Climate Finance 2021

Charity & Philanthropy

The age old institution of wealthy benefactors giving money to charitable organizations such as the Coalition for Rainforest Nations, Clean Air Task Force, or Climate Emergency Fund. Such donations are generally tax-deductible and come with few strings attached: namely that the money be used towards the stated mission (eg. forest cultivation, renewable energy resources, methane capture) or to compensate the individuals whose efforts make such initiatives possible.

Compliance & Voluntary Markets

Towards the end of last century, governments became increasingly aware of the acute and adverse effects of pollution on climate change and society, culminating in the 1997 Kyoto Protocol agreement. The resulting regulation on “pollution markets” led to the popularization of “Cap and Trade (CAP)” and “Emissions Trading Schemes” (ETS). These systems enable carbon-intensive businesses to offset their footprint by purchasing carbon “allowances”, which help fund projects to counteract their negative environmental impact. This “Compliance” market model was later extended to the “Voluntary” carbon market, fueled by consumer awareness and corporate ESG commitments. Voluntary offsets are intended as a temporary stopgap measure that allows companies more time to transition to sustainable practices.

Sustainable Business Models

Most modern start-ups try to build sustainability into their business model, driven by the founders values or advertising departments recommendations. “B Corporations” or other green certifications require prudent decisions around employment, supply chains, and even revenue sharing.“Gear for Good” is the motto of Cotopaxi, one of my favorite apparel brands. They use recycled materials, partner with global factories with documented ethical practices, have a carefully designed carbon-minimal supply chain, and most importantly: looks great!

Cotopaxi Top Picks: https://www.cotopaxi.com/collections/our-top-picks
Ecosia Financial Report

Impact Investing

In his post “The Case for Clean Money”, Rune Christiansen, founder of MakerDAO, confidently states there is plenty of “climate alpha” to go around. Or in other terms, investing in the environment can be profitable. Don’t just take my word for it: Mukesh Ambani, Asia’s richest man, recently purchased a number of renewable energy companies including solar wafer manufacturer NexWafe. And more broadly as we get closer to our 2030 climate goals, the value of sequestering 1 ton of carbon (or equivalent) will only increase; by extension so too will projects that efficiently, transparently, and enduringly sequester carbon, or otherwise improve the climate situation.

Natural Capital Reserves

And now we arrive at the “2021” part of this article. Inspired by January’s retail-frenzy GME rally and April’s success of OlympusDAO’s reserve currency model, KlimaDAO recently launched a token backed by treasury assets consisting of Base Carbon Tonnes (BCT) and Liquidity Pool tokens with USDC. “Every KLIMA token is backed by 1 tonne of verified, tokenized carbon reduction or removal. These can remain locked in the treasury indefinitely, or sold to balance the price of KLIMA.”

Celo Reserve Allocation

Radical DAOs and dPIPE

PleasrDAO’s purchase of the coveted 1-of-1 Wu-Tang album from widely-hated big-pharma-exec Martin Shkreli for $4M was a big moment for the “metaverse”, which now hosts the albums’ NFT deed of ownership. “Decentralized Autonomous Organizations” (DAOs) are community-driven projects that collectively make decisions based on discussions, proposals, and coin-votes. As OlympusDAO, KlimaDAO, WhaleDAO, and many other have demonstrated: people financially rally around shared causes and goals. The Olympus treasury is almost $700M, the “Total Value Locked” including the users staked funds is $3.7B, and it just launched in April — older DAOs such as Maker has almost $18B TVL that it intends to transition to “clean money” partially backed by natural capital.

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A.N.Ranga

A.N.Ranga

I write about crypto, climate, sports, music, and other stuff