Virtus: Bye, Hot Summer 🌻

August 2023

Photo: Jonas Horsch

We are a just few short days away from September. It’s hard to believe that summer is already winding down! Although for many communities around the world, the upcoming autumn is likely a welcome respite from what has been a brutally hot summer. Despite the crazy heat, it appears that many of our colleagues have been quite busy this summer. It’s the same story for us at Gordian Knot Strategies!

As many of our subscribers have already noticed, we launched this newsletter in July, as well as our weekly dispatch, Sliced, and our podcast, Untangling Climate Finance (more on this further down in the email). We hope that everyone has found some value from our flurry of content.

As always, we are open and eager to connect with anyone that wants to chat.

All the best,

Gordian Knot Strategies

We are Igniting Climate Solutions: Mobilizing$1 Billion in Impact Investment by 2030!

What can an American economist, ancient Mesopotamia, a Republican senator from New York, OPIC, and MIGA teach us about urgently mobilizing credit enhancement to support massive flows of investment in natural climate solutions?

In 1990, Harry Max Markowitz, an American economist, received the Nobel Memorial Prize in Economic Sciences. Despite his curiosity in physics and philosophy at school, Markowitz specialized in the field of economics at the University of Chicago. For his dissertation, he elected to apply mathematics to the analysis of the stock market. As he explored the field of stock market pricing that largely centered on John Williams’ analysis of stock prices as reflecting their “intrinsic value,” Markowitz realized that the prevailing theory lacked the analysis of the impact of risk. This fundamental insight caused him to develop his recognized theory of portfolio allocation under uncertainty, published in 1952 by the Journal of Finance.

Markowitz’s continued work in the field led to his modern portfolio theory (MPT), or mean-variance analysis, that is a mathematical framework for assembling a portfolio of assets such that the expected return is maximized for a given level of risk.It is humorous to note that the topic was so novel that, while Markowitz was defending his dissertation, Milton Friedman, another economist and statistician, is said to have argued that Markowitz’s contribution was “nice work, but … not economics.” 

To read the rest of this article, click here.

📚 Amidst this summer’s worldwide heatwaves, we found ourselves pondering the implications of a 1.5°C or 2.0°C future. And it seems we’re not alone in this contemplation. In his recently released book, “The Heat Will Kill You First: Life and Death on a Scorched Planet,” author and journalist Jeff Goodell masterfully investigates the multifaceted impacts our warmer planet has already had on life on Earth.

🎙️ Don’t call it a carbon tax! Akshat Rathi (Bloomberg Green reporter and Zero podcast host) and Catherine McKenna (former Canadian Minister of Environment and Climate Change) discuss Canada’s “price on pollution,” the importance of framing carbon pricing, and how the money generated is helping Canadian citizens.

✍️ A joint report from RMI and the Climate Collective – “Voluntary Carbon Market Landscape Guide” – dives into the voluntary carbon market (VCM) and presents its potential to align incentives, allocate finance, and reduce and remove emissions at the level necessary to stabilize the rapidly changing climate. The guide looks at trends, pain points, and innovations shaping the VCM today. 

📺 What will life on Earth look like in 2037? How about 2046 or 2059 or 2070? Scott Z. Burns and Apple TV+ present their version in Extrapolations, a collection of interconnected stories portraying the planet’s response to climate change from diverse perspectives.

🎙️ Our new podcast has launched!

On the pilot episode of “Untangling Climate Finance,” the host Jay Tipton chats with Sean Penrith (CEO, Gordian Knot Strategies).

Sean introduces the term “climate finance” to listeners. He also recounts his journey from an entrepreneur working outside the realm of climate change to his current position, running a private firm that mobilizes and activates climate finance for clients all over the world. 

To listen, click here.

The past month has seen significant activity in climate finance. Here are a few noteworthy headlines that stood out. 

The Nature Conservancy Announces Debt Conversion for Ocean Conservation in Gabon, First Ever in Mainland Africa

The Nature Conservancy (TNC) and the Government of Gabon have reached a financial arrangement to refinance $500 million USD of Gabon’s national debt, resulting in an anticipated $163 million USD for ocean conservation. This funding will support Gabon’s aim to safeguard 30 percent of its land, freshwater systems, and ocean by 2030.

New Zealand, BlackRock to Launch $1.22 Billion USD Climate Infrastructure Fund

New Zealand and BlackRock Inc. partnered on a $1.22 billion USD climate fund, focusing on clean energy and battery storage tech. This initiative marks BlackRock’s largest single-country low-carbon investment effort, aiming to accelerate New Zealand’s emissions reduction and drive the shift to 100% renewable electricity while enhancing business access to capital for growth.

The World Bank Provides $500 Million USD for Ecuador’s Green, Inclusive and Resilient Development

The World Bank approved a $500 million USD development policy loan for Ecuador to support government efforts to achieve inclusive, resilient and low-carbon development. The new funding rests on two main aspects. The first strengthens the fiscal framework, focusing on climate change challenges and governance for green bonds issuance and fiscal risk assessment in public-private projects. The second aspect emphasizes low-carbon development, prioritizing mitigation to blend climate and development, fostering green growth, and catalyzing private investment.

Brazil Rainforest States, Development Banks Commit to $900m USD Fund

Nine Brazilian rainforest states have united to pursue objectives outlined in the ‘Amazonia Forever’ initiative of the Inter-American Development Bank (IDB). The IDB and the Brazilian Development Bank (BNDES) have further pledged $900 million USD towards advancing the ‘Pro-Amazonia’ program. These goals encompass land tenure formalization, enhanced financing for local businesses in Amazon regions, and promoting sustainable development as an alternative to practices that harm the rainforest with the goal of opening access to finance for disadvantaged Brazilians.

A $150M USD Boost: Allowing Small Forest Owners to Profit from Carbon Credits

Small forest landowners in the US will receive $150 million USD in grants to engage in the carbon credit market and collaborate with corporations in need of carbon credits. This subsidy aims to enable those managing 2,500 acres or less, including underserved landowners, to participate more extensively in the expanding carbon market.

“There are literally trillions of dollars of opportunities for the private sector to invest in projects that will help save the planet. Our job is to go out and proactively find those opportunities, use our de-risking tools, and crowd in private sector investment.”

Philippe Le Houérou – CEO, International Finance Corporation

If you want to see more of our content, check out our weekly dispatch, Sliced.

Click here.

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