Take Five: Planning Permission
A selection of the major stories impacting ESG investors, in five easy pieces.
This week saw the roll-out of roadmaps seeking to combine growth, investment and sustainability in developed and developing markets.
Top ten – There’s no one way to fill the near US$500 billion hole in the 2030 climate change budgets of the world’s 70 most vulnerable countries (V20) to global warming. According to a new report from organisations representing these states, including the Bridgetown Initiative, there are ten. And they could raise around US$210 billion at short notice – making the US$300 billion by 2035 promised at COP29 seem slightly less inadequate. “In a world where political cycles are short, identifying the highest priority actions has never been more important,” the report notes. The ten ‘super levers’, conceived as an interconnected framework, start with two familiar mechanisms that, with a few tweaks, can create the conditions for mobilising and deploying climate finance at the scale and speed required. The first involves scaling up standardised and high-integrity carbon and biodiversity credit markets to expand climate and nature investment pipelines for funding mitigation and resilience projects. The second requires the strengthening of country-focused investment platforms, which includes reworking Just Energy Transition Partnerships (JETPs), which have recently struggled to find new participants due to limited success of existing schemes, such as in Indonesia. JETPs have foundered, says the V20 report, due to a “lack of specific plans and poor stakeholder coordination”. But the report insists that a better coordinated approach to country plans “can set a clear strategic direction for domestic governments and institutions and provide clear signalling to international financial organisations”.
A new direction? – The European Commission officially released its first Competitiveness Compass, a framework for regaining competitiveness and securing “sustainable prosperity” based on the recommendations of the Draghi report. As well as seeking to “reignite” innovation by creating a supportive habitat for start-ups, the compass outlined a “joint roadmap” for decarbonisation and competitiveness, which included the Clean Industrial Deal, as well as tailor-made action plans for energy-intensive sectors, such as steel and chemicals. It also confirmed that the recently launched sustainable finance Simplification Omnibus Package will be the first of many similar initiatives, in this case targeting – among other objectives – “better alignment with the needs of investors”. Whether investors will back these efforts on their behalf is unknown as yet.
Green growth – This week, UK Chancellor Rachel Reeves also tried to strike a balance between growth and sustainability. “Net zero is the industrial opportunity of the 21st century, and Britain must lead the way,” she said, providing multiple examples of what this would mean in practice. Reeves confirmed government backing for a third runway at Heathrow, while announcing further investing in the UK’s Advanced Fuels Fund. She also promised 16 gigawatts of offshore wind, made possible by designating new Marine Protected Areas off the UK’s east coast. These and other commitments echoed last week’s plan to accelerate infrastructure development by allowing firms to pay into a Nature Restoration Fund, rather than addressing environmental risks prior to being granted planning permission. They also fell between last week’s parliamentary machinations to kill an opposition party’s Climate and Nature Bill – which would have forced full alignment with the Paris Agreement and the Global Biodiversity Framework – and the official filing of the UK’s updated nationally determined contribution, explaining how carbon emissions will fall 81% from 1990 levels by 2035. Further moves are in the pipeline, such as subsidising electric vehicle sales by guaranteeing loans. But future events will inevitably conspire to knock Reeves and colleagues off their tightrope, starting with the government’s reaction to the court decision yesterday forcing the developers of the Rosebank oil and gas field to reapply for permission to start production.
Deep dive – For the US tech sector, the key question shifted this week from ‘how sustainable is your data centre infrastructure?’ to ‘how sustainable is your competitive advantage?’ Having unveiled plans for an energy-intensive scaling up of AI-led investment, US technology firms faced their ‘Sputnik moment’, in the form of a much cheaper, less emissions-intensive Chinese alternative. This potentially disrupts the narrative in which the US asserts global dominance in information technology while China leads the field in clean energy. It also echoes the national security threat posed by TikTok. DeepSeek may or may not play a significant role in them, but Sino-US AI wars are looming and the risks posed by Chinese large language models processing reams of US data will be noted in the Pentagon and on Capitol Hill. DeepSeek hot takes caused havoc on Wall Street this week, but one group of investors was more sanguine. According to BloombergNEF’s Energy Transition Investment Trends 2025 report, climatetech private and public equity fundraising was down 40% last year, with the US accounting for around half. According to Pitchbook, however, US climate tech venture capitalists see demand for grid efficiency and renewable energy production – partly spurred by investment in AI infrastructure –offsetting US President Donald Trump’s freeze on the US Inflation Reduction Act. “It’s a life-changing opportunity,” said one.
Drive to survive – Another investor that’s betting big on AI is Elon Musk. Having suffered Tesla’s first dip in annual sales in over a decade, its CEO unveiled this week lower-than-expected profits and revenues for Q4 2024. But he also promised the launch of a driverless ride-hailing service in Texas by June, followed by a humanoid robot before the end of the year, and autonomous ‘cybercabs’ in 2026. Tesla’s diversification into AI-based driving software could also be a bet on President Trump being friendlier toward autonomous vehicles than subsidies for electric ones. “I don’t even know who second place [in AI] is . . . I would need a very big telescope to see them, that’s how far behind they are,” said Musk, displaying a taste for hyperbole rivalling his new best friend. He did mention new EV model launches, suggesting he still has ambitions to regain the lead in a market that grew 25% last year globally. But how much time he intends to spend on that task – alongside goading Europeans, cutting government waste and resolving US-Chinese tensions over TikTok – remains to be seen.
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