The unprecedented need for investment to address greenhouse gas emissions has been widely cited and acknowledged by today’s academic institutions, governments, asset owners, corporates, and innovators. The World Economic Forum estimates that a Net Zero future will require $5 trillion in annual capital investment by 2030 - a collective target we are roughly 25% to achieving. Notably, 2022 was the first year in which investment in decarbonizing energy surpassed $1 trillion - a great milestone and, simultaneously, a reminder that we are in the beginning innings of the transition.
Why is the financing gap so pronounced?
While we expect secular trends to buoy sustainability-focused projects over the next decade, there are notable frictions slowing green product adoption in high-emissions sectors. Adoption of more sustainable technology or underlying practices can take several years given market seasonality, concentration, capital requirements, and process intensity. Many of our companies face this every day across the agrifood, oceans, and energy value chains.
Barriers to entry are then reinforced by capital providers and asset owners, who have their own structural or underwriting limitations. Asset managers are still evolving to align with the most pressing sustainability challenges, becoming more problem-centric than product-centric. Meanwhile, myriad project opportunities (particularly gray-to-green) remain siloed within institutions and among subject matter experts lacking connectivity to fit-for-purpose capital.
How might we accelerate transition finance?
Beyond capital allocation, the market requires leaders willing to facilitate and work across the ecosystem. Meeting the $5 trillion target (and beyond) will require bespoke, multi-party solutioning across our key emitting sectors - between corporates, policymakers, innovators, academics, and financial institutions. It necessitates partnership exploration between operators and financiers to mitigate risk and demonstrate returns in newer project areas.
This is something we encourage and work to emulate through our engagement with portfolio and community partners. We proactively make purposeful ecosystem connections - many of which have resulted in mutually beneficial co-investments, partnerships, joint ventures, or collaborations - and we are continually working to improve.
How are we doing this in practice?
One recent example of our partnership model is in the area of nature-based solutions. Management of nature-based systems for greater sustainability requires significant operational expertise, as well as reporting and governance systems. This includes end-to-end supply chain traceability, boots-on-the-ground operators, best-in-class standards, and navigation of local regulations and incentives (including smallholders in developing countries). For agriculture, in particular, capabilities include farm management, hydrology, data analytics, deal structuring, sustainability measurement, labor management, supply chain management, and carbon product development. This necessitates funding and clear ROI (financial and sustainability) targets.
Recognizing market need and expertise required, we partnered with Mitsui & Co. and Renewable Resources Group to form a new venture called RRG Nature Based Solutions (NBS). RRG NBS provides one-stop solutions - from project development to design, administration, and farming guidance - all pointed toward the achievement of sustainability in agriculture. RRG NBS is identifying project opportunities in emerging markets where investors and corporations can deliver on carbon neutrality and sustainability pledges via direct investment and supply chain participation. These efforts are bolstered by RRG’s 20-year track record of managing funds and developing projects in sustainable agriculture, water resource conservation, and smallholder services.
How can you join us?
For RRG NBS, cooperation and collaboration with multinational corporations, governments, family farmers, and others is welcomed to support these opportunities. For S2G, we are continually evaluating how to best partner for returns and impact. Join us on this exciting journey toward a more sustainable future.