Compendium

Climate Finance and Investment

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Climate Finance and Investment

Climate finance is the capital that flows into mitigation (reducing emissions), adaptation (preparing for unavoidable change), and the loss-and-damage redress framework agreed at COP27 Sharm El-Sheikh (2022) and COP28 Dubai (2023). The annual flow has grown from ~$364 B in 2011/12 to ~$1.3 T in 2021/22 (Climate Policy Initiative, Global Landscape of Climate Finance 2023) and ~$1.5 T in 2023/24 (CPI preliminary, BNEF New Energy Outlook 2024, IEA World Energy Outlook 2024) — still well below the $5–$8 T per year required under net-zero by 2050 trajectories (IPCC AR6 WG3 Ch 15; IEA NZE 2023 update). The investors range from sovereign wealth funds and multilateral development banks to climate-tech venture capital to the voluntary carbon markets recovering from the 2023 integrity reset. This note compiles capital flows, deal structures, blended-finance facilities, just-transition partnerships, voluntary and compliance carbon markets, climate-tech VC trajectories, disclosure regimes (TCFD, ISSB, CSRD, SEC, California), and the transition-vs-physical risk pricing apparatus connecting climate science to capital allocation.

See also

1. Global capital flows

1.1 The aggregate

Climate Policy Initiative’s Global Landscape of Climate Finance is the standard reference tracking tracked climate finance flows. Headline numbers (CPI 2023 + 2024 update):

  • 2011/12. ~$364 B per year.
  • 2017/18. ~$579 B.
  • 2019/20. ~$665 B.
  • 2021/22. ~$1 265 B (1.3 T) — first crossing of the trillion-dollar threshold.
  • 2023/24 preliminary. ~$1.46 T (CPI), within a context where IEA WEO 2024 reports $2 T per year invested in clean energy specifically.

Within the $1.3 T (2021/22):

  • Public. ~$640 B (~49%), led by national governments, DFIs (Development Finance Institutions), MDBs.
  • Private. ~$625 B (~51%), led by corporates, commercial financial institutions, households, institutional investors.
  • Mitigation. ~$1 150 B (~91%).
  • Adaptation. ~$76 B (~6%).
  • Dual benefits. ~$39 B (~3%).
  • Geographic. EAP (East Asia + Pacific, dominated by China) ~30%; Western Europe ~22%; US + Canada ~16%; Latin America 6%; South Asia 4%; MENA 3%; SSA 4%; non-OECD ECA 3%.

The adaptation gap is acute: UNEP Adaptation Gap Report 2023 estimates developing-country adaptation needs at $215–$387 B per year by 2030 against current finance of ~$21 B per year — a 5–10× shortfall.

1.2 Sectoral split

IEA WEO 2024 + BNEF NEO 2024:

  • Renewable power. ~$510 B in 2023 (solar PV $390 B, wind $80 B, others $40 B).
  • Grid and storage. ~$330 B (transmission + distribution + batteries).
  • End-use electrification. ~$330 B (electric vehicles $190 B, heat pumps $50 B, electrified industry).
  • Energy efficiency. ~$320 B.
  • Nuclear. ~$70 B (with notable China + Russia + UAE + France + UK + South Korea capacity build-out).
  • Hydrogen. ~$5 B operational + $57 B announced in pipeline (BNEF).
  • CCUS. ~$5 B operational + $11 B in development.
  • Fossil fuels. ~$1 T in 2023 (IEA), unchanged from 2022 — the fossil-clean ratio remains ~1:1.7 vs the ~1:9 required by NZE 2050.

1.3 Solar + storage cost curves

Lazard Levelized Cost of Energy v17.0 (April 2024) + BNEF:

  • Utility solar PV LCOE. $29–$92 / MWh unsubsidized, lowest $23 / MWh in best Saudi + Indian + Chilean auctions 2023–24.
  • Onshore wind LCOE. $27–$73 / MWh.
  • Offshore wind LCOE. $74–$139 / MWh (recently rising on supply-chain and turbine inflation).
  • 4-hour lithium-ion BESS. $170–$296 / kW-year, pack prices $139 / kWh average 2023 (BNEF), $115 / kWh end 2024.
  • Combined-cycle gas CCGT. $45–$108 / MWh.
  • Nuclear (large LWR new-build). $142–$222 / MWh.

2. Investor categories

2.1 Sovereign wealth funds

  • Norges Bank Investment Management (NBIM / Government Pension Fund Global). ~$1.7 T AUM (2024); 1.5% private equity + 70% equities; Climate Action 100+ engagement; divested coal 2015, oil-sands 2019, oil-and-gas exploration 2019 (production assets retained).
  • GIC Private Limited (Singapore). ~$770 B AUM (2023 estimate); sustainable-investment commitments, green-bond holdings.
  • ADIA (Abu Dhabi Investment Authority). ~$1 T AUM; expanding renewables exposure via Masdar; new transition-finance commitments under COP28 hosting.
  • Mubadala (Abu Dhabi), PIF (Saudi Arabia), QIA (Qatar), KIA (Kuwait), CIC (China).
  • Australia Future Fund, NZ Super, NSWTC.
  • Temasek (Singapore). Net-zero by 2050; ~$10 B+ in green transition investments to date.

2.2 Commercial banks

The Net-Zero Banking Alliance (NZBA, founded April 2021 under GFANZ Glasgow Financial Alliance for Net Zero) had 144 banks representing $74 T of assets as of mid-2024 (UN-convened). Major signatories: Barclays, HSBC, BNP Paribas, Citi, JPMorgan Chase, Bank of America, Wells Fargo, Goldman Sachs, Morgan Stanley, Deutsche Bank, Société Générale, Crédit Agricole, ING, UniCredit, Santander, BBVA, UBS, Standard Chartered, MUFG, SMBC, Mizuho, RBC, TD, BMO, NAB, ANZ, Commonwealth Bank, Westpac, ICBC, CCB.

Notable departures and tensions: several US banks (JPM, Citi, BofA, Wells Fargo, Morgan Stanley, Goldman) departed NZBA late 2024/early 2025 amid US state-AG anti-ESG pressure. Bank exposure to fossil-fuel financing remains substantial (Banking on Climate Chaos 2024 report: $705 B fossil-fuel financing in 2023 by top 60 banks).

2.3 Asset managers

NZAM (Net-Zero Asset Managers initiative): 325 signatories with $57 T AUM as of 2024 (UN PRI + IIGCC). BlackRock departed NZAM January 2025 (under similar pressure as banks but retained internal targets). Vanguard departed earlier (December 2022). State Street remained.

Major participants: BlackRock ($11 T AUM end-2024), Vanguard ($10 T), State Street ($4.4 T), Amundi (~€2.2 T), Fidelity, Capital Group, Wellington, T. Rowe Price, Schroders, JP Morgan AM, Goldman AM, BlackRock Sustainable Investments, Federated Hermes, Allianz GI, AXA IM.

2.4 Insurers

NZIA (Net-Zero Insurance Alliance, founded 2021): collapsed mid-2023 after several insurers withdrew amid US AG antitrust pressure. Successor frameworks include the Forum for Insurance Transition to Net Zero (FIT, launched April 2024 under UNEP-FI).

Top reinsurers: Munich Re, Swiss Re, Hannover Re, SCOR, Berkshire Hathaway Re, China Re. Primary insurers: AXA, Allianz, Zurich, Generali, AIG, Chubb, Aviva, Tokio Marine. Many maintain coal exclusion policies (Munich Re from 2018, Swiss Re from 2018, Zurich from 2017). AXA + Allianz + Generali maintain unconventional-oil/gas exclusions.

2.5 Pension funds

  • CalPERS (California Public Employees’ Retirement System). ~$502 B AUM (2024); $100 B climate-solutions target by 2030; Climate Action 100+ engagement.
  • CalSTRS (California State Teachers’ Retirement System). ~$338 B AUM; net-zero by 2050 target.
  • OTPP (Ontario Teachers’). ~CAD$255 B AUM; net-zero 2050.
  • CDPQ (Caisse de Dépôt et Placement du Québec). ~CAD$452 B AUM; portfolio decarbonization plan + $10 B+ green-bond exposure.
  • IMCO (Investment Management Corporation of Ontario), AustralianSuper, ABP (Netherlands), CPP Investments.

2.6 Family offices

UBS Global Family Office Report 2024: ~50% of family offices have direct exposure to private climate-tech; ~30% have explicit decarbonization commitments. Notable climate-active offices: Bezos Earth Fund ($10 B 10-year commitment 2020), Bill Gates BEV (Breakthrough Energy Ventures, founded 2016), Vinod Khosla family office.

2.7 Impact funds

Generation Investment Management (Al Gore + David Blood, founded 2004; ~$45 B AUM). Just Climate (Generation spinoff focused on heavy-emitters, 2021). Lowercarbon Capital (Chris Sacca, 2019; ~$2 B). Energy Impact Partners ($3 B+ AUM, EIP Deep Decarb Frontier fund 2022). DCVC (formerly Data Collective). S2G Ventures (food + agri). TPG Rise Climate ($10 B fund 2022). Brookfield Global Transition Fund ($15 B 2022, $10 B follow-on 2024). KKR Global Climate (announced 2023, $7 B target).

3. Deal structures

3.1 Project finance

The dominant structure for utility-scale renewables: non-recourse project-company SPV, PPA (Power Purchase Agreement) revenue, debt 60–80% from commercial banks or institutional lenders, equity 20–40% from sponsors. Tenors 15–25 years matching PPA. Debt-service coverage ratios typically 1.30–1.50× P50.

In the US, tax-equity is a critical layer: 25–30% of project capex monetized via investors with tax appetite buying the 30% ITC (Investment Tax Credit) or PTC (Production Tax Credit) through partnership-flip or sale-leaseback structures. IRA 2022 introduced direct-pay (Section 6417) for tax-exempt entities and transferability (Section 6418) allowing non-tax-equity buyers to acquire credits.

3.2 Corporate finance and PPAs

Corporates contract directly with renewable developers via:

  • Physical PPAs. Direct on-site or sleeved off-site delivery of MWh.
  • Virtual PPAs (VPPAs). Financial contract-for-difference (CfD) on power-market settlement price; widely used by Google, Amazon, Microsoft, Meta to claim Scope 2 RE-100 alignment.

BNEF Corporate Energy Market Outlook 2024: ~46 GW of corporate PPAs signed in 2023, down from peak ~50 GW in 2022 but cumulative >155 GW since 2014. Largest off-takers: Amazon (>27 GW), Meta (>12 GW), Google (>10 GW), Microsoft (>10 GW), TSMC (>5 GW).

3.3 Green and sustainability-linked bonds

  • Green bonds (use-of-proceeds). Issuance ~$575 B in 2023 (Climate Bonds Initiative). ICMA Green Bond Principles 2021 framework. Cumulative ~$5 T issued since 2007.
  • Social bonds, sustainability bonds. ICMA Social Bond Principles + Sustainability Bond Guidelines.
  • Sustainability-linked bonds (SLBs). General-purpose with KPI-linked step-ups; ~$80 B issued 2023. Criticised for weak KPIs (Kölbel-Lambillon 2024 Review of Financial Studies working paper).
  • Transition bonds. Issued by hard-to-abate sectors with transition trajectories; ~$5 B in 2023 (Japan METIS leadership).
  • Green sukuk. Sharia-compliant green bonds (Indonesia, Malaysia, Saudi Arabia, UAE). ~$15 B cumulative.
  • Carbon-linked bonds. New category 2023–24 with carbon-credit delivery obligations.

3.4 Tax-equity for US clean energy

The Inflation Reduction Act of 2022 (PL 117-169, signed August 16 2022) is the largest single climate investment in US history: ~$369 B in clean-energy provisions through FY 2031 (CBO score, since revised upward by Penn Wharton to $870 B+ as uptake exceeded baseline). Key tax credits:

  • Section 45 PTC (Production Tax Credit). $26 / MWh inflation-adjusted (2024 $28 / MWh) for wind, solar, geothermal, biomass; 10-year duration from in-service date.
  • Section 45Y Clean Electricity PTC. Technology-neutral replacement starting 2025 for facilities placed in service after Dec 31 2024; phases out when grid emissions ≤25% of 2022 baseline.
  • Section 45X Advanced Manufacturing PTC. Per-unit credits for domestic manufacture of solar wafers/cells/modules, wind components, batteries, critical minerals. Drove the multi-billion-dollar US PV + battery factory boom 2023–2025.
  • Section 48 ITC (Investment Tax Credit). 30% base + 10% domestic-content + 10% energy-community + 10% low-income adders, max ~50–70%.
  • Section 48E Clean Electricity ITC. Technology-neutral ITC starting 2025.
  • Section 45Q. CO2 sequestration credit; $85 / t for industrial CCS, $60 / t for EOR utilization, $180 / t for DAC sequestration, $130 / t for DAC utilization.
  • Section 45V. Clean hydrogen PTC; $0.60–$3.00 / kg based on lifecycle GHG intensity tier.
  • Section 30D + 25E + 45W. EV credits.

Transferability under Section 6418 allows project owners to sell credits to unrelated third parties; the secondary market priced credits at $0.87–$0.95 per dollar of credit in 2024 (Crux, Reunion, Basis, Evergrow, Atheva platforms).

3.5 Production tax credit secondary market

Crux Climate (founded 2023, raised $50 M Series A 2024) is the dominant marketplace for IRA credit transfers; >$10 B in transactions facilitated through Q3 2024. Reunion Infrastructure provides advisory. The PWC, Deloitte, KPMG, EY tax-equity practices remain central to deal structuring.

4. Blended finance and DFIs

Blended finance combines concessional public capital (often grants, first-loss equity, guarantees) with commercial private capital to crowd in investment that wouldn’t otherwise meet risk-return thresholds.

4.1 Multilateral climate funds

  • GCF (Green Climate Fund). UNFCCC fund, founded 2010 (Cancun) operational 2015; ~$13 B cumulative commitments (initial + 1st + 2nd replenishments); programmed across 250+ projects.
  • GEF (Global Environment Facility). Established 1991; ~$5.3 B for GEF-8 (2022–2026); broader environmental scope including biodiversity, persistent organic pollutants, international waters.
  • Adaptation Fund. Funded by CDM levies + voluntary contributions; ~$1.2 B cumulative.
  • CIF (Climate Investment Funds, World Bank-administered). ~$11 B; includes Clean Technology Fund, Strategic Climate Fund, Forest Investment Program, PPCR.
  • LDF (Loss and Damage Fund). Operationalized at COP28 Dubai with initial $700 M+ pledges; administered through World Bank as host (4-year interim arrangement).

4.2 Multilateral Development Banks

  • World Bank (IBRD + IDA). Climate finance commitments $38.6 B in FY24 (45% of total lending); target 45% by FY25 → met.
  • IFC (International Finance Corporation). Private-sector arm; ~$8 B climate finance FY24.
  • MIGA (Multilateral Investment Guarantee Agency). Guarantees against political/credit risk for emerging-market climate projects.
  • EBRD (European Bank for Reconstruction and Development). GET (Green Economy Transition) target 50% of investments by 2025 (achieved).
  • EIB (European Investment Bank). Climate Bank by 2025 plan; 50%+ of lending climate-aligned by 2025.
  • AIIB (Asian Infrastructure Investment Bank). Climate finance to reach 50% of total approvals by 2025.
  • ADB (Asian Development Bank). $100 B climate finance 2019–2030 commitment.
  • AfDB (African Development Bank). $25 B+ climate finance commitment.
  • IDB (Inter-American Development Bank). 40% climate-aligned by 2025.

4.3 Bilateral DFIs

  • KfW (Germany). ~€72 B in commitments 2023; substantial climate share.
  • JBIC, JICA (Japan). Major financiers of emerging-market infrastructure including renewables.
  • KEXIM, K-EXIM (South Korea).
  • DFC (US International Development Finance Corporation, founded 2019). Climate finance target 33%+ by FY25.
  • UKEF (UK Export Finance), Bpifrance, FMO (Netherlands), Proparco (France), CDP (Italy), Finnfund, Norfund, Swedfund, IFU (Denmark).

4.4 Just Energy Transition Partnerships (JETPs)

Country-specific blended packages aligning international finance with national decarbonization commitments:

  • South Africa JETP (announced COP26 Glasgow 2021). $8.5 B from US, UK, EU, France, Germany — for coal-to-renewables transition and just-transition support (Mpumalanga coal communities).
  • Indonesia JETP (announced G20 Bali 2022). $20 B (later expanded under COP27 follow-up) — power-sector decarbonization.
  • Vietnam JETP (announced 2022). $15.5 B — coal phase-out and grid expansion.
  • Senegal JETP (announced 2023). €2.5 B — gas-to-renewables transition.
  • India declined formal JETP but engages through bilateral channels.

JETPs have faced disbursement delays and concerns over conditionality (grant vs concessional vs commercial blend). The South Africa JETP investment plan disbursed ~$1.3 B by end-2023 against $8.5 B target.

4.5 Other blended-finance vehicles

  • GAVI, CEPI (health vehicles, not climate-specific).
  • Climate Investment Fund Capital Markets Mechanism. Securitizes CIF Clean Technology Fund loans into capital markets.
  • Catalyst Fund (Allianz + ASN + KLP + Etihad).
  • Global Energy Alliance for People and Planet (GEAPP, founded COP26 2021). $10 B over 10 years from Bezos Earth Fund, IKEA Foundation, Rockefeller Foundation, plus MDB co-investment.

5. Voluntary carbon markets

5.1 Market overview

Voluntary carbon market (VCM) traded ~$1.4 B in secondary markets 2024 (Ecosystem Marketplace + AlliedOffsets), down from the 2021–22 peak of ~$2 B following the integrity crisis triggered by Guardian + Source Material + Die Zeit January 2023 investigation finding most Verra REDD+ “rainforest” credits were not delivering additional emissions reductions (West-Wunder-Sills-Borner-Rifai-Neidermeier-Frey-Kontoleon 2023 Science 381 published the academic analysis behind the journalism).

Subsequent reset:

  • Verra revised its REDD+ methodology under VM0048 (consolidated methodology released November 2023, applicable from January 2025); jurisdictional REDD+ (JNR) increasingly preferred.
  • ICVCM Core Carbon Principles (Integrity Council for the Voluntary Carbon Market, launched 2023). Ten Core Carbon Principles; CCP-eligibility labels for high-integrity credits issued July 2024 onwards; first-tier methodologies approved include certain Gold Standard household devices, ACR landfill gas, CAR ozone-depleting substances.
  • VCMI (Voluntary Carbon Markets Integrity Initiative) Claims Code of Practice (June 2023, updated 2024). Sets out tiered claims (Silver, Gold, Platinum) requiring scope-emission reductions + high-integrity offsets for residuals.

Total cumulative VCM issuances ~3.2 GtCO2e since 2002; ~80% still uncertified retired (Trove 2024). Top registries: Verra (Verified Carbon Standard, ~70% of supply), Gold Standard (15%), ACR (American Carbon Registry, 8%), CAR (Climate Action Reserve, 5%), Plan Vivo, Puro.earth (CDR), ICR Isometric Carbon Registry, ART (Architecture for REDD+ Transactions, jurisdictional).

5.2 Project types and pricing (2024)

  • Avoided deforestation (REDD+). Pre-reset $5–$15 / t; post-reset many vintages illiquid; CCP-eligible credits $15–$25 / t.
  • Improved Forest Management (IFM). $15–$50 / t.
  • Afforestation/Reforestation (ARR). $15–$80 / t (premium for high-quality projects with co-benefits).
  • Renewable energy. Historic supply, now ineligible under most claims frameworks. Sub-$5 / t.
  • Household devices (cookstoves). $10–$25 / t.
  • Methane reduction (landfill, livestock). $10–$30 / t.
  • Soil carbon, agricultural. $15–$60 / t (Indigo, Nori, Boomitra, Carbon by Indigo, CIBO, eAgronom platforms).
  • Blue carbon (mangroves, seagrass, saltmarsh). $25–$80 / t.
  • Biochar. $120–$250 / t.
  • Enhanced Rock Weathering. $200–$400 / t.
  • DAC (Direct Air Capture). $400–$1 000 / t in current spot, with frontier purchasers including Microsoft, Stripe, Frontier, JPMorgan, Shopify.

5.3 Frontier Climate, Stripe Climate, Microsoft

Frontier ($1 B AMC Advance Market Commitment 2022, anchor buyers Stripe, Alphabet, Meta, Shopify, McKinsey; later JPMorgan + Workday + Autodesk + H&M + Salesforce) catalyzes durable CDR. Pre-purchased >300 kt CO2 by mid-2024 across Climeworks, Heirloom, Lithos, CarbonRun, Vaulted Deep, Charm Industrial, Carboncapture, Living Carbon, others.

Microsoft is the largest single corporate CDR buyer: ~5 MtCO2 contracted across DAC, biomass-BECCS (multi-megaton offtake from Stockholm Exergi, Drax, Ørsted), enhanced rock weathering (Lithos, UNDO, InPlanet), blue carbon, biochar.

5.4 Reset infrastructure

  • CAD Trust (Climate Action Data Trust). Joint World Bank + IETA + Singapore platform tracking credits across registries to prevent double-counting; operational 2023+.
  • Sylvera, BeZero, Pachama, Renoster. Ratings agencies for VCM credits; assess project integrity, baseline plausibility, additionality, leakage risk, permanence.
  • CIX (Climate Impact X, Singapore). Public exchange for high-integrity nature-based credits; co-owned by DBS, SGX, Standard Chartered, Temasek.

6. Compliance carbon markets

6.1 EU Emissions Trading System (EU ETS)

The world’s largest compliance market. Phase IV (2021–2030) under EU “Fit for 55” reforms (Regulation 2023/957 + 2023/959):

  • Coverage. ~10 000 installations across power + heavy industry + aviation; ~40% of EU GHG. Expanded under reforms to maritime (from 2024), road transport + buildings (ETS-2 from 2027).
  • Cap. Linear Reduction Factor 4.3% per year 2024–2027, 4.4% per year 2028–2030.
  • Free allocation. Continues for trade-exposed sectors with benchmarking; phased out by 2034 for sectors covered by CBAM.
  • Allowance price (EUA). Averaged €83 / tCO2 2023, €69 / tCO2 2024 (volatile; spiked to €100+ in February 2023, declined on industrial gas demand drop). Forward curve to 2030 in €80–€120 / tCO2 range.
  • MSR (Market Stability Reserve). Absorbs surplus allowances when total surplus >833 M EUAs.

6.2 UK ETS

Split from EU ETS post-Brexit; began 2021. Linked to EU under negotiation as of 2024–25. UK ETS price diverged from EU ETS (UK ~£35 / tCO2 vs EU €70 / tCO2 mid-2024) leading to UK government considering tighter cap.

6.3 California Cap-and-Trade (WCI)

Western Climate Initiative joint with Québec. Covers ~75% of California GHG. 2024 auction settlement averaged $36 / tCO2 (CCA California Carbon Allowance). Reforms under AB 1207, AB 398 ongoing.

6.4 RGGI (Regional Greenhouse Gas Initiative)

Northeast US power-sector only; 11 states + DC. 2024 auction prices ~$14–$22 / ton. Pennsylvania entry contested in litigation.

6.5 China National ETS

Launched July 2021; covers power sector (~5 GtCO2, ~40% of China emissions). Currently intensity-based rather than absolute cap. Expanded to cement, aluminum, steel in 2025 announcement. Price ~CNY 100 / tCO2 ($14 / tCO2) end-2024.

6.6 CBAM (Carbon Border Adjustment Mechanism)

EU Regulation 2023/956. Transitional phase October 2023 – December 2025 (reporting only); full operation January 2026 (CBAM certificates required for embedded emissions in imported cement, aluminum, fertilizer, iron + steel, hydrogen, electricity). Designed to prevent carbon leakage as EU ETS free allocations phase out. UK CBAM proposed January 2027.

6.7 Other systems

  • South Korea ETS. 2015 launch; second-largest ETS by value.
  • New Zealand ETS. 2008; forestry-inclusive.
  • Tokyo Cap-and-Trade. Subnational.
  • Mexico ETS pilot.
  • Indonesia ETS. Launched 2023.

The World Bank State and Trends of Carbon Pricing 2024 reports 75 carbon-pricing instruments in operation globally (39 ETS + 36 taxes) covering 24% of global GHG emissions.

7. Insurance and parametric

Climate-related insurance losses reached ~$118 B in 2023 + ~$143 B in 2024 (Swiss Re sigma + Aon Catastrophe Insight; record year). Major events 2023–24: Hurricane Helene + Milton 2024, European floods (Spain DANA October 2024 $10 B+), Japan earthquake + Noto, Pakistan floods 2022, US convective storms run-rate $50 B+ annually.

7.1 Parametric insurance

Parametric policies pay out on objective triggers (rainfall threshold, wind speed exceedance, temperature) rather than indemnity-based loss adjustment.

  • Demex. US drought + heat. Series B $11 M 2024.
  • Arbol. Weather-based for agriculture + energy + commodities. >$1 B in coverage written.
  • Skyline Partners. UK-based; specialty parametric for energy.
  • Descartes Underwriting (now Maaike). French parametric MGA for corporates.
  • CelsiusPro. Parametric specialist (Swiss Re subsidiary).
  • Ondo InsurTech (water leakage), Floodflash (flood), Jumpstart (earthquake).

7.2 Sovereign and humanitarian parametric

  • CCRIF (Caribbean Catastrophe Risk Insurance Facility, 2007). Multi-country parametric pool; payouts on Hurricane Beryl 2024 $84 M to Grenada + St. Vincent + Jamaica + Cayman.
  • ARC (African Risk Capacity). Drought + cyclone parametric for African Union members.
  • PCRAFI (Pacific Catastrophe Risk Assessment and Financing Initiative).
  • SEADRIF (Southeast Asia Disaster Risk Insurance Facility).
  • Global Shield Against Climate Risks (COP27 launch 2022). Funded by G7 + V20 vulnerable countries; $300 M+ commitments to expand sovereign parametric.

7.3 Insurance retreat from high-risk regions

  • California. State Farm + Allstate + Farmers paused new policies 2023; California Insurance Commissioner approved rate increases + reform package 2024 (Sustainable Insurance Strategy) including catastrophe modeling and reinsurance pass-through.
  • Florida. Citizens (state insurer) became largest insurer in state; private market in flux.
  • Louisiana, Texas, North Carolina coastal regions.
  • Australia flood + bushfire exposure under Cyclone Reinsurance Pool (federal, 2022).

8. Climate-tech venture capital

8.1 Funding trajectory

Climate-tech VC peaked at ~$86 B in 2022 (Crunchbase + Climate Tech VC + PwC State of Climate Tech 2024), declined to $51 B 2023, ~$32 B 2024 (Sightline Climate + Net Zero Insights). Decline driven by higher interest rates, dilution of crypto/climate-tech “everything bubble,” and softening of corporate purchase commitments.

8.2 Top funds

  • BEV (Breakthrough Energy Ventures, founded 2016 by Bill Gates). ~$3.5 B AUM across BEV I + II + III + Catalyst (concessional). Portfolio: Form Energy (iron-air battery, $405 M Series F 2024), Commonwealth Fusion Systems, TerraPower (Natrium reactor), Heliogen, Boston Metal, Pivot Bio, Mangrove Lithium, KoBold Metals, Climeworks (DAC), Sublime Systems (cement), Ample, Antora Energy (thermal storage), Pachama.
  • Lowercarbon Capital (Chris Sacca, 2019). $2.5 B+ AUM after Q2 2024 close. ~150 portfolio companies including Heirloom (DAC), Twelve (CO2-to-chemicals), Pachama, KoBold, Antora, Verse Innovation, Lithos, Boom Supersonic.
  • Energy Impact Partners. $3 B+ AUM; EIP Deep Decarb Frontier fund ($1 B 2022). Portfolio: Lineage Logistics, AMPLY Power, Veir, Splight, Form Energy.
  • S2G Ventures. Food + agriculture climate-tech.
  • Generation Investment Management + Just Climate. Macro + heavy industry decarb.
  • DCVC. ~$3 B; deep-tech + climate. Portfolio: Pivot Bio, Capella Space, Planet Labs, Twelve, Antora, Boom.
  • Khosla Ventures. Founded 2004; climate-tech track record back to early biofuels.
  • TPG Rise Climate ($10 B 2022). Decarbonization at scale; portfolio includes Hertz EV fleet financing, Olympus Terminals.
  • Brookfield Global Transition Fund I ($15 B 2022) + II ($10 B 2024). Mark Carney + Connor Teskey lead. Anchor LPs include CDPQ, OTPP, sovereign-wealth.
  • Climate Adaptive Infrastructure (Bill Green, $1 B).
  • G2 Venture Partners, Galvanize Climate Solutions, Capricorn Investment Group, Spring Lane Capital, GreenPoint Partners, Kinnevik Climate VC.

8.3 Major rounds 2024

  • Form Energy $405 M Series F (October 2024). Iron-air long-duration storage.
  • Pacific Fusion $900 M Series A (October 2024). Inertial-confinement fusion. General Catalyst-led.
  • H2 Green Steel (now Stegra) €4.75 B project finance (June 2024). Green-hydrogen direct-reduced-iron plant in Boden, Sweden.
  • Twelve Series C $200 M (2024). CO2-to-chemicals.
  • Northvolt filed Chapter 11 November 2024 after $15 B+ raised — major write-down.
  • CATL, BYD, Tesla dominate battery + EV CapEx in their respective public-market positions.

8.4 Exits

IPO drought 2023–24 limited exits; notable Climeworks valuation reset (private). Energy Vault (gravity storage) public via SPAC 2022 traded down. SunRun, Sunrun + Sunnova restructuring. M&A: Shell acquired Daystar; BP acquired bp Pulse + Archaea Energy (2022); ExxonMobil acquired Denbury (2023, CO2 pipeline for CCS).

9. Climate disclosure regimes

9.1 TCFD → ISSB

Task Force on Climate-related Financial Disclosures (TCFD, founded 2015 under FSB by Mark Carney + Michael Bloomberg) published its final recommendations 2017: four pillars (governance, strategy, risk management, metrics and targets) + 11 disclosure recommendations. TCFD was retired June 2024 after handover to the ISSB.

International Sustainability Standards Board (ISSB) under IFRS Foundation (founded COP26 2021) published:

  • IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information (June 2023).
  • IFRS S2 Climate-related Disclosures (June 2023). Builds on TCFD architecture; mandatory Scope 1, 2, 3 + scenario analysis + transition plans + climate risk and opportunity.

Adoption status as of 2024: UK + Japan + Singapore + Hong Kong + Australia + Canada + Brazil + Nigeria + Bangladesh + Pakistan + Sri Lanka committed to ISSB-aligned national rules. EU equivalency under CSRD (see below).

9.2 EU CSRD and ESRS

Corporate Sustainability Reporting Directive (CSRD, Directive 2022/2464, adopted December 2022) replaces Non-Financial Reporting Directive. Phased applicability:

  • FY 2024 (first reports 2025). Large public-interest entities (>500 employees) already under NFRD.
  • FY 2025 (reports 2026). Other large EU companies (>250 employees + €40 M revenue + €20 M balance-sheet).
  • FY 2026 (reports 2027). Listed SMEs.
  • FY 2028 (reports 2029). Non-EU companies with substantial EU operations.

European Sustainability Reporting Standards (ESRS, EFRAG-developed, adopted July 2023 + delegated act July 2023): 12 standards covering environment (E1 Climate, E2 Pollution, E3 Water + Marine, E4 Biodiversity, E5 Resources + Circular Economy), social (S1–S4), governance (G1), and cross-cutting (ESRS 1, ESRS 2). Double materiality — both financial materiality and impact materiality required.

The “Omnibus” simplification proposal (Commission, February 2025) is under review to reduce scope of CSRD as part of the EU competitiveness agenda. ESG fatigue and political pressure are notable.

9.3 SEC climate rule

The SEC adopted final climate disclosure rule March 2024 (Release Nos. 33-11275 + 34-99678) requiring:

  • Material climate risk disclosures. Governance + strategy + risk management.
  • Scope 1 + Scope 2. For Large Accelerated Filers + Accelerated Filers (the rule notably scoped out Scope 3 from earlier proposal).
  • Financial-statement impacts. Climate-related expenditures, losses, capitalized costs.

Rule stayed by SEC itself April 2024 pending Fifth Circuit consolidated litigation (Liberty Energy + others). Legal status uncertain as of mid-2025 under Trump administration. State-level action filling vacuum.

9.4 California climate rules

  • SB 253 Climate Corporate Data Accountability Act (signed October 2023, effective FY 2025 for reporting in 2026). Requires Scope 1, 2 in 2026 and Scope 3 in 2027 for companies doing business in California with revenue >$1 B.
  • SB 261 Climate-related Financial Risk Act (signed October 2023, first reports January 2026). TCFD-aligned climate-risk reports for companies with revenue >$500 M.
  • AB 1305 Voluntary Carbon Market Disclosures Act. Disclosure of carbon-credit purchases + claims.

9.5 SBTi (Science Based Targets initiative)

Joint CDP, UN Global Compact, WRI, WWF (founded 2015). Validates corporate targets aligned with 1.5°C trajectory:

  • Near-term targets (5–10 years). 4.2% per year linear absolute reduction for Scope 1+2, 2.5% per year for Scope 3 (revised methodology under SBTi Net-Zero Standard).
  • Long-term Net-Zero Standard (October 2021). 90–95% absolute reductions by 2050 with high-quality removals for residuals.
  • FLAG (Forest, Land, Agriculture) standard (September 2022). Separate target track for agriculture + forestry sectors.
  • Financial Institution SBT framework (August 2024). For banks + insurers + asset owners + asset managers; portfolio temperature alignment.

5 000 companies committed as of 2024; ~2 500 with validated targets. Bloomberg + Reuters questioned credibility April 2024 after SBTi board controversially proposed allowing carbon offsets in Scope 3 targets, contradicting standard; reversed under staff revolt.

9.6 CDP and ratings

CDP (formerly Carbon Disclosure Project, founded 2000). >23 000 companies disclosed in 2023; +18 000 cities, states, regions. Rated A through F. >$130 T AUM of investor signatories.

ESG ratings agencies: MSCI ESG, Sustainalytics (Morningstar), S&P Global ESG (acquired RobecoSAM), ISS ESG, Refinitiv (LSEG), Moody’s ESG, FTSE Russell. Notoriously divergent across agencies (Berg-Kölbel-Rigobon 2022 Review of Finance 26 — “aggregate confusion”).

9.7 NGFS scenarios

Network for Greening the Financial System (NGFS, founded 2017 by 8 central banks; now 138 members + observers). Issued reference scenarios for financial-system stress testing (Phase IV release 2023):

  • Net Zero 2050. Orderly transition; 1.5°C with limited overshoot.
  • Below 2°C. Slower start; 1.7°C.
  • Delayed Transition. 1.8°C with disruptive 2030 policy implementation.
  • NDCs. Current pledges trajectory; ~2.5°C.
  • Current Policies. ~3°C.
  • Fragmented World (added Phase IV). Disordered + regionally divergent.

Underlying IAM combinations: REMIND-MAgPIE, GCAM, MESSAGE-GLOBIOM (consistent with IPCC AR6 vetted scenarios). Used by ECB, Bank of England, Banque de France, Fed (CSEs Climate Scenario Exercises), Bank of Japan, MAS (Singapore), HKMA, APRA, ASIC, FCA, OSFI for climate stress tests of regulated entities.

10. Transition vs physical risk

10.1 Conceptual distinction

  • Transition risk. Risk arising from policy, market, technology, reputation shifts as economies decarbonize. Examples: stranded fossil-fuel assets, carbon-tax exposure, EV displacement of ICE, building-stock retrofit obligations.
  • Physical risk. Risk from climate hazards. Acute (heatwaves, hurricanes, wildfires, floods) and chronic (sea-level rise, gradual temperature shifts, water-stress).
  • Liability risk. Litigation arising from climate-related damages (subset of transition; sometimes treated separately).

10.2 Stranded-asset analysis

Carbon Tracker Initiative (founded 2009 by Mark Campanale) pioneered the “unburnable carbon” framing: McGlade-Ekins 2015 Nature 517 estimated ~80% of coal, ~50% of gas, ~30% of oil reserves must remain unused for 2°C. Stranded-asset risk for fossil-fuel majors quantified by IEA NZE, Carbon Tracker 2023 + 2024 reports. Caldecott-Howarth-McSharry 2013 Stranded Assets report and Caldecott et al. ongoing Oxford Smith School work.

Empirical exposure: Bos-Gupta 2019 Energy Research and Social Science 56 quantified ~$1.4 T potentially stranded global power assets; Mercure-Pollitt-Viñuales-Edwards-Holden-Chewpreecha-Salas-Sognnaes-Lam-Knobloch 2018 Nature Climate Change 8 — “Macroeconomic impact of stranded fossil fuel assets” modeled $1–4 T global stranded-asset losses.

10.3 Social cost of carbon (SCC)

Stern Review 2006 (The Economics of Climate Change) estimated SCC at $85 / tCO2 (2005 dollars). Updated Stern 2024 with William Nordhaus + Drupp-Freeman-Groom-Nesje 2018 AEJ Policy 10 + revised damage functions. EPA IWG (Interagency Working Group on Social Cost of Greenhouse Gases): 2016 estimate $51 / tCO2 (2020 dollars); revised SCC December 2023 Final Supplementary Material — $190 / tCO2 (2020 dollars, 2% discount rate, central estimate); range $120–$340 / tCO2 across discount rates.

Howard-Sterner 2017 Environmental and Resource Economics 68 meta-analysis suggested SCC $200+ / tCO2. Rennert-Errickson-Prest-Rennels-Newell-Pizer-Kingdon-Wingenroth-Cooke-Parthum-Smith-Cromar-Diaz-Moore-Müller-Plevin-Raftery-Sevcikova-Sheets-Stock-Tan-Watson-Wong-Anthoff 2022 Nature 610 produced $185 / tCO2 central estimate using updated damage functions, climate uncertainty, demographics, and discount rates. Updating Drupp et al. 2018 suggests substantially higher SCC at low discount rates. Some studies (Kotz-Levermann-Wenz 2024 Nature 628) indicate damages may be much larger than assumed — putting SCC potentially well above $1 000 / tCO2 under heavy uncertainty.

10.4 Physical-risk modeling

Catastrophe modelers historical: Verisk (AIR Worldwide), Moody’s RMS (RMS), KCC (Karen Clark Company), CoreLogic. Climate-physical-risk specialists:

  • Climate X. UK; flood, sea-level rise, heat, wind, drought across asset registers.
  • Sust Global. US; CMIP6-derived global physical-risk indicators for institutional investors.
  • Cervest (now Mitiga Solutions following 2024 sale). Asset-level Earth-science-AI integration.
  • Jupiter Intelligence. Cat-modeling-grade climate-conditioned hazard layers.
  • First Street Foundation. US-focused flood + wildfire + wind public benefit research; powers Zillow + Redfin disclosure.
  • Risilience (Cambridge spin-out). Stress testing combining physical + transition + reputational.
  • Four Twenty Seven (S&P). Acquired by Moody’s 2019 → integrated into Moody’s CRE + corporate risk products.

10.5 Litigation as risk channel

Sabin Center Columbia Climate Change Litigation Database (Maria Antonia Tigre + Michael Burger): >2 500 cases globally end-2024. Notable:

  • Urgenda v Netherlands (Dutch Supreme Court 2019). State liability for emissions reduction.
  • Milieudefensie v Shell (Dutch District Court 2021). Shell ordered to cut emissions 45% by 2030 (overturned on appeal November 2024 — court found no specific reduction obligation).
  • Held v Montana (2023). State environmental constitutional right enforced.
  • Juliana v US (long-running; certiorari denied 2024).
  • KlimaSeniorinnen v Switzerland (ECHR April 2024). European Court of Human Rights ruled that state climate inaction violated Article 8 (right to private and family life).
  • Massachusetts v ExxonMobil + others (state-AG cases). Investor-fraud + consumer-protection theories.

11. Loss and damage

COP27 Sharm El-Sheikh (November 2022) established the Loss and Damage Fund. COP28 Dubai (December 2023) operationalized it; initial pledges $700 M+ (UAE $100 M, Germany $100 M, EU $245 M, UK £40 M, US $17 M [criticised as inadequate], Japan + others). World Bank serving as 4-year interim host.

Vulnerable Twenty (V20) Group (now 70 countries; coordinated through Climate Vulnerable Forum + V20 Ministerial Dialogue) continues to press for adequate scale ($200–400 B per year required per V20 calculation, vs $700 M pledged).

Attribution science (see extreme-event-attribution) provides the scientific basis for loss-and-damage claims by quantifying anthropogenic-share of extreme-event damages.

12. Open problems

  • The trillion-to-trillion gap. Bridging $1.5 T per year actual against $5–$8 T per year required, particularly toward EMDEs (emerging-market + developing-economy) and adaptation.
  • Currency + sovereign-risk premiums in EMDEs. Cost of capital for renewables in Nigeria/Indonesia/India can be 2–3× US/EU equivalents; blended finance and currency-hedging structures still inadequate.
  • VCM credibility recovery. Whether ICVCM + VCMI labels restore buyer confidence and bring liquidity back to >$5 B/year.
  • Disclosure consolidation. Rationalizing ISSB + ESRS + SEC + national rules to reduce compliance burden + improve comparability.
  • Disclosure backlash. Political pressure in US (state AGs, Trump administration), EU Omnibus simplification, anti-ESG rhetoric vs investor pull toward climate metrics.
  • CBAM ramifications. Trade-flow shifts as 2026 enforcement begins; WTO compatibility; non-EU CBAM proposals (UK 2027, possibly US under future bills).
  • Just-transition financing. Whether JETPs disburse at scale and avoid conditioning critiques.
  • Insurance retreat in high-hazard regions. Whether parametric + sovereign + government backstop mechanisms keep coverage available.
  • SCC range. Resolving the order-of-magnitude uncertainty between $50 and $1 000+ / tCO2 estimates.
  • Stranded-asset transition shock. Avoiding disorderly transition costing trillions in market capitalization.

Further reading

  • Pierrehumbert, R. T. 2010. Principles of Planetary Climate.
  • Holton, J. R. and G. Hakim 2013. An Introduction to Dynamic Meteorology (5th ed.).
  • Wallace, J. M. and P. V. Hobbs 2006. Atmospheric Science: An Introductory Survey (2nd ed.).
  • Trenberth, K. E. (ed.) 2009. Climate System Modeling.
  • Held, I. M. 2005. “The Gap between Simulation and Understanding in Climate Modeling.” BAMS 86.
  • Stocker, T. F. 2011. Introduction to Climate Modelling.
  • Stern, N. 2006. The Economics of Climate Change: The Stern Review.
  • Stern, N. 2024. “Climate change, economic policy and the path to net-zero.” LSE Grantham Research Institute working paper.
  • Nordhaus, W. D. 2017. The Climate Casino.
  • Rennert, K. et al. 2022. “Comprehensive evidence implies a higher social cost of CO2.” Nature 610.
  • CPI (Climate Policy Initiative) 2023. Global Landscape of Climate Finance 2023.
  • IEA 2024. World Energy Outlook 2024.
  • BloombergNEF 2024. New Energy Outlook 2024.
  • IPCC AR6 WG3 Ch 15 (Kreibiehl, Yamahaki et al.) 2022. “Investment and finance.”
  • NGFS 2023. Scenarios for central banks and supervisors — Phase IV.
  • World Bank 2024. State and Trends of Carbon Pricing 2024.
  • ISSB 2023. IFRS S2 Climate-related Disclosures.
  • TCFD 2017. Recommendations of the Task Force on Climate-related Financial Disclosures.
  • Carbon Tracker Initiative 2024. Reach for the Sun: The Renewable Resource Curse.

Adjacent

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