![]() Date: 2024-08-16 Page is: DBtxt003.php txt00018959 | |||||||||
Initiatives | |||||||||
Burgess COMMENTARY Peter Burgess | |||||||||
CARBON, CARBON OFFSETS, CLEANTECH INSIGHTS, RESOURCES & ENVIRONMENT |
Carbon Removal and Nature-Based Solutions
To combat the climate crisis and build a new economy, an increasing number of innovators and investors are turning to nature-based solutions to sequester carbon, manage land and restore ecosystems. Nature-based solutions typically solve multiple challenges at once. They create highly productive and diverse ecosystems while being very effective at specialized tasks such as capturing carbon or recovering from extreme weather events. These solutions can increase resilience and well-being, plus they tend to entail lower operating costs despite early transition costs. While many nature-based solutions tend to be on a local scale financed by public money and foundations, some underlying technologies and business models can be scaled up, creating highly attractive venture opportunities.
In this insight, just ahead of our second edition of Cleantech Interactive, Investing in Nature, on 17 June, we present the overall landscape of nature-based solutions, diving into the two main areas opening up to investment: forest-based carbon removal and regenerative agriculture.
Investing in Nature: Venture Opportunities
Venture capital is well-adapted to financing technologies and business models that can scale across large geographies or customer bases. We see three areas of nature-based solutions where that applies:
![]() Source: Cleantech Group Key Opportunities Forest-based Carbon Removal Reforestation-based carbon offset projects have become increasingly attractive to corporates looking to showcase green credentials and meet net neutrality goals. This is particularly true of large polluters such as oil and gas companies and airlines. For example, Shell recently launched a carbon offset scheme for its fuel customers along with net neutrality goals. In 2018, issuances of afforestation and reforestation voluntary offsets rose by 342% and remain the most popular type of offset despite cheaper alternatives. Some emerging companies such as Land Life Company or Finite Carbon are acting as project developers or aggregators, selling high-end credits to large corporates, making sustainable reforestation profitable. Others are using technology to provide services such as forestry monitoring to improve protection and to reduce operational costs. For example, Cleantech Group’s 50 to Watch company Pachama has developed satellite and LiDAR-based carbon storage estimation software to enable remote calculations of carbon sequestration and encourage forest conservation and expansion. In January 2020, the company raised $4.1 million in a Series A round led by Saltwater Capital and Lowercase Capital. Regenerative Agriculture Regenerative agriculture aims to improve soil whilst maintaining profitable farming practices. Various methods are employed including agroforestry, silvo-pasture, no-till farming, the use of biological inputs to replace chemicals, rotational grazing and other farming process improvements. The aim is to increase biodiversity and promote soil carbon and nutrient content, improving long term yield and agricultural sustainability. Emerging companies are creating new revenue streams for farmers by helping them sell carbon credits for adopting regenerative practices. Companies such as Nori and Indigo have created marketplaces to scale up intermediation between farmers and off-setters. These offsetting schemes are supported by new tools such as Soil Capital’s MySoilCapital which tracks, measures and models the potential returns of moving to regenerative agricultural practices, thus reducing the farmer’s risk when deciding to make the switch. These innovations are offering new opportunities for venture investors looking to scale nature-based solutions. Corporations in food and agriculture are feeling pressure from consumers for greater transparency and more responsibly organized supply chains (the latest example is from shoe maker Timberland). This is compounded by regulators increasingly legislating against non-regenerative practices, such as the EU’s decision to cut chemical pesticide use by 50% over 10 years. Business model innovations, alongside innovation in verification and data analytics, will be the key competitive differentiators to ensure adoption of new methods is both profitable and sustainable. ----------------------------------------------- Interested to learn more? Join us on 17 June at Cleantech Interactive to meet executives from Land Life Company, Nori, Soil Capital and other pioneers in nature-based solutions – and the investors backing them. We look forwards to seeing you there, Jules Besnainou, Director, Cleantech Group Chris Sworder, Senior Analyst, Agriculture & Food Holly Stower, Analyst, Resources & Environment Jules Besnainou About Jules Besnainou Director Jules works closely with investors, corporates and governments to help accelerate sustainable innovation. His research focuses on high-impact themes and nature-based solutions. Jules also oversees Cleantech Group’s 50 to Watch program, an annual program identifying early-stage companies solving the world’s most pressing challenges. |