At COP26 in Glasgow, unlike before, the financial world showed up and a group of 450 financial institutions pledged to invest $130 trillion in the transition to a low carbon world.

But, there is so much to be done and it is now incumbent upon banks of all sizes in the US – and around the world – to become engaged in the necessary climate transition that must occur to ensure the world remains within what the Paris Agreement deemed acceptable climate change parameters.

The question is how. There is so much to be done. And, while banks come under heavy criticism for their lending to the fossil fuel and coal industry and commitments must be made now to reduce this funding over the next few years, banks must also need to figure out how to more actively engage in a transition.

At the consumer level, it seems obvious that banks can assist any federal and state incentives and require heat pumps and energy efficiencies in any mortgages and home equity loans they extend. Auto loans can be predicated on shorter payback periods with favorable terms extended if the car is removed from service in favor of a fully electric car.

Loans to industry can require immediately methane remediation and sourcing of materials from green carbon-neutral sources. Green steel, for example, could be immediately required, even if that now requires sourcing all steel from Scandinavia where Hybrit and Vow Green Metals are way ahead at this game.

Loans to agriculture can also demand methane procedures around livestock, but also better water and fertilizer practices.

But, the biggest challenge facing banks is that many technologies that have the potential to reduce carbon are still in their infancy and may in fact never materialize – such as the use of hydrogen as a fuel and carbon capture. And, banks and large financial institutions, which are inherently risk averse, will not be able to get comfortable with the risks of these projects.

One area where banks can easily become comfortable and where tremendous progress can be made very quickly is through investing in onshore and offshore wind projects. Wind projects are essential to the new energy infrastructure, offering not only the lowest levelized cost of energy for the next decade, according to the Department of Energy, but also a proven technology that banks across northern Europe have now been actively funding for the last 10 years. Other areas that banks can invest in today without technology risks are solar, energy storage and the laying of cables to expand the electrification of transportation networks.

These types of projects, particularly offshore wind projects, can require complex lending structures to protect the lending banks. The good news is that the repayment periods for the cost of funding are much shorter and collateral can be better securitized than was ever possible for oil and gas project finance structures that major banks were always so eager to fund worldwide. Banks of all sizes in the US can extend capital to these projects at the most senior or secure tranches where the cost of capital is the lowest. Other funding and guarantees can come in at less secure levels in the capital structure by long-term power purchase agreement (PPA) counterparties (utilities or direct partners) or by local and federal agencies. As a result of Build Back Better, there will be a healthy amount of capital available that will be released through these agencies in early 2022.

The highest level of risk in the project (and much higher returns) is then taken by sponsors, by OEMs, by developers or by a group of venture capitalists. Sponsors like NextEra, Brookfield, Orsted and Avangrid will have basically unlimited capacity for these projects in the US.

It is time for banks to begin to act.

Contact me through BestCashCow if you need further direction, advice or introductions.

The Federal Reserve has tapered its bond buying, beginning to contract its $120 billion monthly bond buying purchases that propped up the economy after COVID-19 struck in March 2020. The bond buying will be decreasing by about $15 billion a month.

The Fed’s actions – and other stimuli that have been introduced – served its purpose initially. Powell not only prevented a catastrophic recession in 2020; he also kept financial markets intact and maintained full employment.

But, these types of actions were designed to address an emergency and to keep things intact through 2021. They also, though not designed, created inflation that is by even the most conservative metrics running well above 3.50%, and by more realistic metrics as high as 7.00%. In short, we now have rampant inflation that is reflected in the price of everything from bread to mega-mansions.

After the Fed first lowered interest rates to its current range of zero to 0.25% on March 15, 2020, Chairman Powell guided that it would hold interest rates at this level until 2023 or 2024. Somehow, Powell has been unable or unwilling to process new information as it has come to him, and he has held the Federal Reserve to this pronouncement through 2021. In fact, Powell is unwilling to commit to any sort of schedule to raise rates in 2022.

The Fed and the Treasury Secretary insist that the inflation we are seeing is transitory. The new language released today is that inflation “is expected to be transitory”.

Regardless of whether inflation is transitory or not, it is here now, and the Fed is way behind the curve. Holding interest rates at this level is now creating a complete diminution of people’s purchasing power. $1000 that you earn today can be worth $1005 in one year if you put it in an online savings account or online CD, and that $1005 will buy you goods and services that today would cost you only $930, if you are lucky.

In emerging markets that have experienced this kind of currency depreciation, people would run to the bank and place their money in a high yielding account or switch it into dollars. This is not possible here, unfortunately.

In the US, our alternative currency has become Bitcoin, a virtual token that isn’t a currency at all and that has so far failed to emerge as a currency (except where it is used to pay off international hacks). It was established as a Ponzi scheme and it may now be forced through circumstances of the Fed’s creation to replace the US dollar as the most accepted means of exchange.

By just announcing a taper and failing to at least begin to address this reality by raising the Fed funds rate, the Fed is showing that it just doesn’t care.

Bask Bank, a division of Texas Capital Bank, has launched a new online savings account. The account, called an Interest Savings Account, is paying 0.60% APY. The rate is clearly among the best online savings rate available at the moment (compare rates here), and is above the 0.50% APY currently offered by BankDirect, which is also a Texas Capital Bank subsidiary.

The catch here is that this account is only available to those customers of Bask Bank who have first opened an account that earns American Airlines AAdvantage® Miles. We’ve written previously about Bask’s primary offer before, most recently last December here.

Bask Mileage Savings Account pays 1 AAdvantage® mile for every dollar on deposit per year. In other words, $250,000 on deposit as Bask for 12 months will earn 250,000 American miles. Anyone who travels by air at all values these miles at well over a penny each and therefore this account is especially compelling as long as rates remain below 1% (and arguably remains compelling even when savings and CD rates are around 2%, as they were when Bask launched in early 2019).

Today, the 0.60% APY rate on its face is compelling, but there are other places where you can this rate or close to this rate, and those who are not interested in Bask Bank’s core mileage earning account should probably seek out one of these accounts. But, for those who recognize the value in AAdvantage® miles and are interested in earning AAdvantage® miles as long as savings rates remain low, Bask’s new Interest Savings Account may represent an interesting development. Bask Bank is now indicating that it will offer a cash interest-earning alternative as rates rise (so you may not need to move accounts when rates eventually go higher) and it is already enabling customers the ability to toggle between American miles and cash interest. And, that just may be enough of an incentive to jump over to earning AAdvantage® miles from Bask Bank as long as savings rates remain so low.