Hello, I hope February was a good month for everyone and that you were able to see friends and family during the Chinese New Year Holiday. This is the year of the fire horse, and I suspect it will be a very active year in the green finance and investing markets, and I hope everyone can stay in their saddle!
Although it is early in the year, global sustainable finance and green innovation activity accelerated in February 2026, with Asia playing a growing role in carbon markets, large‑scale storage, and hydrogen technology, while Europe’s CBAM rollout and tightening climate‑risk analytics continued to shape capital flows for institutional investors. Below are the key news, events and innovations that took place this month that I believe you will find interesting. [1][2][3][4][5][6]
1. Macro climate and policy backdrop
Data from major scientific agencies compiled this month show that “global warming has sped up markedly since the mid‑2010s,” underscoring the materiality of climate risk for asset pricing and physical‑risk modelling. This accelerates regulatory pressure on financial institutions, as supervisors increasingly treat climate risk as a core prudential concern rather than a peripheral disclosure issue.[1][3]
Bloomberg analysis of 2025 climate‑risk data highlights “the continued rise of sustainability risks including weather‑related disruptions, infrastructure strains, supply chain vulnerabilities, water scarcity and low‑carbon technology deployment,” trends it expects to remain “relevant in 2026.” These patterns support the case for integrating location‑specific physical‑risk metrics and sectoral transition pathways into credit, equity, and real‑asset models.[3]
The EU’s Carbon Border Adjustment Mechanism (CBAM), which formally launched at the start of 2026 for selected high‑emission sectors, is one of the most consequential policy instruments shaping cross‑border cash flows and tradeable margins. The Financial Times notes that CBAM is a “key test” of the world’s willingness to tax embedded carbon in traded goods, while the mechanism’s design is meant to “level the playing field for European businesses by ensuring that all imported products adhere to equivalent environmental standards or incur additional costs.”[5][7] However, I think many in Asia view CBAM as a trade barrier Europeans have put in place to protect their industries.
Le Monde reports that from January 1, 2026 imports of iron, steel, cement, fertilisers, aluminum, electricity and hydrogen will be taxed at a level “equivalent to the price of the ETS carbon allowances,” initially covering 303 products but only around 3% of EU imports by value. For Asian exporters in steel, cement, fertilisers and aluminum, this implies a de facto carbon price embedded in EU‑directed revenues, raising the importance of verifiable emissions data, eligible offsets, and potentially onshore optimisation CAPEX.[7][5]
2. Carbon markets and regulatory convergence in Asia
Japan’s new Green Transformation Emissions Trading Scheme (GX‑ETS), is moving to mandatory status in April 2026. I believe the move to a mandatory scheme is important. I remember when the TCFD was first developed as a voluntary scheme and it really did not move the market until it started going mandatory in countries around the world. The Japanese Scheme is emerging as a structural driver of compliance and voluntary carbon credit demand in Asia. The system is expected to cover 500–600 million tons of CO₂ annually “more than half of national emissions”—and bring 300–400 companies under regulation.[2]
Under the GX‑ETS design, regulated firms “will be allowed to meet up to 10% of their compliance obligations using carbon credits,” creating potential demand of 50–60 million tons of credits per year. For context, total voluntary carbon market retirements across major registries were about 163 million tones in 2025, meaning Japan alone could represent “roughly one‑third of that volume in compliance‑driven demand.”[2]
The same analysis positioned 2026 as a year where “the convergence between compliance and voluntary markets is no longer theoretical,” with Japan’s GX‑ETS demonstrating a model where “a large national ETS covers over half of emissions” and “companies can use carbon credits for 10% of compliance.” For investors, this structurally raises the floor for high‑integrity credit demand, shifts value toward credits that meet emerging compliance eligibility criteria, and increases the relevance of governance and legal risk in project‑level underwriting.[2]
More broadly, Asia is emerging as the “carbon pricing growth hub.” Key developments for investors include:[2]
- China is “expanding its national ETS and moving toward absolute emissions caps,” which would tighten the link between allowances and actual reductions and strengthen the case for long‑only or spread strategies around Chinese carbon instruments.[2]
- India plans to launch its Carbon Credit Trading Scheme in mid‑2026, complementing existing Perform, Achieve and Trade (PAT) mechanisms and opening a path for broader market‑based optimisation signals in power, cement and metals.[2]
- Indonesia’s IDXCarbon exchange, launched in 2023, is evolving toward “a hybrid model that links trading with a carbon tax‑style backstop,” giving domestic emitters a clearer price corridor while potentially creating cross‑border trading opportunities as regulations mature.[2]
- Vietnam has mandated a pilot ETS starting August 2025 and aims for a fully functioning carbon market by 2029, signalling future demand for advisory, verification and finance for industrial optimisation.[2]
Across Asia, the World Bank estimates that carbon pricing instruments now cover about 28% of global greenhouse gas emissions, with Japan’s GX‑ETS set to become “Asia’s second‑largest carbon market.” This coverage, while uneven, is sufficient to influence strategic capital allocation decisions in heavy industry, utilities and transport.[2]
3. Sustainable finance market dynamics and green bonds
Mordor Intelligence’s latest report projects that the global sustainable finance market will expand at a compound annual growth rate of about 12.3%, with sustainable finance volumes rising from roughly USD 15 trillion in the mid‑2020s to about USD 27 trillion by 2031. According to the report, green bonds held “53%+ share in 2025,” underscoring their position as the dominant labelled instrument in sustainable capital markets.[8]
Europe “remains the dominant player in sustainable capital,” backed by comprehensive regulatory frameworks and initiatives such as the European Green Deal, while the Asia‑Pacific region is described as “the most rapidly expanding market in sustainable finance.” The report notes that Asia‑Pacific’s growth is “driven by ambitious governmental green bond initiatives and regional efforts to digitise sustainability data,” with regulators rolling out “new instruments and frameworks that bolster renewable energy projects and climate‑centric investments.”[8]
Chinese green finance trends illustrate this regional momentum. Research on China’s green finance status points out that, as of late October 2025, global green bond issuance had fallen year‑on‑year by 11% to USD 506 billion, yet China’s market “bucks the trend” and had grown to account for about 20% of global green bond issuance, making it “the world’s largest green bond market.” Earlier, China’s Ministry of Finance published the “Green Sovereign Bond Framework of the People’s Republic of China,” with the aim to “attract international funds to support domestic green and low‑carbon development.”[4]
Key themes institutional investors should note:
- Regulatory‑driven demand: Central bank climate stress tests and emerging global reporting standards are turning ESG data from a voluntary add‑on into “a fundamental aspect of financial prudence,” improving risk assessment and capital allocation but increasing compliance costs for issuers.[3][8]
- Regional rebalancing: Europe’s share remains the largest, but Asia‑Pacific’s acceleration, particularly in China and increasingly in India, Japan and ASEAN markets, suggests a shift in the geography of labelled issuance pipelines.[4][8]
- Product innovation: The sustainable finance report highlights “digitally enabled green instruments and sustainability‑linked financing” as ways to improve market accessibility and efficiency, which is relevant for fintech, primary banking and secondary‑market liquidity strategies.[8]
For sophisticated investors, the combination of Europe’s regulatory depth and Asia’s growth trajectory supports multi‑region allocation strategies that arbitrage differences in disclosure regimes, green‑taxonomy definitions, and sovereign support.
4. Clean and green technology highlights
MIT’s Energy Initiative (MITEI) is supporting a portfolio of “next‑geothermal” projects that aim to tap deeper and hotter rocks to generate firm, dispatchable low‑carbon power. A featured project led by MITEI research scientist Pablo Duenas‑Martinez focuses on the “techno‑economics of electricity generation from a geothermal plant co‑located with a data center,” addressing the growing power needs of data‑intensive industries and the potential for long‑term power purchase agreements (PPAs) tied to geothermal.[9]
The initiative highlights several enabling technologies emerging from MIT research:
- Sensors that measure micro‑cracking in high‑temperature rock, improving reservoir optimisation and operational safety for enhanced geothermal systems.[9]
- Advanced metal alloys capable of handling “superhot fluids at a fraction of the cost of titanium,” potentially reducing capex for deep geothermal pipelines and heat‑exchange infrastructure.[9]
- Anti‑fouling coatings to protect pipes from “caustic geofluids common in hot, deep systems,” extending asset life and lowering maintenance costs.[9]
MITEI’s upcoming Spring Symposium and its joint GeoTech Summit with the Clean Air Task Force will bring together exploration, drilling, reservoir development and technology firms, aiming to “accelerate technology development for and investment in next‑generation geothermal.” For private capital and infrastructure investors, this constitutes a curated opportunity pipeline in early‑stage geothermal technology, with potential for later‑stage project finance as the technology matures.[9]
4.2 Ultra‑large battery cells for grid storage (China)
In February 2026, Chinese battery manufacturer EVE Energy announced the commissioning of “the world’s first battery storage system using 628Ah ultra‑large battery cells,” aimed at large‑scale stationary storage markets. The system is positioned as a milestone in the fast‑growing grid‑scale storage segment, responding to increasing variability in renewable generation and the need for multi‑hour storage at lower optimised cost.[6]
A 628Ah cell architecture can, in principle, reduce balance‑of‑system costs and simplify pack design relative to smaller‑format cells, potentially improving both capex per installed kWh and operating reliability for utility‑scale installations. Investors in Chinese and global storage supply chains should consider how such innovations might influence market share, cost curves and competitive dynamics against other chemistries (including sodium‑ion and flow batteries) over the coming decade.[6]
4.3 Compressorless hydrogen gas turbine (Germany)
The Karlsruhe Institute of Technology (KIT) reported a breakthrough in power generation using an “innovative compressorless hydrogen gas turbine,” noting that its runtime has surpassed a NASA benchmark record. The technology is being developed within the context of an early‑stage hydrogen industry ramp‑up and is presented as a potential building block for low‑carbon firm power supply.[6]
A compressorless design could reduce complexity and potentially improve efficiency and reliability compared with traditional turbine architectures, particularly when optimised for hydrogen rather than retrofitted from natural‑gas systems. For investors, such technologies form part of the broader hydrogen value chain thesis, where long‑dated infrastructure and equipment investments hinge on credible policy support and competitive green‑hydrogen production costs.[6]
Summary
Again, I wish everyone great health, happiness and prosperity in the year of the fire horse. We will continue to follow the green and technology markets and policy activities and provide you with good market intelligence.
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References:
Reuters, “Sustainable Switch: World warming at an accelerated rate,” 2026. https://www.reuters.com/sustainability/sustainable-switch-world-warming-an-accelerated-rate-2026-02-19/
Carbon Credits, “2026 Could Redefine Voluntary and Compliance Carbon Market Convergence, with Japan Leading the Way,” 2026.
https://carboncredits.com/2026-could-redefine-voluntary-and-compliance-carbon-market-convergence-with-japan-leading-the-way/Bloomberg, “Ten data insights showing the continued rise of climate risk – and what investors should look out for in 2026,” 2026. https://www.bloomberg.com/professional/insights/sustainable-finance/ten-data-insights-showing-the-continued-rise-of-climate-risk-and-what-investors-should-lookout-for-in-2026/
Griffith University, “China green finance status and trends 2025-2026,” 2026. https://blogs.griffith.edu.au/asiainsights/china-green-finance-status-and-trends-2025-2026/
Financial Times, “Climate action faces key tests in 2026,” 2026. https://www.ft.com/content/33ba41ba-4b57-4fb0-b16f-baa03358fc59
Renewable Energy Industry, 2026.
https://www.renewable-energy-industry.com/news/nachrichten/artikel-7239-pne-group-boosts-power-marketing-pne-reports-successful-2025-for-wattmate-platformLe Monde, “Europe rolls out new carbon border tax, but industry leaders remain unconvinced,” 2025.
https://www.lemonde.fr/en/economy/article/2025/12/31/europe-rolls-out-new-carbon-border-tax-but-industry-leaders-remain-unconvinced_6748965_19.html#Yahoo! Finance, “Sustainable Finance Market to Hit $27 Trillion by 2031 as Green Bonds Held 53%+ Share in 2025, Says a 2026 Mordor Intelligence Report,” 2026. https://finance.yahoo.com/news/sustainable-finance-market-hit-27-013100491.html
MIT Energy Initiative, “Next-geothermal energy: Promise, progress, and challenges,” 2026.
https://energy.mit.edu/news/next-geothermal-energy-promise-progress-and-challenges/Reuters, “Elliott presses LSEG for portfolio review, 5 billion pound buyback, source says,” 2026.
https://www.reuters.com/sustainability/sustainable-finance-reporting/elliott-pushes-divestments-5-billion-pound-buyback-lse-group-bloomberg-news-2026-02-18/Reuters, “Genuine Parts to carve out industrial business; shares fall,” 2026. https://www.reuters.com/sustainability/sustainable-finance-reporting/genuine-parts-spin-off-auto-unit-separating-industrial-vehicle-businesses-2026-02-17/
Reuters, “Roaring global growth train emerging from 2026 fog,” 2026. https://www.reuters.com/markets/roaring-global-growth-train-emerging-2026-fog-2026-02-10/
Los Angeles Times, “Organizers of the Winter Games made clean energy a priority. Here’s how,” 2026.
https://www.latimes.com/environment/story/2026-02-23/organizers-of-winter-games-made-clean-energy-priority-heres-howUnited Nations Economic Commission for Europe , “The Implications of the Carbon Border Adjustment Mechanism on the Energy Transition in Central Asia,” 2026.
https://unece.org/sites/default/files/2026-02/CBAM%20Compliance_formatted.pdfReuters, “Japan's first sovereign green bonds expected to attract healthy demand,” 2024. https://www.reuters.com/sustainability/sustainable-finance-reporting/japans-first-sovereign-green-bonds-expected-attract-healthy-demand-2024-02-13/
Reuters, “China's to sell first global green sovereign bond on Wednesday,” 2025. https://www.reuters.com/sustainability/sustainable-finance-reporting/chinas-sell-first-global-green-sovereign-bond-wednesday-2025-04-01/
Reuters, “China to issue sovereign green yuan bonds in UK for first time,” 2025. https://www.reuters.com/sustainability/sustainable-finance-reporting/china-issue-sovereign-green-yuan-bonds-uk-first-time-2025-03-19/
Reuters, “Green bond issuance dives almost a third amid climate backtracking,” 2025. https://www.reuters.com/sustainability/cop/green-bond-issuance-dives-almost-third-amid-climate-backtracking-2025-07-23/
Reuters Events - Global Energy Transition Awardees 2025. https://events.reutersevents.com/energy/energy-industry-awards/winners
ESG News, “Japan lays out plan to issue $157 billion in ‘green transition’ bonds,” 2022. https://esgnews.com/japan-lays-out-plan-to-issue-157-bln-in-green-transition-bonds/
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