.   Wherever this is not the case and renewables projects have to be realised under a merchant regime, it is crucial to remove any remaining barriers to Power Purchase Agreements (PPAs) and to further facilitate them.   2-sided CfDs should become a key instrument for the energy transition. Hence, we welcome that the regulatory discussion on how to design specific CfDs is gaining pace.

Something is bent, if not broken, in the US solar sector. Many of the investors who finance solar projects flip the assets after a brief period of time, once they have claimed the investment tax credit. Because they do not intend to own the solar asset for any period of time factors like module quality, longevity and reliability are given much less weight than the cost of the modules. This is in part why, even after we have driven module costs down by over 90% in a decade and modules are on the order of 20% of project costs the price of modules receives the most scrutiny. This has fueled a race to the bottom on cost, which vast Chinese overcapacity has helped to fuel. With too much supply chasing too little demand prices are at rock bottom, often below manufacturing cost, and sellers are cutting each others’ throats for market share. This has also driven a race to the bottom in quality, as manufacturers try to shave costs by downgrading the materials they use. The results have been widely reported – significant quality problems in manufacturing and in the field. High rework levels in manufacturing plants as flawed panels are pulled and manually ”repaired”. Inverters failing. Delamination of backsheets. Microcracks. Projects that are delivering much less power than expected after just a couple years. How did we let ourselves get here? Since when does quality degrade in technologies as they mature? Developers tell me they would like to specify higher quality and more sustainably manufactured modules in projects but the investors are chasing every $.10/watt in module cost. How much power generating capacity are we forfeiting by these practices? The industry needs to find itself to a more sustainable model. Certainly investors seeking to maximize the value of the Production Tax Credit (PTC) rather than the investment tax credit will be motivated towards quality and longer term performance. Are there other ways to incentivize better quality modules in projects? Share your thoughts.

How do we make decarbonising Britain’s homes a reality? Lloyds Banking Group alongside the Green Finance Institute and NatWest Group has published the ‘greenprint’ of how to apply property linked finance to the UK, so that we can scale the retrofitting of energy efficiency measures in our homes and buildings. The finance model allows homeowners to fund their upgrades with finance linked to the property rather than the individual. It means people only pay for the energy efficiency measures while living in their property, and when the house is sold, payments can be transferred to the next owner. Potential benefits include reduced bills for the property owner, and the creation of skilled jobs across the UK. We know that retrofitting is essential for meeting the UK’s net zero targets, and that we have some of the oldest and least efficient buildings in Europe. There are currently many hurdles – particularly in financing retrofitting on the scale necessary, and in incentivising landlords and homeowners to upgrade their properties. We need innovative financing solutions that will make retrofitting projects simpler and more accessible to consumers, and property linked finance is one measure we’re keen to explore. Read more about the research: https://lnkd.in/dqJkgKzh #GreenHomes #RetrofitFinance #Sustainability #ClimateAction Andrew Asaam Meryem Brassington

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.

The 29th United Nations Climate Change Conference (COP29), held in Baku, Azerbaijan, concluded. Here are the 10 key outcomes which will impact businesses: 1.Global Carbon Credit Market Established Businesses can trade carbon credits globally, incentivising emission reductions. Economic impact: Potential cost savings for compliant businesses and revenue opportunities for those investing in renewable projects. 2. $300 Billion Annual Climate Finance Commitment Funding will assist developing nations’ transitions to greener economies. Economic impact: Opportunities for businesses in infrastructure, renewable energy, and technology transfer in emerging markets. 3. $120 Billion Annual Pledge by Multilateral Banks Increased lending for climate-related projects in low- and middle-income countries. Economic impact: New markets for sustainable technologies and climate adaptation solutions. 4. Loss and Damage Fund Operationalised Financial assistance for nations affected by climate impacts. Economic impact: Businesses must account for increased disaster recovery costs and integrate resilience measures into operations. 5. Strengthened Nationally Determined Contributions (NDCs) Governments will require stricter compliance from businesses to meet climate targets. Economic impact: Increased compliance costs but also market opportunities for businesses offering low-carbon solutions. 6. Global Carbon Market Valuation at $250 Billion by 2030 Expansion of the carbon market creates a high-value trading ecosystem. Economic impact: New revenue streams for businesses innovating in emissions reduction technologies. 7. Increased Private Sector Investment Expected Policy alignment with 1.5°C goals will drive private sector financing of sustainable projects. Economic impact: Greater competition for investment in renewable and energy-efficient technologies. 8. Focus on Adaptation and Resilience Emphasis on addressing climate risks encourages businesses to prioritise resilient infrastructure. Economic impact: Increased costs for climate-proofing operations but reduced long-term risks. 9. Opportunities in Emerging Markets Developing nations receiving climate finance create demand for green technology and services. Economic impact: Growth prospects for businesses specialising in clean energy, water management, and waste reduction. 10. Economic Penalties of Inadequate Action The $2.5 trillion annual cost of climate impacts underscores the need for rapid action. Economic impact: Delayed adaptation exposes businesses to higher costs from supply chain disruptions, infrastructure damage, and reduced productivity. These outcomes highlight a dual impact: businesses face rising costs from compliance and climate risks, but proactive strategies aligned with COP29 goals offer significant opportunities for growth in the green economy. #cop29 #decarbonisation #co2 #emissions #carbon #carbonmarket #cop #un #unitednations #co2market

Sun Burned Solar panel specialty finance companies are getting burned. Sunnova & Mosaic filed for bankruptcy in the past few days, while SunPower filed/liquidated last year, and Sunrun remains a going concern despite its cash burn. The problem with solar is not on the manufacturing side, it’s with the specialty finance solar companies. Sunnova filed for bankruptcy holding $13.5 million in cash vs. $8.9 billion in debt and will likely move to liquidate as it is difficult for highly leveraged finance companies to restructure—ouch! Solar panel ABS bondholders are also getting burned: - Senior bonds down 10-20 points (no impairment expected) - BBB-rated bonds down 30-40 points (50% impairment probability, case-by-case basis) - BB-rated bonds down 60-80 points (impairment likely) Specialty Finance got into trouble due to these 8 key reasons: 1. Overleverage 2. High cost structure 3. Tariffs for import of the panels (largest solar manufacturers are Chinese) 4. Killing the tax credit for homeowner who purchases the panels (under reconciliation) 5. Homeowners who are unable to re-sell solar power to their local utility in certain key states 6. Rising default rates (despite homeowners with high FICO scores) 7. Financing costs for solar panels has soared in the higher-for-longer environment 8. Yields rose more than the loan rate as the market deteriorated, resulting in losses for the specialty finance company Key points: 1. Like auto’s sometimes it’s not the OEM, it’s the specialty finance crowd that gets itself into trouble 2. ABL managers who financed these specialty finance solar companies will likely incur meaningful loss 3. Select opportunity to purchase distressed/discounted solar ABS 4. This should not be a surprise; the fire alarm has been going off for the past 12 months

The Future of Credit Ratings: How Sustainable Finance is Redefining Risk 💼 The intersection of sustainability and finance is no longer a niche concept—it’s a transformative force reshaping credit ratings and investment strategies. Environmental, Social, and Governance (ESG) factors are now critical financial stability and risk management indicators. 🔑 Why Sustainable Finance is Reshaping Credit Ratings: 1️⃣ Reduced Default Risk for ESG Leaders Companies excelling in ESG practices are proving to be more resilient. According to Moody’s (2023), firms with strong ESG performance have a 30% lower likelihood of credit downgrades compared to their peers with weaker ESG profiles. 2️⃣ Cost-Effective Capital Access Issuers of green bonds or sustainability-linked loans often benefit from lower borrowing costs. S&P Global highlights that green bond issuers in emerging markets enjoy 10-20 basis point reductions in interest rates compared to traditional bonds. 3️⃣ Regulatory and Reputational Pressures With frameworks like the EU’s Green Taxonomy, companies failing to meet sustainability benchmarks face higher regulatory risks and potential credit downgrades. Ignoring ESG factors can lead to increased capital costs and reputational damage. 💡 Implications for Investors and Businesses Enhanced Risk-Adjusted Returns: ESG-integrated portfolios consistently outperform traditional ones over the long term. Evolving Credit Assessments: Leading rating agencies like Fitch and Moody’s now embed ESG metrics into their evaluations, making it imperative for investors to prioritize sustainability. Climate Risk as a Key Driver: Moody’s estimates that $2.2 trillion of rated debt globally is exposed to climate-related risks, underscoring the urgency for ESG integration. 📊 The Numbers Don’t Lie 40% of corporate credit rating changes in 2022 were influenced by ESG factors, with climate risk being the primary driver (S&P Global). Firms with high ESG scores benefit from 25-100 basis point reductions in borrowing costs, as per the Bank for International Settlements (BIS). 🌱 Why ESG is a Financial Imperative Sustainable finance isn’t just about ethical investing—it’s about managing risk and unlocking opportunities. Companies that fail to address ESG challenges risk higher capital costs and limited access to funding. For investors, integrating ESG into decision-making is no longer optional—it’s essential for long-term success. 🚀 What’s your perspective on the growing link between ESG and credit ratings? Have you observed real-world examples of this trend? Let’s discuss how sustainable finance is shaping the future of risk assessment. #SustainableFinance #ESGInvesting #CreditRisk #ClimateAction #GreenBonds #FinancialInnovation #RiskManagement #CorporateSustainability #ClimateFinance #FutureOfFinance Let’s connect and explore how sustainable finance is driving change in the financial world! 🌟

🌍 Just published SunCulture's annual letter. Some highlights: 📊 Our collection rate: 90%+ vs industry average of 68.5% 📊 Monthly digital engagement: 90% of our customers 📊 Investment: We acquired a stake in a company to expand into financing agricultural inputs We're working with 60,000+ digitally connected farmers with solar irrigation across Africa. Each interaction generates ~100 data points continuously. This isn't just business intelligence—it's real-time insight into Africa's emerging consumer economy. The opportunity is staggering: By 2050, 1 in 4 people on Earth will be African. Half of all new workforce entrants will come from sub-Saharan Africa. Yet Africa accounts for only 3% of global output today. That disconnect? That's the opportunity. Some insights from the ground: → We can predict loan performance through irrigation patterns. → We're layering geospatial and demographic data with usage and repayment behavior to identify areas for companies to expand to. → What started as solar irrigation has evolved into credit, insurance, and agricultural inputs based on customer demand. The conventional wisdom about African markets is shifting. When leaders like Bridgewater's CEO are co-hosting summits in Côte d'Ivoire and Jamie Dimon is building networks across Nigeria, Kenya, and South Africa, institutional attention is clearly growing. Like the Mercator projection that makes Greenland look the size of Africa (when Africa is 14x larger), our mental maps about risk and opportunity may need updating. Full letter: https://lnkd.in/dVqy2vKa #KeepItFlowing #ClimateTech #AgTech #Africa #Fintech #Investing #Entrepreneurship #EmergingMarkets