7 reasons to finance climate projects
November 25, 2024
Why it makes sense for companies to invest in emission reduction projects
Climate change will cost the German economy approximately €900 billion. Globally, it will likely cost $38 trillion by 2049. Limiting global warming to 2 degrees would cost us another $6 trillion from today. It's clear that we can't really afford to wait to address climate change.
To take action now, we need to invest the $6 trillion proactively and with foresight. This is sometimes considered a charity activity by CFOs and CEOs and therefore often falls outside the calculation of corporate costs and benefits, which can be a costly mistake with high consequences.
Climate projects reduce or avoid emissions
It is not just the broader impacts of rising temperatures that are already affecting businesses today: raw material shortages, price volatility and insurance risks too are impacting business models, supply chains and markets. Companies respond by committing to a net-zero strategy with long-term reduction targets. At the same time, companies can invest in measures that have an impact today: climate projects that demonstrably reduce or remove carbon emissions from the atmosphere, for example through reforestation or the use of climate-friendly technologies.
By funding climate projects, companies not only contribute to the reduction of global greenhouse gas emissions, but also can directly benefit from it.
1. Strengthen your brand
According to a survey by Utopia, consumers prefer companies that prioritise the environment and are committed to climate action. Above all, they expect companies to do more: 85% believe that companies are not doing enough to protect the climate.
ClimatePartner's own market research shows that 60% of consumers choose brands that are committed to climate action. In Deloitte's 2024 CxO report, 38% of the executives surveyed confirmed higher customer satisfaction and loyalty.
Today, committing to and communicating about climate action is therefore an investment in brand value and business success.
2. Tell your own story
Climate projects are not only technical projects aimed at reducing carbon. They can also support and engage local communities. The social impact of climate projects is often just as important as addressing climate change: Improved cookstoves or water purification systems can make an immediate difference to the lives of people, most of whom live in rural areas. Projects that plant trees or other species can create jobs or bring important investments to rural areas, to name a few benefits.
Contributions towards corporate sustainability goals, or SDGs, are often crucial in corporate sustainability reporting and reflect the multifaceted positive effects that climate projects can have. Behind every project are communities of passionate people, and telling their stories can link the abstract idea of climate action to concrete personal experiences, and to a company’s purpose and mission.
3. Going beyond regulation and reporting
Calculating and reducing the carbon footprint of your company, products or services is at the heart of your climate action strategy. Both are increasingly becoming the norm, or even a legal requirement, rather than a special obligation.
Funding climate projects, on the other hand, is voluntary and highly individualised. This means that your company can go beyond these basic obligations and set itself apart from the competition. Finding or developing a project that aligns with your brand purpose can create powerful, lasting impact both against climate change and in the mind of your customers.
4. Attracting and retaining talent
Companies that are committed to climate action are more attractive to potential employees. According to a survey by the European Investment Bank, a potential employer's stance on climate action was an important consideration for 56% of respondents when applying for a job. Millennial and Gen Z candidates, in particular, are on the lookout for employers with a strong sustainability focus.
You can involve your employees in deciding which climate projects you support. This creates a sense of ownership and responsibility. At the same time, the projects can be integrated into the company culture and linked to employees' values and concerns. This creates a sense of belonging.
5. Mitigate climate risks and stabilise supply chains
The impact of the climate crisis on businesses includes physical risks to their own operations. This is particularly the case where supply chains extend into regions that are more vulnerable to climate change: Businesses there are already feeling the effects of high temperatures and unpredictable weather.
Climate projects often help stabilise these regions and help them adapt to extreme environmental conditions. This also contributes to the stability of supply chains. Many companies therefore choose to support climate projects in countries where they source raw materials or manufacture intermediate products.
6. Climate projects in your sustainability report under CSRD
Climate projects not only reduce greenhouse gas emissions, but also promote sustainable development in the project countries, for example by improving the supply of clean drinking water, developing local infrastructure, creating jobs or preserving or promoting biodiversity. In this way, climate projects contribute directly to achieving the Sustainable Development Goals (SDGs), particularly in the areas of poverty reduction, health, and education. They also help make communities more resilient to the effects of climate change..
Companies based in the EU can report these social benefits in their sustainability reports under the Corporate Sustainability Reporting Directive (CSRD).
7. Convincing investors and raising capital
69% of investors increase their investments in companies that are successful in sustainability issues, according to an international investor survey conducted by PwC. By contrast, 42% of investors have withdrawn from companies that do too little for sustainability. It is therefore likely that it will become increasingly difficult to secure funding without a credible sustainability strategy.
Do the whole job!
According to current knowledge, companies that embark on the path to net zero and commit to reducing their own emissions by up to 90% are already doing a lot of the right things. But according to SBTi, the remaining emissions must be neutralised by carbon sequestration by 2050 at the latest. Apart from the fact that this reduction is not easy to achieve, emissions continue to add up every year on the way to net zero. Those emissions equal about 15 times your current carbon footprint.
That is the other half of the emissions that we need to think about and take responsibility for. Financing climate projects is necessary because it means funding the reduction or avoidance of emissions outside our own value chain. Only then is the whole job done.
We are happy to advise, to provide material, and to help you tell the story.