The Wide Open Window For Climate Investments

“Climate will be to this decade what cloud was to the last one.” – Fred Wilson, Union Square Ventures Co-founder

Emergency creates urgent motivation. In the case of the looming climate crisis, this emergency has galvanized a boom in clean and climate technology investments. Solutions in both climate mitigation and adaptation are rapidly emerging, from regenerative agricultural technologies, to improved water filtration for the developing world, to energy efficiency improvements to decrease the large share of emissions from aging infrastructure. Pairing these emerging solutions with enthusiasm for direct individual climate action, new federal leadership, and business friendly regulations has created an investment ecosystem the likes of which has not been previously seen. New financial developments, such as Regulation Crowdfunding,  now allow any entrepreneurial individual to invest in early-stage climate startups and similar ventures. This new flow of capital has provided an unprecedented economic environment, as private capital, from both venture capital firms and angel investors, has shockingly outpaced public commitments. Before public commitments accelerate and match private capital, a window for investors to take direct, and profitable, action against the climate crisis will remain open.

 

As venture capital firms lead the charge, with new funds emerging almost daily, there exists a unique opportunity for individual investors to capitalize on this explosion of much-needed solutions. Through Regulation Crowdfunding, individual investors can invest up to $5 million in early-stage climate ventures — from community solar projects to climate startups. With more cross-sector opportunities than ever across a myriad of climate-adjacent industries, including: carbon, climate, consumer, energy, food and water, industrial, and mobility, there is bound to be continued interest and investment across the space. Especially in the face of intensifying natural disasters, rising temperatures and sea levels, and decaying infrastructure, the climate sector and its derivatives is currently an investor’s dream. Individual investors with as little as $100 can align their principles with their investments, using their dollars to fight climate change. 

Climate Tech Venture Capital, one of the emerging authorities on climate tech investing, recorded a total flow of $16 billion into the climate technology sector in the first half of 2021 alone (“Climate tech $16b mid-year investment action report,” 2021). This is nearly equivalent to the total amount of climate investment yearly in each 2018, 2019, and 2020 (“Why investors are raising climate tech funds at a torrid pace,” 2021). 

 

Figure 1: Total Number of Climate Tech VC Deals, by quarter 2020-2021

Companies like Tesla, which has exhibited 7600% revenue growth in the last decade, have cemented the emergence of a thriving climate tech sector (“Tesla's revenue from FY 2008 to FY 2020,” 2021). Furthermore, the transition of large corporations to focus on clean energy, international airlines’ status as carbon neutral, and the allocation of billions to climate across both public and private capital, demonstrate the rich opportunity that is the climate sector. By utilizing tools like Regulation Crowdfunding the public, regardless of accreditation status, can join the rising tide of climate investment. As we look ahead to 2022, Raise Green predicts a continued expansion of such investment, with the most liberal predictions reaching nearly $30 billion in private capital investments to climate-related projects and companies. 

All signs point towards a green future for climate investing, especially in US public policy. Gary Gensler of the Securities Exchange Commission (SEC) said that climate disclosure rules are likely to be defined this year, including new regulations concerning disclosure and data for words and phrases like sustainable, green, and low-carbon (Optimizing for Impact: Managing investments to meet goals for impact – and expectations of regulators,” 2021). The U.S. Commodity Futures Trading Commission (CFTC) report, “Managing Climate Risk in the U.S. Financial System,” follows two central tenets that are driving climate management. Firstly, CFTC states that U.S. financial regulators “must recognize that climate change poses serious emerging risks to the U.S. financial system, and they should move urgently and decisively to measure, understand, and address these risks (“Managing Climate Risk in the U.S. Financial System”, CFTC).” Governmental and regulatory support for assessing and responding to the potential consequences of climate change will provide greater opportunities for the expansion and adoption of solutions, which ties into the second pillar of the report. The CFTC states that the financial community must not be reactive, but instead demonstrate proactivity by catalyzing regulatory frameworks that advance climate solutions. It’s these financial innovations, such as Regulation Crowdfunding, that will spur climate solutions. 

Also in support of this position is an October 22nd report from the Financial Stability Oversight Council (FSOC), which sets out four major pathways to proactively responding to financial risks caused by the climate crisis. FSOC recommends the immediate expansion of reporting and tracking capabilities as they relate to climate and financial risk, identification of actionable data as it relates to climate and financial risk, enhancement of regulated entities’ disclosure of climate risks, and the adoption of climate-risk scenario analyses. As said by Treasury Secretary Janet Yellen, “FSOC’s report and recommendations represent an important first step towards making our financial system more resilient to the threat of climate change (“FSOC Report: Climate Change ‘increasing threat’ to U.S. financial stability, Compliance Week).” Alignment of public and private sector initiatives will bolster our capacity to mitigate and respond to the climate crisis and its potential widespread impacts on the financial system. 

Ambitious and direct climate action is not just necessary, but can also yield impressive returns. No longer are such investments inaccessible to the public, as new tools allow for investment into the same companies that larger corporations and financial firms are heavily investing in. Invest in your future and the future of the planet on Raise Green’s platform, visit invest.raisegreen.com.

 

This Blog is for discussion purposes only, expresses the views of Raise Green, and is not investment research. This is not investment or tax advice, and does not constitute a solicitation to sell or an offer to buy any securities. Certain information is from or links are to third party sources. Although they are believed to be reliable, we do not guarantee their accuracy, completeness or fairness. Raise Green is a licensed Funding Portal with the SEC and FINRA, and is not a Municipal Advisor. Prior to being approved to list a company on the Raise Green portal, a diligence review is completed. Prior to investing. investors must sign up for an account on the portal. Raise Green does not provide tax, accounting or legal advice. Investing in crowdfunded offerings involves risk and you should review the risks of a particular investment prior to investing. You are strongly encouraged to consult your professional advisors before investing. Go to www.raisegreen.com for additional information on services, the funding portal, regulation, and investment risks. Or, direct inquiries to info@raisegreen.com. Copyright © 2021

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