Green Finance Briefing: Tech’s newfound interest in carbon capture

“With Frontier, we want to send a loud demand signal to entrepreneurs, researchers and investors that there is a market for permanent carbon removal: Build, and we will buy,” said Stripe’s head of climate, Nan Ransohoff.

More recently, the IPCC warned in its latest report that the world needs more bold action from financial institutions in order to avoid the worst case scenarios caused by climate change. While it’s not a central solution to the problem, carbon removal has its role to play in this gloomy puzzle as well – we won’t be able to reach net zero without it. 

“If global temperature temporarily overshoots 1.5°C, carbon dioxide removal would be required to reduce the atmospheric concentration of CO2 to bring global temperature back down,” the report says.

But getting to the billions of tons of carbon that we’d need to capture to keep temperatures from rising more than 1.5°C is no small feat, and the consensus seems to be that governments will eventually pay to remove most of the carbon. Ransohoff told The Atlantic that the carbon-removal market will probably need to reach $1 trillion a year – not doable by any company or fund.

Until then, someone’s gotta break the ice. 

“We are trying to buy ourselves time to get the right policy mechanisms in place to take this market where it needs to go,” Ransohoff said. "A billion dollars is roughly 30 times the carbon-removal market that existed in 2021. But it’s still 1,000 times short of the market we need by 2050."

Stripe previously committed to pay $1 million a year to remove carbon in 2019. A year later, it started buying carbon removal, allowing US businesses that process payments through its platform to give a portion of their revenue to carbon removal projects. 

But there seems to be a plethora of carbon removal solutions at the moment, with scientists still exploring all the different ways we could pull carbon out of the atmosphere. And tech companies are happy to finance away such experiments, probably in the hope that something will ultimately stick.

Take Stripe – it is now working with 14 different startups that are taking very different approaches, from capturing carbon in concrete to lining beaches with carbon-capturing minerals. All these projects were financed in advance with the purpose of Stripe later being able to capture carbon at a bigger scale.

Nevertheless, tech companies are not the only ones eyeing this sector – carbon removal seems to be experiencing growing interest from private markets as well. 

Just yesterday, VC firm Lowercarbon Capital announced that it raised a $350 million fund dedicated to carbon removal startups. Its founder, Chris Sacca, said there has never been a better time to start a carbon removal company, and that he’s open to any number of solutions. 

“So, come to us with your wildest ideas. They don’t have to be fully baked, and we have no preconceived notions about what might work. There are entire categories of carbon removal approaches with massive potential that haven’t even been discovered yet,” Sacca wrote in the fund’s announcement.

And in Europe, Swiss carbon dioxide removal startup Climeworks just closed a $650 million round of financing – the largest investment ever to go to a startup in this sector. 

While based in Switzerland, the company’s carbon capture and storage plant, Orca, is the world's biggest, and is located in Iceland. It stores carbon in the ground or turns it into fuels and materials. 

Time will tell what all these startups will come up with, but it’s true that a higher level of interest and investment was needed in order to find and develop the proper technology for capturing carbon. 

However, this sudden wave of enthusiasm coming from leading tech companies also brings about concerns of mainstreaming carbon removal across the board – using it as a primary solution, diverting attention from the more important issue of reducing actual emissions.

It’s pretty easy to imagine a future where everyone is rushing to buy carbon credits to get to net zero on paper, without having to truly employ sustainability practices in their day-to-day operations…

Chart of the week

Global green finance has grown over a hundredfold in the past decade, from $5.2 billion in 2012 to $540.6 billion in 2021, according to a new report by TheCityUK. This surge has been driven mainly by rising green bond issuances, up from $2.3 billion in 2012 to $511.5 billion in 2021.

However, the market remains small compared to the overall bond market – the cumulative green bond issuance of $1.4 trillion over 2012-21 accounts for just 1.7% of the total bond issuance.

Quote of the week 

“Climate activists are sometimes depicted as dangerous radicals. But the truly dangerous radicals are the countries that are increasing the production of fossil fuels. Investing in new fossil fuel infrastructure is moral and economic madness. Such investments will soon be stranded assets — a blot on the landscape and a blight on investment portfolios. But, it doesn’t have to be this way.” – UN Secretary-General António Guterres

Food for thought: Social responsibility as a greenwashing strategy?

The latest IPCC report introduced, for the first time, evidence that people’s lifestyle changes can also contribute to reducing carbon emissions. 

"Having the right policies, infrastructure and technology in place to enable changes to our lifestyles and behavior can result in a 40-70% reduction in greenhouse gas emissions by 2050. This offers significant untapped potential," said IPCC co-chair Priyadarshi Shukla.

However, opening this door towards consumer accountability could backfire, as it could lead to a wave of advertising campaigns from big brands and governments trying to persuade people to eat less meat, use public transportation and use less A/C, Forbes reports.

Faced with a new avenue to meet their carbon targets, the concern is that governments are going to turn to business to intervene in their consumers’ lifestyle emissions. 

“Those businesses will turn to their marketing and advertising agencies to activate ‘behavior change’ and ‘sustainable lifestyle’ campaigns for them to show governments how responsive and proactive they are being. I know, because for 20 years I’ve been running those campaigns for governments, businesses, and even the United Nations itself,” said sustainability solutionist Solitaire Townsend in the Forbes article. 

The danger here is an imbalance of where the attention is going versus who has the biggest impact. We all share some sort of collective responsibility, but it’s not really the people’s fault – they’re not the ones in charge of the actual decisions that need to be made to avoid the worst outcomes of climate change.

What we're writing

Wall Street is running out of time for bold climate action

Big banks are making climate pledges, but more bold actions are needed in order to avoid the worst global warming scenarios, according to a new report by the IPCC.

The Net Zero transition: Banks are starting to engage in the climate conversation

The global financial system can finance the transition to a clean economy, but it will take leadership and cooperation, as well as new technological capabilities.

What we're reading 

Sustainable fintech CarbonPay launches prepaid business payment card (FintechFinance)

Amex launches solutions enabling corporate clients to track and offset their carbon impact (ESG Today)

NatWest to pilot carbon tracking app with SMEs (Finextra)

SEC chair Gensler defends climate disclosure rule (Barrons)

Chief Sustainability Officers earn up to $1.5 million in hot market (Bloomberg)

Chief Sustainability Officers are gaining in influence, but still lack board access (ESG Today)

JPMorgan’s Dimon calls for increased gas production alongside massive investment in clean energy tech (ESG Today)

Is ESG drowning in a flood of data providers? (Sustainable Views)

Climeworks’ $650 million raise signals carbon capture’s mainstream arrival (Sifted)

UBS shareholders back bank's climate roadmap (Reuters)

BlackRock expects 75% of company and govt assets to be net zero-aligned by 2030 (Reuters)

Bank of America mobilized and deployed $250 billion in sustainable finance capital in 2021 (Seeking Alpha)