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Author: Claudine Emeott (Salesforce Ventures Impact Fund Partner), Naomi Morenzoni (Salesforce Senior Vice President of Philanthropy)
The Earth just endured the hottest year on record. And as global temperatures are predicted to rise further, communities around the world are at risk of reaching beyond the limits of their survival. The need for action is clear, but an estimated $4 trillion per year is needed to reduce the most severe impacts of climate change and limit global warming to 1.5°C.
Companies can play a key role in addressing the climate finance gap by strategically deploying multiple capital streams. Raising $4 trillion a year may seem daunting, but it’s within reach if companies are willing to rethink how they use their capital to fight climate change.
A blueprint for coordinated climate finance
Today, many companies use multiple forms of capital, such as philanthropy, venture, and carbon credits, in isolation to drive incremental progress on climate goals. But companies are hampering their impact by failing to take advantage of all the financial tools at their disposal.
We too have been guilty of this. But over time, we have learned that by optimizing our overall capital for climate change, we can move towards our goals at a pace that the planet will notice.
That’s why we partnered with the Climate Policy Initiative to develop a practical blueprint that incorporates best practices from our peers and customers, including Autodesk, Cisco, and Seventh Generation.
In doing so, we learned two important lessons.
Lesson 1: Each financial tool has its own superpowers.
One size does not fit all. Each form of capital has advantages and disadvantages, which need to be taken into account when building a tailored climate finance strategy.
For example, philanthropy is catalytic in nature, making it ideal for early-stage initiatives where there is no or uncertain financial return. By funding feasibility studies and demonstration projects, philanthropists empower early-stage innovators to take risks and bring new solutions to market. However, the check size may be limited and the solution may be difficult to scale due to the lack of economic benefits.
Venture capital, on the other hand, is best suited for high-risk, high-return opportunities. Larger check sizes give venture capitalists the power to scale innovations with a clear path to financial return, but when deployed alone, they are at a very early stage that is equally viable. ideas will be buried.
The most effective strategy is to deploy both in parallel. That’s why Salesforce launched a $100 million Climate Justice Fund in 2021. This serves as a key pillar of Salesforce’s comprehensive climate finance strategy. The strategy includes a $100 million investment in carbon removal, the purchase of 280,000 MWh of renewable energy certificates from small-scale distributed energy projects, a $1 billion sustainability bond, and Ventures to invest in climate startups. It includes pledges such as funds.
Another example of a tailored climate finance model is the Cisco Foundation’s $100 million climate impact and regeneration portfolio, which is growing in impact. Recognizing that organizations at different stages may benefit from different funding structures, Cisco is deploying half of its portfolio through grants and the remainder through venture investment, thereby providing We were able to support Vesta, a carbon capture nonprofit company.
Lesson 2: A tailored climate finance strategy can maximize impact.
To unlock a company’s full potential and achieve maximum impact, different forms of capital need to be strategically blended.
In 2021, Salesforce set a goal to purchase 1 million metric tons of high-quality blue carbon credits, or credits derived from coastal and marine ecosystems, by 2025. These credits provide the ability to remove carbon from the atmosphere 10 times faster than tropical forests.
But there was one small problem. The world didn’t have enough. That’s why we partnered with a global coalition of ocean leaders to establish the High Quality Blue Carbon Principles and Guidance, a set of development standards for high quality blue carbon credits. We also leveraged our financial stack by blending multiple forms of capital to build and refine the blue carbon credit market from the ground up.
We used philanthropic grants to help fund Mangrove Breakthrough, a solution to scale up global mangrove investment. In parallel, through the Salesforce Ventures Impact Fund, for-profit climate solutions like Pano AI, which uses AI to detect wildfires before they spread and become a serious threat, and Arcadia, a platform that enables access to public utilities. We are also investing in Data for faster decarbonization.
Another example of a company with a tailored climate finance approach is Autodesk. Through the Carbon Fund, Autodesk reduces operational emissions through high-quality carbon credits, virtual power purchase agreements, and advanced market commitments like Frontier. Meanwhile, Autodesk used funding from its sustainability bond to acquire Innovyze, a startup that helps customers deliver sustainable water solutions, and through the Autodesk Foundation he backs ventures like Heirloom.
Leveraging all capital to combat climate change
Achieving global climate goals will require smarter, more flexible types of capital to make an impact at the speed and scale the planet needs. Increased corporate commitment to climate change is a step in the right direction, but driving real impact requires all companies to make the most of their capital.
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