From 2007, the Reserve Bank of India incentivized banks to fund projects that are environmentally sustainable in one of the first striking examples of green finance. As a result of their policies, Indian banks decided to lend less money to projects that produce big carbon footprints. The Reserve Bank has also tried to stimulate work in environmentally friendly projects through issuing green bonds, amounting to $8 billion since January 2018. For the sake of preserving the environment, banks in the country keep the costs of borrowing low for green projects and check the sustainability claims of borrowers before lending.
It is estimated that, if the world keeps going as it is, this century could bring an increase in global temperature of more than 3 degrees Celsius, which could interfere with trade enough to provide a major obstacle to many economies. For instance, it could mean global GDP will be cut by as much as 18% by 2050. In the case of India, which is planning to expand its economy approximately four-fold by 2030, it’ll need about $10 trillion to achieve this green growth. This is where banks come to the rescue with green finance, making funds available funds to create green infrastructure. Share trading as CFDs of big green companies like Plug Power, General Electric, or Tesla is influenced by the workings of Green Finance behind the scenes, which is spreading more and more to keep their motors running. Let’s take a closer look at green finance.
General Electric, Sunrun, Plug Power
In December last year, the UKEF (United Kingdom Export Finance) signed an agreement with General Electric (GE), agreeing to provide more support for GE’s sustainable energy projects. The UKEF had already fulfilled contracts worth more than $3.6 billion since 2015, with the goal to ease the way for UK exporters of green energy products to find funding. In the UK, at least 410,000 people work in green industries, and the sector may be worth as much as $223 billion by 2030. UK exports Minister Mike Freer says this agreement is important because “It will harness UK expertise to build a better world.”
Solar panel maker Sunrun wanted to deal with the problem of prohibitive upfront costs for its home solar systems back in 2011. US Bancorp came in with a solution, paying out $200 million to finance the set-up of these systems, making it possible for residents to pay only a small upfront fee, followed by monthly payments. US Bancorp earns money in the form of a tax credit, while Sunrun maintains the solar panels, which it continues to own.
Plug Power, which sells and services fuel cell products using hydrogen technology, saw its shares increase five-fold in the first three months of 2021, reaching $75.49 per share, but which later settled down to $29 by the end of the year. This year, after opening a cutting-edge production plant in Fresno County, California, they expect their revenue to increase by a hefty 80%. Lee Ann Eager, the CEO of the Fresno County Economic Development Corporation, which provided support for the project, was “Proud to have worked alongside Plug Power representatives… in supporting the catalytic investments Plug Power’s hydrogen production facility stands to create.”
Tesla, NIO, Ford
One great illustration of green finance operating today is in Hawaii, where Tesla’s Kauai Island Utility Cooperative, which started in 2017, still aims to provide the island with electricity at about one-third the cost of fossil fuel electricity. Tesla’s power plant uses solar panels to produce and store energy on a long-term basis and has the potential to save 1.6 million gallons of fossil fuels per year. Tesla, with government funding, also made a green electric grid that generates all the power needed for the island of Ta’u.
Ford aims, through its Electric Vehicle project, to be carbon neutral by 2050, and pushed ahead to achieve this late last year by selling $2.5 billion of bonds. “It is a strong example of a legitimate green bond”, said James Rich of Aegon Asset Management, “and is strongly aligned with long-term trends towards a sustainable global economy.” Ford is committed to promoting projects “That are good for people, good for the planet, and good for Ford,” according to chief financial officer John Lawler.
The Electric Vehicle maker NIO raised funds this year through an ABN (Asset-backed Medium-term Notes) offering, which means that the company found a channel of financing on the Chinese capital markets, on which NIO first appeared in October 2021. The money will be used to finance leasing options for NIO customers.
Share trading in big green companies like these as CFDs will continue to be influenced by green finance behind scenes, so it’s important to keep informed about the ways financial institutions are making possible our society’s green dreams as you speculate on the share price movements of Tesla, Ford, and NIO and make more informed trading decisions.
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