Climate Venture Investing - What is blended finance, and why it matters?

Or in the case of climate change, $5 trillion!

Eko the Explorer here, and when it comes to blended finance, sometimes combining different capital sources doesn’t just add variety—it helps us find solutions that would never come to fruition otherwise. 

And when we’re talking about solutions to climate change, that makes a HUGE difference! 

But first… Let’s check in on the Sustainability Sentiment Score and the performance of the climate markets:

The SSS is down this week. Growth stocks continue their descent, though climate companies have remained stronger than broader growth stocks (the Russell 2000 is down 2.41% over the past 5 days). Mature companies remain fairly flat in 2024. 

The voluntary carbon market has come back down to earth following a rapid ascent to start 2024. The regulated market continues to look for a bottom, as analysts attempt to forecast supply and demand in a volatile year ahead. 

CLIMATE STORY OF THE WEEK

Talk about a harsh budget: according to the IMF and International Energy Agency, the world needs to invest $5 trillion EVERY YEAR until 2030 in order to really make the shift to clean energy stick. 

That’s $30 trillion total—and a tall order for private capital alone! 

That’s where blended finance comes in. Blended finance provides one blueprint for the potential impact of bringing together different sources of capital to finance projects or companies. 

From real estate to renewable energy, this approach can help:

• Derisk investments by giving more resources at the start

• Act as catalytic capital to unlock commercial investment ($1 can unlock $4 of investment))

• Allow investors to choose different risk tolerance—those willing to take more risk can act as a capital cushion for investors who need to take less risk

The result: projects that would normally be dead in the water can start to get some traction

Not only do you get the individual benefits of each funding source, but combining them can actually make the final product more than just the sum of its parts. 

What does that mean for future climate venture projects? Read the full story on our blog to find out!

In other news…

First Solar’s Strategic Leap: This leading U.S.-based solar panel manufacturer is one of the first to leverage the Inflation Reduction Act (IRA) by selling up to $700 million in tax credits to companies like Fiserv. Not only has this demonstrated the IRA’s potential to stimulate sustainable economic growth in the solar industry, in real time but it has also put the USA onto the global solar industry stage, previously dominated by China. Read more about how this move will send ripples in the clean energy sector here! 

Leap In Livestock Emission Control: Researchers from the University of Copenhagen, in collaboration with Ambient Carbon, have developed a new method to remove low-concentration methane from the air from previously impractical sources like livestock barns.  Not only does this technology boast an 88% efficiency rate, but it also paves the way for new businesses in the livestock and waste management sectors—all of which can help mitigate climate change by targeting methane emissions from livestock housing, biogas production, and wastewater treatment plants. To hear all the moo-ving details, read more here! 

Venture Building Lesson from the front lines of building climate ventures:

"Ask an investor for money, and get advice...

Ask an investor for advice and get money."

Founders often ask us the best playbook for raising capital.

and we almost always tell them:

"Don't wait until you need money to start talking to investors"

Raising money is a year-round job.

It's not just about the ask—

it's about the relationship.

Forge bonds, seek counsel, and watch as doors open.

This isn't a sprint for capital; it's a marathon of connection.

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