Innovative Finance -Environment & Sustainability

Mobilizing Private Finance for Climate Change: 5 Examples

Leadership | November 16, 2021

Addressing climate change will not be cheap. 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. (This doesn’t include the trillions needed to meet global targets for climate mitigation.) 

Governments, foundations, and NGOs can’t foot this bill alone. 

To move forward, we need support from the private sector.

Mobilizing private finance was a central theme at this year’s UN Conference of the Parties (COP26). And while the challenges for drawing private investment into climate-related projects are well-known and complex, solutions are fuzziereven 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, it recently announced the $200 million Restore Fund to invest  globally in forestry projects that both reliably remove carbon from the atmosphere and generate a financial return for investors. The Fund aims to remove at least 1 million metric tons of carbon emissions each year.

Restore Fund investments will aim to develop and conserve sustainable “working forests” that produce trees for building materials, paper, and other uses while also pulling carbon from the atmosphere. Goldman Sachs manages the Restore Fund while Conservation International ensures every project meets stringent environmental and social standards. The Fund is designed to demonstrate a profitable financial model to scale up investment in forest restoration. 

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 newly 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.  

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.  

We’ve seen promising new developments at COP26: The recently launched Glasgow Financial Alliance for Net Zero—a group of nearly 500 global financial services firms—has pledged to align $130 trillion in financial assets with global climate goals and net-zero targets. These firms have agreed to use science-based guidelines to reach net-zero emissions by 2050 and to achieve a 50% reduction in emissions by 2030.   

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 relatively untested—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. 

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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.