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We are a strategy consulting and financial advisory firm serving the sustainable infrastructure industry.

About us

Overview

Experience

Resources

Opportunities

As Senior Vice President, Victor leverages his experience across the public, private and not-for-profit sectors to deliver policy, capital markets advisory and financial structuring expertise to advance climate change and environmental justice efforts.

Victor Rojas

<blockquote class="wp-block-quote">
“Ports are the No. 1 target [for vehicle electrification]&#8230;There are health implications, environmental implications, jobs and workforce development implications. You get a lot of bang for your buck in developing electric drayage vehicles and other electric infrastructure.”
<cite>Victor Rojas</cite></blockquote>

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Ports need electric trucks. Forum Mobility has $400M to make it happen

As an Associate Director, Hannah works directly with clients in the sustainable infrastructure sector to solve problems by building impactful and thoughtful sustainable solutions.   Hannah is highly motivated by her clients and their passion for making society more sustainable and advancing environmental justice efforts. Hannah works with her clients including non-profits, foundations, and green banks to increase the flow of capital into climate resilient investments. This includes conducting research, interviews, and analysis to develop project roadmaps, business expansion plans, and financing mechanisms such as credit enhancements.  

Hannah Lindsell

Transportation is the largest contributor to greenhouse gas (GHG) emissions in the United States, contributing 27% of total U.S. GHG emissions.[1] While the increasing sales of personal electric vehicles (EVs) could have an impact on reducing GHG emissions, research shows that EV buyers are mostly white, high-income, highly-educated, and male.[2] Studies from California and Maryland show that typically EV buyers in those states are not socioeconomically, or ethnically, representative of the state as a whole.[3] This indicates the existence of hurdles for the community at large to be able to access EVs.



The inconsistent deployment of EVs excludes populations that could benefit the most from access to EVs and corresponding infrastructure. For example, low-income households spend approximately 11.2% of their annual income on vehicle fuel, maintenance, and repairs compared to all households which spend, on average, 4.5% of their annual income on these expenses.[4] Additionally, low-income households and disadvantaged households are more likely to reside in areas of high traffic which have higher rates of local air pollution.[5] Reducing the number of internal-combustion-engine vehicles in low-income and disadvantaged communities could reduce local air pollution and related health impacts in addition to reducing costs associated with these vehicles which put strain on household budgets.[6], [7]



However, there are significant “EV charging deserts” which makes it challenging for individuals within certain communities to transition to EVs.[8] One example is the Bronx, which has a population of 1.4 million, a median household income of $40,000, a region known as “Asthma Alley” for its high rates of asthma related hospitalizations, and only 17 EV charging stations.[9]



Having access to at-home charging is crucial for communities located within “EV charging deserts.” However, many households, especially low-income and disadvantaged households, face significant challenges to installing charging infrastructure.[10] Some of these challenges include: funds to install chargers, having designated spaces for chargers, and permission to install chargers.[11] Within multi-family housing environments these challenges make it essential for property owners to be participants in working to install EV charging infrastructure.[12]



Montgomery County Green Bank EV Charging Engagement



The Montgomery County Green Bank (Green Bank) received grant funding from The General Motors Company to support, and incentivize, affordable multi-family housing property owners within Montgomery County, Maryland to install EV charging infrastructure at their properties, for the benefit of residents. The Green Bank was to utilize the grant funding to launch a pilot program with a target of installing 30 EV chargers at a minimum of six affordable housing properties.



The Green Bank hired Sustainable Capital Advisors (SCA) to conduct research and strategy development to support the Green Bank in launching this pilot program. The SCA team researched different incentives and subsidies that already existed within the market that are available to affordable multi-family property owners within the county. Additionally, the SCA team conducted stakeholder outreach across three broad categories:



<ul>
<li>Affordable multi-family property owners. SCA engaged with property owners within the county to understand their challenges and concerns regarding installing EV chargers. This was essential for understanding what roadblocks had prevented property owners from previously installing EV chargers and what challenges would need to be addressed, by the Green Bank pilot program, to support installation of EV chargers.</li>



<li>Providers of charging infrastructure. SCA met with multiple providers of EV charging infrastructure to understand the different options they offer, and the logistics of installing and managing chargers.</li>



<li>Rebate and incentive providers. SCA connected with organizations (Maryland Energy Administration [MEA] and Pepco) that already provide EV charging rebates to multi-family property owners, within Montgomery County, to understand how existing rebate programs work and to identify potential gaps.</li>
</ul>



The SCA team’s research revealed that there were existing EV charging infrastructure rebate and incentive programs available for multi-family property owners within Montgomery County provided by MEA and Pepco. However, there were gaps and challenges within what is currently offered. For example, the Pepco program did not cover the cost of upgrading utility connections which can present a significant hurdle to installing EV charging infrastructure. Both the Pepco and MEA programs have caps on the amount of funding they will provide, so property owners could still have outstanding costs even if they are able to access rebates from both MEA and Pepco. Also, neither program was specifically designed to support affordable housing properties.



SCA’s conversations with affordable multi-family property owners yielded eye-opening, on-the-ground insight, which was crucial for developing an impactful Green Bank pilot program. Property owners expressed concern that within existing programs they would be required to carry the costs of installation for potentially several months before receiving rebates. Many affordable multi-family property owners have competing priorities and do not always have the upfront funds to install EV chargers. Additionally, property owners were concerned about allocating high-in-demand parking spaces to EV charging infrastructure that they were not sure would be significantly utilized.



The Green Bank’s original concept for the pilot program was a structure designed to cover the differential cost between what was offered by existing rebates and the cost of purchasing and installing the charging infrastructure. However, given the insight gained from SCA’s research and stakeholder engagement, a different structure was proposed by SCA to meet market intel on the needs and gaps.



Using this insight, the SCA team and the Montgomery County Green Bank developed an innovative and strategic solution to position the Green Bank to have the most impact when supporting affordable multi-family property owners to install EV chargers. This solution resulted in the Montgomery County Green Bank Electric Vehicle Charger Incentive Program (EV-CIP), which consists of several components:



<ul>
<li>A Bridge Loan to cover property owner’s carrying costs while awaiting MEA and Pepco rebate payments. This loan will cover the infrastructure and installation costs for EV chargers, a cost that is anticipated to be refunded through MEA and Pepco rebates.</li>



<li>An additional 10% provided as a grant above what is covered by the MEA and Pepco rebates to provide funding to cover costs incurred by affordable multi-family property owners to install EV charging infrastructure.&nbsp;</li>



<li>Revenue backstop of $2k for each dual-head charger (for up to two chargers). This is to compensate for any potential lost value or revenue due to allocating parking spaces for charging infrastructure.</li>
</ul>



This innovative structure not only fills gaps that may exist between costs incurred by property owners and existing rebates – which is in line with the Green Bank’s preliminary goal – but it also equips property owners to more fully leverage existing generous rebates within the market. This pilot program is incredibly strategic because it will allow the Green Bank to leverage the grant funding from General Motors to have a larger impact, and it enables the entire community to better access existing resources.



For more information about the Montgomery County Green Bank’s EV-CIP Program:



<ul>
<li><a href="https://mcgreenbank.org/evcip/">EV-CIP Landing Page</a></li>



<li><a href="https://mcgreenbank.org/the-montgomery-county-green-bank-uses-a-general-motors-grant-to-build-equitable-access-to-ev-charging/">EV-CIP Press Release</a></li>
</ul>



For more information about SCA’s work with green banks across the country:



<ul>
<li><a href="https://sustainablecap.com/pages/sustainable-innovation">Sustainable Capital Advisors – Sustainable Innovation</a></li>
</ul>



References 



1. EPA, <a href="https://www.epa.gov/transportation-air-pollution-and-climate-change/carbon-pollution-transportation#:~:text=%E2%80%8BGreenhouse%20gas%20(GHG)%20emissions,terms%20than%20any%20other%20sector.">Carbon Pollution from Transportation</a>



2. MIT Science Policy Review, <a href="https://sciencepolicyreview.org/wp-content/uploads/securepdfs/2021/08/A_perspective_on_equity_in_the_transition_to_electric_vehicles.pdf">A perspective on equity in the transition to electric vehicle</a>



3. MIT Science Policy Review, <a href="https://sciencepolicyreview.org/wp-content/uploads/securepdfs/2021/08/A_perspective_on_equity_in_the_transition_to_electric_vehicles.pdf">A perspective on equity in the transition to electric vehicle</a>



4. MIT Science Policy Review, <a href="https://sciencepolicyreview.org/wp-content/uploads/securepdfs/2021/08/A_perspective_on_equity_in_the_transition_to_electric_vehicles.pdf">A perspective on equity in the transition to electric vehicle</a>



5. MIT Science Policy Review, <a href="https://sciencepolicyreview.org/wp-content/uploads/securepdfs/2021/08/A_perspective_on_equity_in_the_transition_to_electric_vehicles.pdf">A perspective on equity in the transition to electric vehicle</a>



6. MIT Science Policy Review, <a href="https://sciencepolicyreview.org/wp-content/uploads/securepdfs/2021/08/A_perspective_on_equity_in_the_transition_to_electric_vehicles.pdf">A perspective on equity in the transition to electric vehicle</a>



7. GreenBiz, <a href="https://www.greenbiz.com/article/why-equity-must-be-central-ev-infrastructure-planning">Why equity must be central to EV infrastructure planning</a>



8. GreenBiz, <a href="https://www.greenbiz.com/article/why-equity-must-be-central-ev-infrastructure-planning">Why equity must be central to EV infrastructure planning</a>



9. GreenBiz, <a href="https://www.greenbiz.com/article/why-equity-must-be-central-ev-infrastructure-planning">Why equity must be central to EV infrastructure planning</a>



10. MIT Science Policy Review, <a href="https://sciencepolicyreview.org/wp-content/uploads/securepdfs/2021/08/A_perspective_on_equity_in_the_transition_to_electric_vehicles.pdf">A perspective on equity in the transition to electric vehicle</a>



11. MIT Science Policy Review, <a href="https://sciencepolicyreview.org/wp-content/uploads/securepdfs/2021/08/A_perspective_on_equity_in_the_transition_to_electric_vehicles.pdf">A perspective on equity in the transition to electric vehicle</a>



12. MIT Science Policy Review, <a href="https://sciencepolicyreview.org/wp-content/uploads/securepdfs/2021/08/A_perspective_on_equity_in_the_transition_to_electric_vehicles.pdf">A perspective on equity in the transition to electric vehicle</a>

Electric cars

Montgomery County Green Bank – EV Charging Infrastructure

As CEO, Trenton navigates the strategic direction of SCA while continuing to provide clients with subject-matter expertise on the ins and outs of executing sustainable infrastructure projects. Trenton’s long-standing and vast experience in the financial services industry allows him to identify the parties and partners best suited for collaboration to create a more profitable, inclusive, and climate-resilient future.

Trenton Allen

<blockquote class="wp-block-quote">
Startups should continue seeking government funds: &#8220;If going to the loan-guarantee office is a good source of funds for your company, you should still go.&#8221;
<cite>Trenton Allen, CEO</cite></blockquote>

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Climate investors eye midterms with caution

Trenton Allen spoke with the Footprint Coalition about AskSustainable and the importance of climate-friendly investing. AskSustainable.com is an online platform launching on November 2nd, 2022 where visitors can find climate-friendly financial products, supplemental learning materials to help them on their climate-friendly financial journey, and a community of other like-minded investors.

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Finding a new bank is a good way everyday folks can fight global warming

<blockquote class="wp-block-quote">&#8220;It has to be clearly about the impact of an investable dollar, not just the scores and rankings.” <cite>Trenton Allen</cite></blockquote>

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Could you explain ESG investment to your neighbor?

<h2 class="wp-block-heading">Summary</h2>



Climate change awareness is growing, and it’s starting to bring more capital along with it. But the ecosystem is still new, and many connections are yet to be made.

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The Green Finance Podcast, hosted by Tearsheet's senior reporter Iulia Ciutina, discusses what the finance industry is doing to address climate change through conversations with key industry people to untangle the corporate journey towards sustainability.

The Green Finance Podcast

Connecting Capital to Sustainable Projects

<h2 class="wp-block-heading">Summary</h2>



In this podcast, Amath Gomis interviews Trenton Allen, Managing Director and CEO&nbsp;of&nbsp;Sustainable Capital Advisors. They discuss Allen&#8217;s path into Sustainable Infrastructure, what is the definition of Sustainable Infrastructure, and how people can invest in infrastructure that can help create a more sustainable world.

Solar Power Plant

A weekly podcast that covers the range of topics within Environmental, Social, and Governance within ESG. The format is a 30 minute interview with leaders who promote, create, and manage ESG related activities.

ESG Matters

ESG Matters: Interview with Trenton Allen, Managing Director and CEO of Sustainable Capital Advisors

<h2 class="wp-block-heading">Summary</h2>



Deploying clean power starts with people, money, and culture.&nbsp; And then there’s the hardware: solar panels, batteries, wind turbines, transmission lines, and charging stations.&nbsp; Solving the puzzle to reverse the effects of climate change rests on making the economics of clean power work.



Every day, Trenton Allen, CEO of Sustainable Capital Advisors, and advisory board member to the U.S. Secretary of Energy, works to build a climate-resilient future through financial advisory services for sustainable infrastructure projects. &nbsp; Implementing clean power on its own won’t achieve critical mass unless the economics make sense to a wide gamut of stakeholders.&nbsp; Trenton discusses industry changes in the clean energy investment marketplace, the concept of the “energy burden” and how it varies across the US, and he relays some of the energy and policy focus areas of the Biden Administration.&nbsp;



Trenton also provides his perspective on the recent solar industry disruption that literally shutdown the solar marketplace for the last 3 months.

Tehachapi Pass Wind Farm

A bi-weekly podcast featuring people with interesting stories describing how they approach and deal with risk in business and in life. We face and confront risk every day. Sometimes the experience is amazing, and sometimes we see the darkness that exposes the core of what makes us human.  Join us as we listen to how people have confronted risk, and have successfully, and sometimes not so successfully, navigated a never-ending and challenging maze of chance.

Risk Stories!

Removing the Economic Risks to Deploy Clean Energy

Jack Conness

It’s no secret that the current state of America’s infrastructure is the direct result of decades of overuse and underinvestment. While there are myriad issues embedded within the ongoing global supply chain crisis – ports, particularly American ports – sit at the epicenter of this crisis.



In our experience working with ports on sustainability issues, decaying port infrastructure and exponential growth in global commerce are just about as compatible as stable sea levels and melting polar ice caps. If that weren’t enough port managers must layer on the climate, health and environmental justice issues embedded within the “simple”, yet critical infrastructure challenges ports must confront.



According to MarketWatch, the country’s nine largest ports handled a collective 50.5 million shipping containers, a 16% increase from 2020 (1). Regrettably but not at all surprisingly, this increase in business had led to an increase in pollution.



Ninety percent of the world’s trade is transported by sea (2) and nearly 20% of global emissions come from the transportation sector (3). Emissions from the global shipping industry are having a profound impact on a rapidly changing and warming climate, which will certainly hurt business in the decades ahead. While ports are the nerve center of our global transportation infrastructure, the deleterious climate change and health impacts of port activities are felt most dramatically by the estimated 39 million people living near them. When coupled with the sheer magnitude of carbon emissions that port activities generate, there are fewer market sectors in more need of inclusive, equitable, replicable, and scalable climate sustainability solutions.



In a March 2022 report conducted by the Environmental Defense Fund (EDF) – <a href="https://www.edf.org/sites/default/files/press-releases/RTI-EDF%20Act%20Now%20or%20Pay%20Later%20Climate%20Impact%20Shipping.pdf" target="_blank" rel="noreferrer noopener">Act Now or Pay Later: The Costs of Climate Inaction for Ports and Shipping</a> – they estimate that the cost of storm-related damages and disruptions, which is already pegged at $3 billion/year currently, will rise to nearly $10 billion/year by 2050. Port adaptation costs are expected to cost ports $5.8 billion/year by 2050 as well. Rising sea levels and more devastating hurricanes will make it increasingly more difficult for ports to have sustainable and profitable businesses.



In an effort to help ports mitigate climate-related damages and invest in a sustainable future, Congress passed the Bipartisan Infrastructure Law in 2021. This bill is packed with $17 billion in funding specifically intended for ports to invest into their infrastructure. This includes reducing truck emissions, port electrification, climate resiliency projects, charging infrastructure, and nearly double the funding for the Port Infrastructure Development Program (PIDP).



<figure class="wp-block-image size-full"><img decoding="async" loading="lazy" width="1277" height="705" src="/wp-content/uploads/2022/07/220412-SCA-PIDP-Blog.jpg" alt="" class="wp-image-1617" srcset="/wp-content/uploads/2022/07/220412-SCA-PIDP-Blog.jpg 1277w, /wp-content/uploads/2022/07/220412-SCA-PIDP-Blog-300x166.jpg 300w, /wp-content/uploads/2022/07/220412-SCA-PIDP-Blog-1024x565.jpg 1024w, /wp-content/uploads/2022/07/220412-SCA-PIDP-Blog-768x424.jpg 768w" sizes="(max-width: 1277px) 100vw, 1277px" /></figure>



Thanks to the Bipartisan Infrastructure Law, the PIDP will now support, encourage, and give competitive advantages to projects that strengthen resilience, reduce emissions, and advance environmental justice goals. This will provide an incredible and new opportunity for ports to access funding that will either begin or continue their sustainability and climate-related projects.



Other port funding opportunities include:



<ul><li>Section 11401. Grants for Charging and Fueling Infrastructure ($2.5 billion)</li><li>Section 11402. Reduction of Truck Emissions at Port Facilities ($250 million)</li><li>Section 11403. Carbon Reduction Program</li><li>Section 11405 – Promoting Resilient Operations for Transformative, Efficient, and Cost-Saving Transportation (PROTECT) Program ($1.4 billion)</li></ul>



SCA has very specific experience in working with ports and all of the units of government involved to design and execute upon sustainability plans and objectives. We partner with ports to collaborate and help to navigate the policy, financial and operational shoals that sit between ports and their sustainability goals and objectives.



We understand how ports operate, the policy and regulatory frameworks within which ports run the stakeholders to engage to design and execute upon sustainability objectives, the barriers to transition and technology deployments, the barriers to public and private capital engagement, the public and private sources of capital that can be accessed, deployed and assembled in support of port sustainability efforts and the policy tools, business models and financing structures to leverage public capital and animate private capital to meet sustainability goals with inclusive and scalable strategies.



It is imperative that ports move quickly to access federal money that will be available to them. Whether a port is in the beginning stages of their sustainability plan or has already accomplished numerous sustainable infrastructure initiatives, these funds will be available to those who know how to access them quickly and strategically.



We contend that if you make one port sustainable, you’ve created the model and toolkit to make all ports sustainable. Let your port be the first to fully leverage capital in support of a sustainable future.











<h4 class="wp-block-heading">References</h4>



<ol class="has-small-font-size"><li>https://www.marketwatch.com/story/americas-biggest-ports-handled-a-record-50-5-million-shipping-containers-last-year-11645539342</li><li>https://www.npr.org/2021/12/01/1060382176/shipping-industry-is-pressured-to-cut-pollution-caused-by-merchant-fleet</li><li>https://www.edf.org/sites/default/files/press-releases/RTI-EDF%20Act%20Now%20or%20Pay%20Later%20Climate%20Impact%20Shipping.pdf</li></ol>

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How SCA Can Help Your Port Access Federal Funding for Infrastructure Projects

<blockquote class="wp-block-quote">&#8220;If the current trends persist, communities across the West will have to make very difficult decisions related to not only electricity production and water availability but the economic challenge of replacing these much-needed life resources as well.&#8221;<cite>Trenton Allen</cite></blockquote>

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Expert Voices: Sustainable Capital Advisors’ Trenton Allen

<blockquote class="wp-block-quote">“We can deploy a significant amount of capital to existing sustainable technologies. I believe that there are structures that could accommodate those, so you can get the return and have the right counterparties. We’ve done it before in other markets, we can do it again.&#8221;<cite>Trenton Allen</cite></blockquote>

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Green financing is flooding climate-focused sectors

<blockquote class="wp-block-quote">&#8220;[The important thing for an investor potentially interested in renewable energy projects is to] always go back to thinking about what it is that you’re trying to achieve [and to] be mindful of that goal in regards to the dollars that you’re looking to deploy, then try to align that with the companies and other financial products that exist.”<cite>Trenton Allen</cite></blockquote>

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Pros and Cons of Investing in Renewable Energy

<blockquote class="wp-block-quote">&#8220;Green financing has always existed in some respects, such as when municipalities would issue bonds for storm water remediation. What’s different now is, under the green-bond structure, investors can isolate and track the environmental component of the proceeds’ use adding that by offering green bonds, issuers might be able to increase their investor base, and perhaps demand for their particular bonds, which may reduce their overall funding costs.&#8221;<cite>Trenton Allen</cite></blockquote>

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Understanding Green Bonds

<h2 class="has-medium-font-size wp-block-heading" id="summary">Summary</h2>



The building industry is transforming as energy efficiency, lower maintenance costs, and green technologies create safer, healthier, more productive work environments. My guest today, Trenton Allen, Managing Director &amp; CEO of Sustainable Capital Advisors, explains how Public and private partnerships are driving $300 billion in sustainable urban infrastructure opportunities over the next 5 years. Allen has recently been appointed to the Secretary of Energy Advisory Board, which provides advice and recommendations to the U.S. Secretary of Energy. He and I talk about the incredible impact this kind of development will have in driving economic development across the U.S., like providing thousands of jobs in sustainable construction and retrofits as well as maintenance and operations. Allen explains some of the financial mechanisms that are used, like tax credits, cash in lieu of grants, and direct capital investment.

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As CEO, Trenton navigates the strategic direction of SCA while continuing to provide clients with subject-matter expertise on the ins and outs of executing sustainable infrastructure projects. Trenton’s long-standing and vast experience in the financial services industry allows him to identify the parties and partners that are best suited for collaboration to create a more profitable, inclusive, and climate-resilient future. 

Paul is a nationally recognized expert on sustainable investing, and the host of the popular Sustainable Finance Podcast, a weekly program featuring conversations with thought leaders in the field. His guests include cleantech entrepreneurs and VC investors; CEOs leading the low-carbon economy transition; creators of the ESG indices and analytics platforms everyone is using; and NGO executives bridging the public/private partnership funding chasm through digital banking and blockchain-based technologies.

Sustainable Finance Podcast

Public & Private Partnerships Drive $300B in Sustainable Infrastructure

<h2 class="has-medium-font-size wp-block-heading" id="summary">Summary</h2>



The Experts Only Podcast explores solutions to climate change by talking to industry leaders about the intersection of energy, innovation, and finance.

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Host Jon Powers interviews the world’s foremost experts on climate solutions through the lens of  energy, innovation, and finance.

Experts Only

Episode #101

<blockquote class="wp-block-quote">&#8220;Climate First, which has $52 million of assets, has yet to make a loan under the brand-new program, but it’s currently in talks with potentially interested parties, LaRoe said.One of the main challenges for financial institutions that develop similar programs will be finding ways to measure and verify the impact of their financing activities, said Victor Rojas, a senior vice president at the consulting firm Sustainable Capital Advisors. Still, he believes the idea of climate adaptation financing is gaining momentum.&#8221;<cite>Laura Felix, Staff Writer at American Banker</cite></blockquote>

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One bank’s response to climate change: Financing condo retrofits

<blockquote class="wp-block-quote">&#8220;DOE is laser-focused on its core missions of delivering climate change solutions, strengthening our Nation’s nuclear security, and managing our agency’s environmental legacy. I am enthused to welcome these stellar individuals to the SEAB. Their deep and diverse expertise will advise DOE on its core missions and will help steer our efforts to supercharge the clean energy revolution.&#8221; <cite>Secretary Jennifer Granholm</cite></blockquote>

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Trenton Allen appointed to the U.S. Department of Energy (DOE) SEAB

<blockquote class="wp-block-quote">&#8220;It is a rare occurrence when the public health crisis from which we are slowly emerging, the climate crisis on which we appear to be finally focusing and the economic recovery which we are all intent in fostering intersect in such a dynamic manner…Units of government at every level are required to do more with less, fully leveraging scarce amounts of public capital and crafting financing tools and non-financial policy supports that can animate engagement of the private capital that will be required to address critical issues of climate change, environmental justice and resilience.&#8221;<cite>Victor Rojas</cite></blockquote>

Power Moves: CleanChoice Energy CTO Anthony Hoang hopes to use tech to boost decarbonization in the District

<blockquote class="wp-block-quote">&#8220;The sustainability data is used primarily for internal use to make the investment case, to reduce energy costs. But then you’ll see capital markets providing funding for increased energy efficiency. Data, both historical and real time, can help really establish this market.&#8221;<cite>Trenton Allen</cite></blockquote>

Tomorrow’s Sustainable Buildings Need Today’s Staff To Get Schooled

<blockquote class="wp-block-quote">&#8220;Getting a market-rate return is something impact investors are comfortable with, but a lower return makes it harder to attract enough investors. It&#8217;s not impossible but you’re narrowing the number of investors you have access to.&#8221;<cite>Trenton Allen</cite></blockquote>

An Argument for Investing Where the Return Is Social Change

Beverly Chan

As the world’s top polluting country embarks on a green revolution, its bold environmental commitments are placing it on the forefront of climate action. Already the largest producer and exporter of renewable technologies including solar panels, wind turbines and electric vehicles, China is sprinting to lead on sustainable finance—but on its own terms. In only 5 years, China has created the world’s largest carbon trading exchange, accelerated issuance of green bonds, and spurred innovative mechanisms to structure its own sustainable finance model, by launching national and local policies aimed at developing a green financial system. However, there are still many gaps to fill in China’s green schemes; especially when it comes to attracting international investors, getting foreign governments on board with their plans, and alleviating global concerns with its Belt-Road Initiative (BRI).



In its ambitious efforts to reverse the environmental destruction caused by decades of unbridled economic growth, China pushed forward an official mandate in 2015 to include a green finance system into its five-year strategic plan. As such, China has become the first in the world to release a broad framework for green finance policy. By producing a national roadmap for reform involving financial and environmental stakeholders in China’s governance systems, the central government has been successful in directing large flows of public and private capital into sustainable infrastructure projects. For example, in 2016, China became the world’s largest issuer of green bonds, issuing 40% of global green bonds worth $32.4 billion. Similarly, in 2017, China announced the launch of its carbon trading market, which aims to cover 8 billion tons of CO2 emissions—making it the biggest in the world. The carbon trading market has an initial focus on the coal-fired power industry, with the first trade expected in 2020. To prepare for the national launch, policymakers developed pilot trading platforms across seven regions (including: Beijing, Guangdong, Shanghai, Hubei, Chongqing, Shenzhen and Tianjin), which guided the design and roll out of the national market. The central government also set up five additional pilot zones to promote green finance on the local level by experimenting with different mechanisms and models. In Zhejiang, for example, the city of Huzhou pioneered a tech platform for green finance that, along with other credit policy incentives, increased its green credit volume 9% higher than the national average of 13%.



Despite the progress, however, observers identify significant hurdles that hold back China’s greenhouse gas (GHG) emissions reductions. A major point of contention lies in China’s varying standards of green finance. According to Climate Bonds Initiative, only $31.2 billion of the $42.8 billion of Chinese green bonds from last year met global guidelines for climate-friendly investing – as most of the international community do not view “clean coal” as a sustainable investment. This lack of harmonization will hinder foreign direct investments (FDI) into China, especially as many international financiers are reducing their coal portfolio.



China also lacks a national consensus in defining green projects. As bureaus and departments on varying levels of government hold different standards for categories such as sustainable agriculture and green technology, the effort to mainstream the green finance movement in China is hindered. Until China’s financial regulatory bodies release further uniformed measures, it will be difficult and more costly to identify green projects.



Furthermore, countries like the U.S. are deeply concerned with China’s involvement in financing fossil fuel projects under BRI, namely coal. So far, most Chinese funding for BRI infrastructure have gone towards fossil fuel. From 2014 to 2017, China Development Bank and China Eximbank invested $37 billion in fossil fuel projects overseas, totaling 61% of BRI energy projects financed exclusively by the two largest Chinese lending institutions. And of the $25 billion in syndicated BRI loans from Chinese banks in the same period, 54% ($14 billion) was used to finance fossil fuel projects including coal, oil, and gas, while only 30% ($9.1 billion) was used for renewable energy. With another $14.6 billion proposed for coal projects, China’s financing activity for coal-fired capacity overseas continues to raise concerns over its green finance agenda.



China has made a valiant head start in the move towards greening its financial system. However, tensions between China’s green finance initiatives and its foreign loan portfolio present key challenges to mobilizing foreign investments and global support for its sustainability efforts. To continue leading in sustainable achievements, a standardized, official, classification system for green projects is needed along with harmonizing foreign energy investments with domestic policies. Establishing such rules and regulations to enforce environmental criteria will go a long way in strengthening China’s new green finance mechanisms and attracting international investors.

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Taking stock of China’s approach to sustainable finance

Grace Boroughs

In the context of climate change, the war over the future of electricity generation has long been about coal. Yet, as coal continues to be phased out—due to uneconomical and ageing infrastructure—the time has come for the debate to shift toward natural gas. This less carbon-intensive fossil fuel is often touted as the “next best” thing in the United States. But even though natural gas has moved U.S. part way toward lower carbon emissions, it is now in the way of a deeply decarbonized future.



Though often skewed by subsidies, energy investments follow economics. This is why less profitable coal plants have steadily closed, despite the recent federal&nbsp;<a href="https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/52794479?utm_source=Sailthru&amp;utm_medium=email&amp;utm_campaign=Issue:%202019-07-17%20Utility%20Dive%20Newsletter%20%5Bissue:21936%5D&amp;utm_term=Utility%20Dive">rollback</a>&nbsp;of emissions regulations. In a recent interview with UtilityDive.com, a Duke Energy spokesperson said, “As we retire old coal, in most cases we will replace that with natural gas.” Consequently, utilities’ sustainability plans appear to show great progress on the path to carbon-free electricity.



But rather than serving as a bridge to an even lower carbon future, natural gas investments are locking us into a fossil fuel infrastructure that is costly for both consumers and the environment. Since 2017 utility decarbonization commitments have slowed and investments in natural gas-fed infrastructure with 30-to-40-year life spans<a href="https://www.nytimes.com/2019/06/26/climate/natural-gas-renewables-fight.html">&nbsp;have increased</a>. The U.S. Energy Information Administration<a href="https://www.eia.gov/todayinenergy/detail.php?id=34612">&nbsp;predicts</a>&nbsp;that natural gas will continue to be the dominant electricity source into the foreseeable future. The&nbsp;<a href="http://www.ncsl.org/research/energy/renewable-portfolio-standards.aspx">29 states</a>&nbsp;&nbsp;that have passed renewable portfolio standards—statewide targets to generate a certain percentage of electricity with renewables—will not meet these goals if natural gas investments increase.



Some utilities are not only failing to address how to replace natural gas but are also proposing or building new natural gas infrastructure. One of these proposals was from Indiana’s&nbsp;<a href="https://www.courierpress.com/story/news/local/2019/04/24/utility-commission-rejects-vectren-natural-gas-power-plant-indiana-posey-county-a-b-brown/3553798002/">Utility Vectren</a>. The Indiana Utility Regulatory Commission rejected the 850-megawatt natural gas-fueled power plant proposed to replace retiring coal plants because Vectren failed to explore renewables as an alternative. The project’s steep cost would leave their electricity consumers at financial risk with stranded assets, and the investment was therefore labeled as “<a href="https://www.courierpress.com/story/news/local/2019/04/24/utility-commission-rejects-vectren-natural-gas-power-plant-indiana-posey-county-a-b-brown/3553798002/">uneconomic</a>.”



Current prices of renewables and storage are not only competitive with natural gas, they are often cheaper, and their costs are predicted to continue to fall with further technological development and market expansion. This&nbsp;<a href="https://www.renewableenergyworld.com/articles/2019/06/new-white-paper-explores-grid-parity-and-the-solar-renaissance.html">grid parity</a>&nbsp;with solar makes an even sounder case for the transition to renewables without the need for natural gas as the&nbsp;<a href="https://www.vox.com/energy-and-environment/2018/7/13/17551878/natural-gas-markets-renewable-energy">“bridge”</a>&nbsp;to propel us there. Another reason for declining futures for the gas market is the shift to heat pumps and more efficient electric heating systems that will decrease the use of natural gas in buildings. Recognizing this, Berkeley, California, voted in July 2019, to ban natural gas heating in new buildings. As the first city to codify this requirement, Berkeley will influence other cities to favor electrification over fossil fuel infrastructure.



So, what is preventing decarbonization? Some utilities say that they are wary of shifting away from natural gas because they fear potential reliability issues with intermittent renewables and the impact on the grid. In an&nbsp;<a href="https://energypolicy.columbia.edu/goals-carbon-free-power">interview&nbsp;</a>with Columbia’s Center on Global Energy Policy, Xcel Energy’s President and CEO Ben Fawk spoke of the utility’s “commitment” to be carbon-free by 2050. But he cautioned against suddenly increasing intermittent energy sources that could negatively affect the grid without a controllable source of energy like natural gas to smooth load peaks.



That argument is becoming outdated. Renewable power generation does require updated grid systems and storage to meet peak demand power loads. The development of better storage technologies, however, can&nbsp;<a href="https://www.vox.com/energy-and-environment/2018/7/13/17551878/natural-gas-markets-renewable-energy">more efficiently</a>&nbsp;smooth out the intermittency of renewables with a shorter lag time than generating with natural gas.



Will the U.S. be able to break up with its number two? The resources, intent and economic incentives are present—what is lacking is clear federal action and leadership. The U.S. can decarbonize fully, and researchers have laid out roadmaps to achieve this. The choice will be up to utilities, cities, states and most importantly the federal government to fully commit and make binding targets that will help make natural gas obsolete.