Clean Tech & Energy

What Does the Green New Deal Mean for Impact Investing?

The “Blue Wave” that swept over Congress in 2018 has brought with it a Green New Deal, championed by new US representative Alexandria Ocasio-Cortez (D-NY). While many pundits and advocates are promoting or attacking elements of what could be in the plan, the current official version is the resolution introduced on February 7 by Ocasio-Cortez and Massachusetts senator Ed Markey.

Announcing the resolution at a press conference, Markey called it “an historic, generational commitment to end climate change” and said that “[w]e will save all of creation by engaging in massive job creation.”

The resolution is less a policy prescription than it is a visionary document. It seeks to “achieve net-zero greenhouse gas emissions through a fair and just transition for all communities and workers,” create jobs, invest in infrastructure, provide a clean environment, and stop the oppression of ”frontline and vulnerable communities.” Calling for a decade-long “national mobilization” with investments in nearly every aspect of the US economy, the Green New Deal could touch everything from energy to water efficiency, food, manufacturing, transportation, and ecosystem restoration.

Impact Investing and the Green New Deal

This legislation, if enacted, would suggest numerous points of entry for impact investors. In fact, investors are already deeply embedded in many areas targeted by the Green New Deal.

Global investment in renewables has averaged $300 billion a year since 2012, even as the cost of capital has fallen, according to the International Energy Agency. The energy transition already underway has created opportunities for investors at various levels, from institutional investments in solar plants and green bonds to individual investments in startups and exchange-traded funds. And energy efficiency providers have become increasingly sophisticated at providing financing strategies for customers. For instance, in performance-based contracts like energy service agreements, service companies provide their own financing to upgrade equipment and share the savings with the customer. Customers can also outsource their commercial lighting needs through the rapidly growing “lumens as a service” market.

Sustainable food systems have earned further attention from investors. Beyond Meat, Memphis Meats, and Perfect Day are just a few startups working to create animal-free “meat” in a lab, drawing high-profile investors like Microsoft founder Bill Gates and Virgin Group founder Richard Branson. Other investors have supported efforts to prevent food waste. For example, Apeel Sciences received $70 million in venture capital from nonprofit ReFED to fund its work on an edible membrane that keeps produce fresh.

Finally, transportation is seeing a swell of innovations developed with the aim of cutting emissions and providing more mobility options. There are dozens of models of electric cars on the market now, with electric buses and trucks rapidly emerging. Bike- and scooter-sharing services are growing in number, and ride-hailing tech companies are under increasing pressure to go electric. Autonomous electric vehicles are getting closer to becoming a reality, suggesting the potential for a major shift in transportation.

The proposal still faces a long journey from hashtag to legislative language, and which aspects of the plan are most likely to move forward are still unknown.

Private vs. Public Investment

The Green New Deal could accelerate all of these opportunities and more. But a note of caution for investors—the resolution puts government investment first, proposing that “the public receives appropriate ownership stakes and returns on investment.”

“This is an investment,” Ocasio-Cortez said at the press conference announcing the resolution. “For every dollar we invest in infrastructure, we get a return on that investment. For every dollar we spend on tax cuts, we get less than a dollar back.”

Overall, the resolution says very little about the private sector. It contains no mention of tax incentives or even a role for private investment. The plan will likely evolve into a more traditional set of energy and social policies in the legislative process, should it get that far. Even at the press conference, Markey made a pitch for tax credits for clean energy and electric vehicles.

The proposal still faces a long journey from hashtag to legislative language, and which aspects of the plan are most likely to move forward are still unknown. No comprehensive energy or climate legislation has passed since 2007—though the 2009 stimulus package did include $90 billion in green initiatives—and there seems to be little political consensus on the issues.

Politics aside, the plan aligns with a number of ongoing market trends and investing frameworks, including the United Nations’ Sustainable Development Goals.
Impact investing already plays a meaningful role in driving the transition toward some of the Green New Deal’s core aspects, and regardless of the plan’s future, investors have laid a strong groundwork to sustain the momentum they’ve built.

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