CFI Newsletter #10: Lessons from COVID-19 Financing

+ Big Oil's big climate shocks, IEA's Net Zero Roadmap, the failings of carbon offsets, and ecosystem restoration

The Climate Finance Initiative Newsletter offers quick digests and insights around what is happening in climate finance. While the Climate Finance Initiative’s current focus of work is India-centric, we will capture a global perspective of climate finance in this newsletter on a fortnightly basis.

The theme for 2021’s World Environment Day is Ecosystem Restoration, a topic that has been subject to a fair bit of researching and reading at CFI recently. As with other areas of climate action, tackling ecosystem restoration as as a financing problem first is a recurring theme. Getting capital to flow into scaling known initiatives, and investments in creating innovative solutions that don’t exist today is often a catalyst to climate section. To tie in with the day, the United Nations has even published a report called The State of Finance for Nature.

The term “climate-smart” is used to denote innovation that is climate-resilient or adaptive. We now need to make financing climate-smart. And given that we are just coming off the second wave of COVID-19 in India, this edition’s Big Read focuses on highlighting what climate smart finance can learn from the structures created for COVID recovery financing.

Climate Finance by the Numbers


The amount of CO2 emissions from its global operations that Shell has been ordered to reduce by 2030 as part of a legal ruling in The Netherlands

Big Oil has faced quite a landmark couple of weeks to get to act concertedly on climate action. 

The most dramatic has to be the ruling against Royal Dutch Shell issued by a court in the Hague, as part of a lawsuit brought by an environmental organisation Milieudefensie voor Veranderaars (Friends of the Earth Netherlands). As part of the ruling Shell has to reduce its global carbon emissions - estimated to be 9 times more than of The Netherlands - by 45% by 2030 to get the company in line with meeting Paris Agreement targets. 

Shell obviously disputes this and intends to contest the rulings, stating that the Paris Agreement commitments are the responsibility of governments, not companies, and highlighting their commitment behind demonstrating improvement on a metric we at CFI HQ have pointed does not equate to creating concerted climate action - carbon intensity, or the amount of carbon emissions per dollar generated. 

This is likely one of the few times that a company not abiding by a “polluter pays” principle that governs a lot of environmental law, has not been issued a fine or penalty for compensation, but instead has been imposed to make a significant change in its nature of operations. It is also likely one of the first instances of an oil major being legally mandated to curb its emissions through a court ruling, and not through government policy which tends to be the main driver for change.

There is speculation that this is likely to lead to a reckoning among oil majors to take greater action towards change. But we do have to recognize this was a Dutch environmental organization laying a case against a Dutch (well Anglo-Dutch) company in a Dutch court. Other jurisdictions are not likely to take such steps. 

Big Oil still may see this as a week of reckoning, which the Shell case only compounds. The success of a climate-focused activist fund, Engine No.1, in managing to get 3 of its nominees to be part of the board of Exxon Mobil, and the story that Chevron is in the sights of another activist investor, is likely to show a way that tips more non-government oil and gas majors to be forced to take concerted action on climate change.

USD 4 trillion

The amount of investment needed by 2030 to get the world on a net-zero energy path by 2050 as estimated by the International Energy Agency

If there was a climate dictionary, 2021’s word of the year would likely be “net-zero”. We have covered net-zero earlier, from the impact of announced net-zero plans of countries, and stances taken by companies and asset owners.

We are bringing net-zero back again to spotlight the International Energy Agency’s latest report on a Net Zero by 2050 Roadmap for the world’s energy systems; because it is one of the most comprehensive studies of how we make such a transition in climate action’s core sector, that accounts for meeting the socio-economic roadblocks net-zero transition tends to face around stable and affordable universal energy access, and delivering on robust economic growth. 

The IEA Roadmap postulates 400 sectoral and technology milestones to guide the global journey to net zero by 2050, the key ones can be seen below.   

What makes the 2030 target so crucial is that the next 10 years are when we have to invest in policy, structural and infrastructure changes that will lead to the results of CO2 emission drops in the two decades until 2050. And there are some big hitters, that the Roadmap calls for that really throw to light the need for investments in this near-term:

  • Ceasing the development of new coal plants by 2021

  • 60% of new global car sales are electric vehicles by 2030

  • Carbon capture storage facilities to capture 4Gt of CO2 by 2030.

Electric vehicles constitute just 4.6% of global car sales today. Carbon capture storage facilities are at around 1% of that capacity in place at various stages of development, with viable business models not developed. Rather than taking the view that these aims are a bit too over-ambitious or hopeful perhaps, we need to take them as what needs to be done if we have to make a concerted effort towards getting energy systems to net-zero. 

The IEA’s Roadmap goes a long way in showing a progressive approach to what policymakers and industry need to do, tied to socio-economic impacts in the near to long-term. This does help to tackle the main issue of naysayers who hide behind the excuse prioritising near-term socio-economic needs to maintain the status quo, over setting the groundwork for tackling climate action in the long run, which will need at least 4 trillion dollars to be invested by 2030.


The percentage of carbon offsets that have failed to deliver promised impact, or created damaging side effects for local communities.

For an approach that has been around for almost 20 years and is facing some of its highest demand in recent times, carbon offsets are problematic, to say the least. The 90% number comes from a study by Compensate, a company that is in the business of providing access to carbon capture opportunities. The number may be on the higher side, but recent investigations by journalistsenvironmental groupsratings agencies, show that something is rotten in the carbon offsets market. We also have to give mention to a delightful piece of radio from the folks at Planet Money.

At the base is an issue of credibility: who decides what counts for a carbon offset project. There is a range of private groups from Gold Standard, to Verra, to the American Carbon Registry, who use a variety of methods of their own choosing to certify and measure what can be offset, with no element of standardization. The Gold Standard, for instance, does not even recognise the United Nations own REDD+ forest conservation program, which accounts for 80% of global forest-based offsets globally, because accounting problems for setting baselines and measuring offsets are problematic. Then there is also the space of uncertified carbon offset, such as one offered by a sustainability consulting startup Sweep that derives offsets from sustainability educational programs for children, on the theory that they go on to adopt more climate-conscious lifestyle habits.

The biggest issue perhaps is the question of additionality - of whether an offset draws down more carbon than would have happened without its sale. This gets problematic when areas like unthreatened forest land are packaged as offsets with the story that the amount goes to preserve the forest land and its associated carbon sink, even when it is no danger of being cut down, as a Bloomberg report found out about the Nature Conservancy, the largest environmental group in the environmental offsets space.

The obvious answer to this is that carbon offsets the world over have to follow the same page in how they are measured and verified, through a common standardized approach.

What we have got is a high-profile international task force, that includes oil majors, airlines, and other corporate polluters, that will publish new voluntary guidelines for the carbon offset market that are meant to bring standardization and order in making offsets more credible, which are not legally binding. There is an expectation, that despite this, its weight and composition of members will force stakeholders in the carbon offsets space to up their game, but it remains to be seen what a more credible carbon offset market will look like.


Life Beyond the Pandemic

What COVID-19 Response can teach us about Climate Finance

The last 15 months has been one of much despair for the world. But even when we grappled with waves of COVID-19 infections and mounting tragedies, heroes have emerged, from charities supporting on-ground action in getting support and relief in hard to reach places, to pharmaceutical companies developing their fastest-ever vaccine. As the world recovers from the effects of COVID-19 and the second wave of infections starts to ebb in India, we felt this the right time to look at the world’s response to the pandemic and see if there are lessons to be learnt for combating the effects of climate change.

At first glance, there is little common between the chaos caused by COVID-19 and climate change. COVID has created an unprecedented disruption to lives and livelihoods. Climate change, on the other hand, seems to most people, as something that will only have an impact in the distant future. When coping with disasters as bad as COVID-19, it is easy to focus on immediate response and to think of the other as a problem to come years from now. We disagree with this understanding.

Serious effects from climate change may still be some time away, but we are already witnessing extreme weather events. Climate change is already causing more than 150,000 deaths globally and it could be a disaster at a scale far greater than the current pandemic within a decade. Combating the effects of a warming world will need changes in the behaviours of individuals, corporations and governments. It will also need financing and infrastructure development at a rapid scale. These are often cited as barriers to climate action. But COVID-19 has taught us that large scale behavioural change, and rapid and significant finance and infrastructure deployments are possible with the right focus and attention.

Climate action and finance has three key lessons to learn and follow-through from the global response to the pandemic:

1. There needs to be a sense of urgency:

In the last year, we have adjusted our behaviours in ways that would have seemed impossible in any other setting. Whether it is working from home or conducting business over zoom calls, the behavioural change was swift. Why, then, do we face so much resistance in moving to renewable energy or using less water or segregating waste. The answer, we think, lies in the perceived urgency of the situation. Climate change manifests itself over a long period of time and while the cumulative effects are more likely to be worse, they are less impactful in driving immediate behavioural change.

COVID-19 is a lesson for governments on the need for urgency and anticipatory response. A majority of countries acted much too late, once the pandemic had spread to a large number of their populations. Delay in climate action can be even more expensive, both in terms of economic costs and human lives. One study has shown that delaying climate action by 10 years will increase the cost of climate action by 37%; another points out that delays can lead to a 50% increase in climate mitigation costs.

It is not just the governments who need to reconcile the less obvious and immediate impacts of climate change with a need for urgent action. As morbid as the COVID messaging of ‘Wear a mask, stay at home, or you die’ might be, it conveyed a need for immediate action and was simple enough to follow. Translating the same urgency to climate action may be hard at an individual level, but this is the path that corporations and funders can move towards - there is an opportunity knocks element in moving to this.

Grant providers and investors, in particular, follow diligence processes that take months, if not years. Most of these investors found shortcuts to process COVID-related funding in a matter of days. In India, one of the most successful examples is ACT Grants. In the early days of the pandemic, several investors, most acting in their personal capacity, put money, time and resources to create a platform that was able to rapidly fund innovations in ventilators and other health infrastructure that was the need of the hour. With volunteers rapidly sorting through funding applications and racing through due diligence processes, ACT was able to fund 112 projects in 2020 with a positive impact on almost 50 million people, something no venture capital firm or foundation could have done in usual circumstances. The processes that ACT and other COVID funders set up are replicable and apt for climate funding.

There is a significant opportunity to leverage this success. Since these COVID response funding structures are set up already, they can pivot to funding climate action when the pandemic is over.

2. The Need for “Leap of Faith’ Investments:

The COVID-19 vaccine is the fastest ever vaccine to be developed and deployed. In what can only be called a leap of faith, Gates Foundation decided to fund the manufacturing of seven potential vaccine candidates in April 2020, many months before any of them could prove themselves viable. In India, Serum Institute put USD 100 million behind stockpiles of the AstraZeneca vaccine, now called Covishield, months before initial trials were completed.

Climate funders will face many such choices in the coming decade. If we are to get to net-zero by 2050 (which even IEA now agrees is the only way forward), several technologies that do not exist today will need to be developed and scaled. The decisions and investments we made for new technologies in the next decade will define how well we survive the impact of climate change. Many of these investments will appear foolhardy or way too much at the time; yet, we need many more funders who take the leap. We need financing to be climate-smart to be resilient and responsive towards adapting to climate change.

3. The Need to Put a Price to Emissions:

As a corollary to our previous point, investors who fund climate technologies will rarely do it for philanthropic reasons. Capital invested at scale towards climate action will need to make a return commensurate with the risk these funders are taking. This is a hard problem to solve: climate innovation will be most needed in poor countries that cannot afford to pay for these technologies.

In theory, this funding should come from the more developed nations - one would argue that the developed nations contributed to a much larger share of past emissions and should be the ones to contribute to solutions as well. However, previous attempts to get the richest nations to invest in climate funding have led to lukewarm results, and has just ended up being a repeated sticking point for inertia.

A better strategy might be to put a price on future emissions. The fines that many states in India imposed on people not wearing a mask did more than bring in funds for COVID relief; they deterred these individuals from repeating bad behaviour.

Just last week, a Dutch court held Shell responsible for the CO2 emissions of their operations, and those of their supply chain. If only we were to add a dollar price to this, we will prompt emission reductions, and potentially bring in meaningful climate funding.

In a now famous TED talk he gave in March 2015, Bill Gates argued that the world was not ready for the next pandemic. We have spent the last 15 months playing catch up because we did not prepare enough for a predictable health emergency. In “The Future We Choose”, Christina Figueres and Tom Rivett-Carnac show us two divergent worlds in 2050: the one where humanity thrives is where we choose to act against climate change. The second world they build is where we ignore the warning signs and stick to our current behaviours. COVID-19 has shown us that there really is no choice; the cost of not acting is simply too high.

Engaging with CFI

As always, if you are keen to engage or talk to us on our work plans (check out the deck here) or if you have something of your own to collaborate on, reach out to us below!

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That’s it for Edition #10 of our newsletter.

As always, send all feedback, compliments and brickbats our way. And of course, we do appreciate you spreading the word about this newsletter.


We’re growing to build something collaborative with you and the more the merrier!


Simmi Sareen and Shravan Shankar