2024 Report — Project Finance and the Great Race to 2030

As impact investors and innovators, we pay attention to trends and lean into plans for growth that also happen to achieve important goals like the United Nations (UNEP) Sustainable Development Goals (SDGs), per In3’s investment strategy. 2024 arrived with a notable concern, and in some circles almost a sense of panic, that we’re not on track to achieving some of these sustainable investment targets. We need to go beyond net zero carbon, for example, to net negative — meaning, drawing down more CO2 than we produce globally. Why? Because we can, therefor we must.

But let’s start where we are — heading rapidly toward net zero carbon emissions by 2030, per the SDGs. A few facts as reported in 2023 by David Carlin, Head of Climate Risk and TCFD (Task Force on Climate-Related Financial Disclosures) for UNEP FI (United Nations Environment Programme’s Finance Initiative):

• Net-zero pathways demand growth in climate finance of 3-6x by 2030
• Way too little current climate finance is going to emerging economies where the bulk of future emissions are projected
• The US and EU green plans present big opportunities for investors, but decarbonization in these regions alone is totally insufficient for global net-zero goals
• New financing structures are needed to derisk projects, lower capital costs, and crowd-in private capital in emerging economies.

Bravo! We agree 100% with these observations, and we at In3 Capital are doing our level best to open up access to funding, innovate and rapidly scale (CAP funding, for example, specifically addresses all three of these) with global reach since inception (we started in 1996 shortly after the first UNCED conference in Rio) and continue to offer some of the lowest costs of capital in the marketplace.

Full article by David: Post | Feed | LinkedIn

Sector-specific Updates

Waste-to-Value is exploding, in a good way, as industry finally “got religion” and has begun a mad scramble to out-compete each other to see who can be the greenest the fastest. We have clients and partners at the cutting edge of this breakthrough opportunity. When converting a liability into an asset there’s both an avoided cost as well as a serious profit center as renewable products tend to be short supply, commanding a premium price (although if volume price competitiveness is a key driver for transforming industry practices that clean up the mess simultaneously, that’s available as well), not including toppings like Carbon Credits, tax equities and sustainable value propositions that won’t fall off a cliff such as petroleum-related, polluting, and/or socially unjust/unhealthy industries now face.

Commercial Real Estate: In funding “impact” or “sustainable” infrastructure and Commercial Real Estate, we have witnessed certain patterns (based on verifiable trends and drivers) that have changed evaluation and underwriting standards since earlier this year. With rising interest rates across the board, the capital market “plate tectonics” continue to slide toward new opportunities and tightening of certain standards.  100% loan-to-cost debt seems to be evaporating, where in the past only Chinese and Russian funding could be obtained (with notable downsides in doing so), now we have a new game with new rules.

Regenerative and “Climate Smart” Agriculture: Believe it or not, the US farming world is “woke” to the importance of carbon sequestration in soil, topsoil fertility, water conservation (this is a tough one), managed grazing of livestock, minimal tillage and other best practices to capture/sequester carbon in the ultimate “carbon sink” second only to the oceans — agricultural soils — in an effort to stop treating it like dirt (homage to friends at Kiss The Ground).

This year also ushered in a diverse array of experiments now underway with carbon credits, robotics/AI, different approaches to packaging and transportation, the proven case for using cover crops, and a newfound appreciation for diversity in soil and human biomes, eating more plants, paying more attention to health and wellness, and gradually moving away from the sugar- and grain-fueled Standard American Diet (just SAD).

Okay, not everybody is on board, but there is strong evidence from mainstream agriculture via soil testing that the conversation has taken hold and is going deeper than most non-farmers realize. Of course there are still plenty of pockets of absolutely brain-dead, wrong-headed practices (and US Farm Bill incentives for unhealthy things like growing GMO corn for High-Fructose Corn Syrup that is dubious at best), but the race is on to monetize healthier soil, more cover crops, higher yields from organic crops … happens to be the right thing for people and the planet, too. Controversy abounds at times of change, so here are some views in favor of this transformation as well as cautionary tales to not get giddy, make unwise choices, or go over-the-top with climate-friendly farming misinformation:

The truth about soil’s ability to sequester carbon (agriculture.com)

Why should farmers care about carbon? (agriculture.com)

North Dakota regulator rejects Summit Carbon Solutions carbon pipeline application (agriculture.com)

Scam Report

There are still plenty of fraudsters that will take advantage of unsuspecting developers/owners (sadly, a growth industry), so we feel it is our duty to report these scam artists in hopes that you will save yourself time and trouble. You won’t want to chew out anyone you “catch in the act” as they’ll just go deeper underground and become harder to detect. Since there will always be a certain number of cheaters and those who seek to victimize others, we prefer that they remain stupid. Don’t teach them what you know. Here are 3 examples:

1. Spoofing: Prepare and verify that the party you are dealing with is who they say they are. An absurd number of scammers have infiltrated the “high finance” marketplace, making it essential but not impossible to know who you are dealing with. Devise a test that gives you one-way confirmation of their identity, because, as the saying goes, on the Internet, anyone can be a dog. Don’t do deals with dogs. Together you’ll just make a mess that someone needs to clean up and the dog will like it.
2. Fee scams: Charging a fee without delivering value. Some “providers” and some banks are actually fake, or worse, they’re operating a fee scam. Although they look real on the surface, if you ask around (or catch them on the bank blacklist), you’ll discover that once you’ve paid real money — typically far less than a proper commercial bank’s guarantee instrument or what other services might cost — but received nothing of value in return. Services that deliver value will describe in detail what you will receive, so when in doubt, ask us or ask the provider for references.
3. Making promises not kept: Some lenders, investors or traders don’t have the funds and will rely on client-gathered funds (sometimes making fraudulent use of their Proof-of-Funds to prop up their own credit) to make transactions possible. For traders, this should be at least matching funds, as traders are not allowed to trade their own cash. But beware of lenders that say they’ll lend you the money they have yet to raise. Be careful about timeframes and contractual details.