Climate Finance Trends for 2022 and Leyline's Role in the Sector

Image: United Nations Framework Convention on Climate Change

Background

Climate finance is more important now than ever. Moving into 2022, we have international COP 26 targets on the table, federal-level goals for greenhouse gas reduction and climate infrastructure, and countless state and local actions and commitments. Effectively leveraging capital is an essential step in combating the climate crisis, but we must route financing to the correct places if we truly want to make a difference.

As of 2020, climate finance across the globe reached $632 billion (in U.S. dollars). Of this total, the public and private sectors split contributions nearly 50/50, utilizing grants, project debt, equity, and balance sheet financing to fund action. These monies primarily drive mitigation, largely within energy systems and transportation sectors. Other funds go to land use and infrastructure-level mitigation and adaptation, water and waste adaptation, and alternative cross-sectoral action.

Financial institutions have an important role to play for climate progress. As things stand, however, current action is not enough. Our world is still largely reliant on fossil fuels, driving economic lag, even as institutions pledge climate progress. With net-zero pledges and the looming shadow of the Paris Agreement's 1.5-degree target, all public and private actors must align to reach goals. Current investment is seriously deficient if we hope to remain below climate tipping points. Estimates suggest that a nearly 600 percent annual increase is necessary to keep warming below 1.5 degrees.

Climate Finance Trends

What are the promising climate finance trends in 2022? The Rocky Mountain Institute's Center for Climate-Aligned Finance recently projected a few trends for the upcoming year. At the end of 2021, nearly 40 percent of major financial firms across the globe made net-zero commitments. This year, we can only expect that others will follow suit and that pledges will expand to cover more assets. We should also see greater specificity in how exactly firms plan to achieve their goals. This should include better evaluative techniques like environmental, social, and governance (ESG) metrics, projections, and data. It will also be important for institutions to include climate provisions in their agreements with high-emitting clients, and expand into more tangible green investment mechanisms, such as loans, bonds, and exchange traded funds.

Leyline's Role

Where does Leyline Renewable Capital fit into this equation? We offer a unique value, as we are a bit different from the average large financial institution. As a renewable capital developer, climate and clean energy are what we think about day in and day out. But we strive to go beyond the bare minimum and do our best to ensure we meet ESG metrics.

Altogether, we invested $140 million in carbon-reducing projects. Our current portfolio, 5.57 GW of renewable energy investments, will produce more than 173 million MWh of clean power over its lifetime and prevent nearly 13,600 metric tons of carbon dioxide from being emitted.

Leyline understands that we need more renewable energy capacity than ever to fight climate change. A big way to move the needle is to help developers bring renewable projects to life. Our unique structure helps minimize development risks by providing flexible financing and getting projects deployed. As the world grows more climate conscious, we will continue to bring our deep-rooted knowledge of green project financing to the table.