Urban Decarbonization #2: Active Cities and Climate Investors

Recently at a Clubhouse online event, I presented my new book, "The Gaiapolis Strategy" (available at: shorturl.at/MWY35) , which explores how cities can become climate leaders by developing decarbonization programs. A critic said the idea that cities will move was impossible, but he's wrong. Why?

The UN C40 Cities, which has 96 member cities, are actively implementing climate programs under the Special Development Goals (SDGs) so their examples can inspire, train and lead other cities. Their 2022 Summit in Buenos Aires will be a hybrid in-person and online event on October 19-21. www.c40.org

Smart cities, which focus on digitization, "automated pollution" in the past by emphasizing data gathering and monetization of car-centric cities, without much citizen involvement, but they are now expanding their clean energy programs. The Smart City World Expo Congress will be held in Barcelona on November 15-17. https://www.smartcityexpo.com/

Clean energy bidding: Cities are beginning to source clean energy on a competitive basis to reduce overall costs. Palo Alto, California tried to get homeowners to install costly solar panels, but that wasn't working since the average age of its citizens is over 70. Instead, it held competitive bidding among private solar grid providers to source low-cost clean energy for the entire city with one contract. Collective energy procurement by groups of cities can eliminate infrastructure costs, reduce energy bills, and enable redundancy and time-shifting by using multiple solar/wind energy suppliers.

There are many city organizations that can develop clean energy and decarbonization programs, such as the Mayors for Peace (mayorsforpeace.org), Sister Cities International, U.S. Conference of Mayors, and others. Here is the City of San Jose's Climate Smart 2030 Plan: https://www.sanjoseca.gov/home/showpublisheddocument/1364/636619228717970000

Climate Financing

Besides reducing training and energy procurement costs, cities can raise climate financing by partnering with climate funds, including:

• Angel investors and venture capitalists (VCs) for early stage and growth companies are possible sources of capital since Climate Tech is becoming the "Next New Thing" theme in investing due to the urgency and size of markets globally.
• ESG (Environmental, Social and Governance) investors have over $120 trillion in capital sitting on the sideline due to the recent studies reporting corporate "greenwashing" of over 80% of supposedly "green" programs. The problem is that companies are rushing to raise ESG funding, but focus on short-term profits, while climate benefits are broader and longer term, which are more congruent with the time horizon of cities and bioregions traditionally using municipal bonds.
• "Green" bonds: In March 2022, about 1.9 trillion Euros in green bonds were outstanding, up from 1.0 trillion in 2020. Market growth is leading to higher a "greenium" -- the premium investors are willing to pay for a G&S bond versus a comparable conventional bond. https://home.cib.natixis.com/articles/green-bonds-review-1q22-the-green-sustainable-bond-market-starts-to-mature
• Corporate venture capital (CVC) funds are expanding with "more open innovation strategies where they invest in external startup ideas rather than only experimenting internally" in emerging, longer-term areas like climate technologies. https://techcrunch.com/2022/04/27/the-corporate-venture-comeback-what-startups-considering-cvc-need-to-know/
• Energy Transition 2022 Trends: In 2021, global investment in the low-carbon energy transition totaled $755 billion, up from $595 billion in 2020 and just $264 billion in 2011. For report: https://assets.bbhub.io/professional/sites/24/Energy-Transition-Investment-Trends-Exec-Summary-2022.pdf

So, despite the Ukraine war, inflation and possible recession, investors are looking at climate technologies as potential growth fields. Cities can attract more capital by hosting Climate Tech pitch events. The best innovation is usually by users, which cities are on a large scale, both locally and globally as a collective. They should leverage their "Power of the Purse."