AI demand is fueling investors' bet on solar energy in North Carolina

It is understood that Brussels has launched a far-reaching regulatory technique to combat global warming. The CSRD and CSDDD have pushed reams of regulations into the laps of corporate bosses (and added countless billable hours to the law firms tasked with figuring all of it out).

Another vital EU measure is the regulation on deforestation, which comes into force at the tip of this 12 months. As I report today, these rules will bring recent verification requirements for Unilever and other global brands that depend on farmers who grow crops like cocoa and occasional.

But first a bullet to get you began. Global institutional investors are increasingly turning to renewable energy sources to capitalize on booming electricity demand driven by artificial intelligence – and on this case, in a fairly unexpected place.

Thank you for reading.

Renewable energy

$650 million solar project brings together pension funds

Pension funds from Sydney and Toronto have joined forces to speculate $650 million in a solar company in a small town in North Carolina's Blue Ridge Mountains.

Asheville-based Pine Gate Renewables announced today that it raised the cash from Generate Capital, the Healthcare of Ontario Pension Plan and Australian pension fund Hesta. Pine Gate operates utility-scale solar projects and has greater than 30 gigawatts of projects in development.

Investor interest is driven partially by artificial intelligence that’s changing the demand outlook for utility-scale solar, Pine Gate CEO Ben Catt told me.

“Numerous the shoppers we cope with are larger technology corporations, individuals with growing data center (power) footprints” and “pretty aggressive renewable energy goals,” he said. At the identical time, “you're seeing an explosion in demand without delay (through) increasing AI. We're going to handle unprecedented load growth,” Catt added.

San Francisco-based Generate raised a major $1.5 billion in January, making it considered one of the most important equity raises of the primary quarter (behind AI company Anthropic and tied with Epic Games, in keeping with CB Insights).

“Pine Gate has done a wonderful job supporting customers resembling large data centers, but in addition others who’re desperate for clean energy that’s cheaper and more environmentally friendly than the opposite energy sources,” Scott Jacobs, co-founder of Generate, told me.

“Some of the drivers of demand usually are not just AI and data centers, but in addition just the electrification of every thing,” including a shift toward using electricity for heating, Jacobs said.

Deforestation regulation

Coffee, chocolate and EU deforestation regulations

One of the largest stories within the commodities sector this 12 months has been the record rise in cocoa prices. Crop failures in West Africa have exacerbated the worldwide shortage of cocoa beans utilized in chocolate making, driving prices to an all-time high of £9,477 ($11,860) a tonne earlier this month.

The price rise has drawn attention to tens of 1000’s of small cocoa farms – in addition to the work of a small Amsterdam company called Meridia.

Founded nine years ago as Landmapp, Meridia has provided land and property records to farmers in West Africa. The company received support from the help organization Mercy Corps and the Omidyar Network, amongst others. Land rights provide farmers with protection from evictions in disputes and in obtaining financing.

Now the corporate's work is expanding due to recent regulations within the EU. The EU's Deforestation Regulation (EUDR) is on account of come into force in December. For certain products sold within the EU, corporations must show by submitting due diligence statements that their supply chains haven’t contributed to forest destruction. Although the settlement focuses on deforestation, it also goes beyond trees and requires corporations to review certain environmental and human rights protections. The EU estimates that its recent rules will reduce CO2 emissions by at the least 32 million tonnes per 12 months.

The extent of the EU deforestation regulation is attracting increasing attention from banks. Companies caught violating the foundations could face fines of as much as 4 percent or more of their annual EU turnover and temporary exclusions from public procurement and funding.

“The tropics lost 3.7 million hectares of primary forest in 2023,” Barclays said in a report this month. “The significant impact of deforestation on climate and biodiversity, in addition to corporations’ modest progress in ensuring deforestation-free supply chains, proceed to focus attention on the merits of regulatory intervention.” The report cited an estimate from Global Forest Watch, a monitoring organization, that the decline of the tropical forest last 12 months was akin to the clearing of virtually ten football fields per minute.

Last week, Meridia announced a €5.2 million fundraising from Regeneration.VC and other enterprise capital firms. These investors are pumping money into Meridia as deforestation regulations have opened up recent opportunities for the corporate.

Chocolate and occasional corporations have had data on local farms for years. But these numbers are stuffed with gaps, Meridia co-founder Thomas Vaassen told me.

“The elephant within the room that everybody within the industry knows: Most of it’s complete crap,” Vaassen said. “What the information reveals doesn’t correspond in any respect to what’s on the bottom.

“Today the information is not any longer an actual problem since it was used for internal purposes,” said Vaassen.

“But now EUDR is suddenly changing the foundations of the sport,” he said. The corporations said: “'Oh rattling, we have now to send this data now and put it into the EU system.'” That has never happened before. Now you should submit your actual, original field data.”

Meridia has built a verification system based on initial field work with West African farmers in addition to business satellite data and public maps, he said. It also operated in greater than 30 countries producing cocoa, coffee, palm oil, soybeans and rubber. And it has already worked with global corporations, like Unilever.

But enterprise capital firms aren't the one ones funding Meridia. One of its most up-to-date investors is the Atlanta-based trading house Intercontinental Exchange, which owns, amongst other things, the New York Stock Exchange.

With EU regulations looming, ICE has a great reason to pump money into Meridia. The trading house warned shareholders in February that EU deforestation rules could “decelerate physical trade in cocoa and occasional and reduce trading volumes” for the corporate's coffee and cocoa futures contracts.

“Meridia has proven expertise in risk assessment and verification of agricultural provenance and provide chain data,” Clive de Ruig, president of the ICE Benchmark Administration, said in an announcement last 12 months when he announced a partnership with Meridia.

ICE isn't the one company warning shareholders about these deforestation regulations. Bunge, considered one of the 4 major global grain trading corporations, also said in February that palm oil and soybeans may very well be affected by the foundations.

Reports from the Rainforest Action Network and the Palm Oil Transparency Coalition showed corporations were still significantly unprepared for EU deforestation regulations on account of a scarcity of traceability and due diligence requirements across the board, Barclays said. For corporations like Meridia, this represents a terrific opportunity to assist them comply with these rules.

Right to answer

Last week we conducted an interview with economist Esther Duflo about her proposal to make use of taxes on corporations and billionaires to finance climate-related aid to developing countries. Gillian Marcelle, managing director of Resilience Capital Ventures in Washington DC, wrote this in response:

Hopefully the voice of a serious global North economist who acknowledges complicity will likely be vital in spurring motion. This generally is a backdrop for vital work on funding the UNFCCC and the Loss and Damage Fund.

However, nothing will change so long as the brand new institutional framework financed with this money is just not used for a unique allocation of economic capital. The money raised from this recent source will likely be used to handle “blind spots” and construct capability in global majority countries. This is an agenda for lasting change.

The values ​​and norms at work in international development require transformation, and no randomized control tests are needed to find out direction.

Intelligent reading

I like to recommend this story from our colleagues about Calstrs, considered one of the most important pension plans on this planet. The California pension fund needed to delay the discharge of its 2023 climate report after finding inaccuracies in calculating the carbon footprint of its $331 billion portfolio. The company has now announced that it can not publish its 2023 CO2 emissions data until 2025.