Mobilizing Private Finance for Climate Change: 5 Examples

July 24, 2023 6 minute read

Nature scene highlighting the need for private finance for climate change

Between mitigation and addressing impacts across the globe, it has become obvious -- addressing climate change will be incredibly expensive, and the required investment will be ongoing. 

 In 2022, the UN estimated that the annual costs of climate adaptation in developing countries will range between $140 billion and $300 billion by 2030—and could be as high as $500 billion by 2050. Although estimated projections vary, these figures do not include the trillions needed to meet global targets for climate mitigation, which are estimated by the International Monetary Fund (IMF) to include energy infrastructure and GHG emissions strategies, among other supportive undertakings. 

The United Nations Framework Convention on Climate Change (UNFCCC) (also known as the Convention) was adopted in 1992 with the ultimate aim of preventing dangerous human interference with the climate system. The 1997 Kyoto Protocol and 2015 Paris Agreement build on the Convention. All three call for financial assistance from Parties with more financial resources to those that are less endowed and more vulnerable.

In terms of progression, mobilizing private finance became a central theme at the UN Conference of the Parties (COP26). Attentive to immense costs and needs for investment, COP27 closed with a breakthrough agreement to provide “loss and damage” funding for vulnerable countries hit hard by climate disasters. And just last week Dr. Sultan Al Jaber, COP28 President-Designate met with US President Joe Biden, His Majesty King Charles III, UK Government Ministers and Leading Investors and Philanthropists, to discuss unlocking climate finance with a focus on developing economies. 

This meeting was part of the Climate Finance Mobilization Forum led by the UK Secretary of State for Energy Security and Net Zero and the US Special Presidential Envoy for Climate. The message was clear: after years of failing to meet climate finance commitments, new climate finance goals will of course be important; however, without supporting reforms of the global financial architecture, and without fulfilling climate finance pledges and mobilizing further capital, the world risks repeating the same mistakes it cannot afford to make.

 "Climate change is a global problem that requires a global solution. All financial actors must work within a new framework of solidarity to enable climate finance at the scale, scope and speed that the world needs."

- Dr. Sultan Al Jaber, COP28 President-Designate

Governments, foundations, and NGOs cannot foot this bill alone; holistic action is required to mobilize capital from all sectors, public, private, and philanthropic. To move forward to scale, private climate financing must play a paramount role as developing economies and emerging markets seek to curb greenhouse gas emissions and contain climate change, while coping with its effects.

And although the challenges for drawing private investment into climate-related projects are well-known and complex, solutions are fuzzier—even though the potential is staggering

5 Examples of How Companies Are Engaging in Climate Finance

Below, we highlight five recent efforts to collaborate with companies for climate finance. The projects below focus private sector attention on protecting and restoring forests, advancing climate-smart agriculture, and boosting the resilience of agricultural supply chains and smallholder farmers. Put another way, each channels private finance toward conservation and resilience, as opposed to other common climate finance avenues, such as clean energy. 

We’ve organized the five examples below into two key categories, each exploring different ways companies are collaborating for climate finance goals: 

  • Protecting and restoring forests to offset carbon emissions and develop net-zero supply chains. Through company-led initiatives and new carbon markets, the private sector is investing in forest restoration and conservation in the quest to achieve net-zero emissions.   
  • Harnessing private climate finance for supply chain resilience & smallholder farmers. 
    Creating resilient agricultural supply chains is another key motivator for private sector climate finance. We’re excited to see new mechanisms for companies to invest in climate adaptation for the smallholder farmers who power global agricultural supply chains.  

Protecting and Restoring Forests to Offset Carbon Emissions and Develop Net-Zero Supply Chains

1. The Restore Fund

Apple has targeted to make its supply chain and products 100% carbon neutral by 2030. As part of this effort, the company announced in 2021 the launch of its $200 million Restore Fund, which made three initial investments in Brazil and Paraguay with Conservation International and Goldman Sachs.

The aim of these projects is to restore 150,000 acres of “sustainably certified working forests” that produce trees for building materials, paper, and other uses, while also pulling carbon from the atmosphere. These investments also protect an additional 100,000 acres of native forests, grasslands, and wetlands. Together, these projects are forecasted to remove 1 million metric tons of carbon dioxide from the atmosphere per year by 2025. The Fund is designed to demonstrate a profitable financial model to scale up investment in forest restoration. 

This past spring (2023), Apple announced a major expansion of the initiative, doubling the company’s total commitment to advancing high-quality, nature-based carbon removal projects. As part of the expansion, Apple will invest up to an additional $200 million in a new fund, which Climate Asset Management — a joint venture of HSBC Asset Management and Pollination — will manage.

Apple and Climate Asset Management are taking a broadened approach with prospective projects, pooling two distinct types of investments: nature-forward agricultural projects that generate income from sustainably managed farming practices and projects that conserve and restore critical ecosystems that remove and store carbon from the atmosphere.

This unique blended fund structure aims to achieve both financial and climate benefits for investors while advancing a new model for carbon removal that more fully addresses the global potential for nature-based solutions. According to the company, the new portfolio also aims to remove 1 million metric tons of carbon dioxide per year at its peak while generating a financial return for investors. For Apple suppliers that become partners in the fund, it will also offer a new way for them to incorporate high-impact carbon removal projects as they decarbonize.

2. The Agroforestry and Restoration Accelerator

The Brazilian state of Pará comprises 9% of the world’s tropical forest area and accounts for 40% of all deforestation in the Amazon, the highest rate in Brazil. under the recently launched Agroforestry and Restoration Accelerator, Amazon and The Nature Conservancy have pledged to provide financing to 3,000 small farmers to restore  20,000 hectares of deforested land over three years. Amazon, in turn, will receive carbon credits to support its pledge to reach net zero by 2040. The Accelerator aims to remove up to 10 million tons of carbon emissions between now and 2050. 

3. Hartree Partners & Wildlife Works Voluntary Carbon Market

Commodities trading house Hartree Partners recently partnered with conservation organization Wildlife Works to channel more than $2 billion in private sector investment toward the creation of new carbon credits. These credits will be generated through two-dozen projects that focus on protecting forests and biodiversity and improving livelihoods in Africa, Asia, and Latin America. 

This initiative is expected to create 20 million carbon credits per year — a 40% increase in the availability of verified, avoided-deforestation projects. In 2022, Wildlife Works announced its plans to expand into Cambodia and Colombia as part of a plan to create 20 million mt of new carbon credits per year. 

Harnessing Private Climate Finance for Supply Chain Resilience and Smallholder Farmers

4. Landscape Resilience Fund

Launched in 2021 by South Pole and WWF, the  Landscape Resilience Fund aims to mobilize $100 million by 2025 for climate adaptation projects that protect smallholder farmers and advance sustainable agricultural and forestry supply chains. The Fund blends public, philanthropic, and private funding (including $25 million from luxury brand Chanel) to provide finance and technical assistance to enterprises that support smallholder farmers vulnerable to the effects of climate change. Repaid loans will be re-invested in other enterprises, in order to create a self-sustaining facility. 

5. The Acumen Resilient Agriculture Fund

The Acumen Resilient Agriculture Fund is an equity fund designed to build the climate resilience of smallholder farmers. The Fund is capitalized with $58 million to invest in early- stage agribusiness that help African farmers anticipate weather-related shocks, bounce-back from adverse climate events, and increase both yield and profits. Long-term, these investments are designed to build an ecosystem that enables smallholder farmers to raise their incomes and increase their climate resilience. Private finance is channeled through IKEA Foundation, the impact investor Global Social Impact, and others. 

Private Sector Collaboration Is Essential to Combat Climate Change

Taking on climate change will require a reconfiguration of our economic system and priorities. It will demand the kind of systemic change that can only be enacted through ambitious cross-sector collaboration, commitment, and accountability.  

The private sector must be part of this movement.  

 Outlined in his recently-released plan, Al Jaber’s finance priorities for the COP28 summit indicate there will be intensive and extensive climate finance discussion. “Climate finance arrangements need to transform to deliver at this scale, to work better as a system and support finance mobilization directed to developing countries at unprecedented levels,” he writes.

This includes additional pledges to the UN’s Green Climate Fund and more funding to help countries with climate change adaptation (including the USD 100 billion goal promised by developed countries), as well as a focus on the loss and damage fund agreed last year. In addition, several analysts suggest there will be an emphasis on Just Energy Transition Partnerships, or JETPs, which will help finance the decarbonization of economies, by decommissioning coal plants, for example, through partnered financing packages or other innovative finance instruments. 

The global community—including companies, investors, and financial institutions—is looking for creative avenues to mobilize private finance and collaboration for climate change. Many of the above examples are new and still being tested—but in the months and years ahead, we expect to learn much about how to unlock significant private finance to advance resilient landscapes and supply chains, protect smallholder farmers and vulnerable communities, and meet net-zero goals.  

The need is overwhelming, but there is also unprecedented opportunity. 

Editor’s Note: This post has been updated for accuracy and current best practices.

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If you are a corporate leader and would like to be a part of a discussion about these and other issues in the presidential transition, contact Resonance Strategic Partnerships Manager, Seth Olson.